“The federal budget is deep in the red, and getting it back in the black will not be easy or swift. On its current course, the debt is likely to reach 100 percent of the nations gross domestic product (GDP) early in the next decade and would continue to grow faster than the economy thereafter. Excessive debt can do much harm: draining productive capital from private investment; increasing the interest payments in the federal budget, which in turn squeeze out other spending or room for tax cuts; and reducing the government’s flexibility to respond to future crises or opportunities. High debt levels also present a real risk of some type of fiscal crisis. The federal budget cannot continue on its current path. The Peterson-Pew Commission on Budget Reform has spent almost two years looking at how to improve the federal governments budget process. In our first report, Red Ink Rising, we called on policymakers to stabilize the national debt so that it would no longer grow faster than the economy. We recommended that the government immediately adopt a statutory goal of stabilizing the debt at 60 percent of GDP and enact a specific and credible plan of policy changes that would phase in beginning in 2012 and achieve that goal by 2018. We also recommended that the commitment be backed by strong enforcement mechanisms and that the debt be further reduced as a share of the economy after 2018.”
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