WASHINGTON - A bipartisan group of former lawmakers and budget officials called on Congress and President Obama yesterday to commit to rein in a trillion-dollar plus budget deficit to avoid having the spiraling national debt drag down the economy.
Policymakers must take steps next year to enact policies to stabilize the debt at 60 percent of the size of the economy to avoid higher interest rates or crisis in global markets with disastrous implications for the U.S. economy, according to a report by the Peterson-Pew Commission on Budget Reform, a bipartisan group of deficit hawks.
The bipartisan group includes former lawmakers and directors of both the Congressional Budget Office and the White House budget office.
The deficit is the annual federal budget shortfall; the national debt - now at $12 trillion - is the accumulation of money borrowed to cover the deficits over the years. Except for the four years from 1998 through 2001, the federal government has run at a deficit in every year since 1969.
"A hard landing - where higher deficits and debt cause investors to lose confidence in the U.S. economy and rising interest rates choke off the economic growth - is a real possibility," said the group's report.
But the commission expressed little confidence that Congress and the Obama administration could summon the political courage to approve tax hikes and spending cuts next year to ease the chances of a debt-related crisis.
The Pew-Peterson group doesn't recommend specific tax cuts or spending cuts to accomplish the goal of stabilizing the debt, which is presently about 60 percent of gross domestic product, which is the broadest measure of the economy and consists of the value of all goods and services produced in the U.S. Given the frail economic recovery, the panel said new debt-reducing policies shouldn't take effect until 2012.