Sound Financial Advice
by Francie Grace
In the season when many Americans' minds turn to thoughts of getting some financial advice to help with their taxes, the Senate is following suit, on another serious matter that affects all of our bottom lines.
Rudolph Penner, a former Congressional Budget Office director who co-chaired the Committee on the Fiscal Future of the United States that wrote the report Choosing Our Fiscal Future, was the source Thursday for some advice for members of Congress.
Testifying before the Senate Budget Committee, Penner emphasized the unsustainability of the federal budget deficit, with Social Security, Medicare and Medicaid accounting for 40 percent of all government spending other than interest in a normal year - and all growing faster than the economy and revenue.
As the deficit increases, said Penner, the national debt will grow ever more rapidly, until interest on the debt becomes a budget problem in itself, with debt expected to pass 100 percent of GDP in less than twenty years.
And that's more than just a ratio. Penner observes that it's highly unlikely that world capital markets would tolerate those sorts of numbers for very long. If no changes are made, it is projected that the market for U.S. debt would collapse long before 2040.
That grim scenario, based on facts and the two-year long work of the committee, was used as a scene-setter. Penner did go to Capitol Hill armed with recommendations on a way forward.
"Our committee," Penner told the panel, "believes that Congress should set a target for the debt‐GDP ratio and not exceed it. Given an explicit target, the American people could judge how well the Congress and administration are doing in their pursuit of fiscal responsibility."
"We believe further that a prudent target would hold the debt to 60 percent of GDP," Penner continued. "That ratio should be achieved by 2022 and we should begin implementing the necessary policies by 2012. If the nation experiences good fortune while holding the debt to this level, it would be wise to lower the target further."
Click here to check out Penner's complete remarks (and here's a shortened link to spread the word on Twitter: http://bit.ly/ariLRF), where you can follow our updates on the federal budget and national debt on @PublicAgenda, @FiscalFuture and @FacingUp.