Debt Digest | Voters Want Congress to Reduce the Debt
Links & Fiscal Facts
Welcome to the new edition of the Debt Dispatch, written by Dominik Lett, Research Associate for Budget and Entitlement Policy at the Cato Institute. Starting this week, you'll receive links to reading recommendations separate from commentary. Please reply with any feedback and feel free to send relevant links our way.
90% of voters want members of Congress to work together to reduce the national debt according to polling by the Peterson Foundation. 69% of Democrats, 72% of Independents, and 88% of Republicans think federal debt should be a top-three priority for Congress. Boccia’s latest policy brief presents Congress with a fiscal agenda to stabilize debt by reducing the growth in spending. You can read her proposed plan here.
More options to reduce deficits. The Congressional Budget Office (CBO) projects annual deficits (the difference between spending and revenues) to average $1.6 trillion over the next decade. Demian Brady and Andrew Lautz of the National Taxpayers Union Foundation (NTUF) highlight eight CBO policy options to reduce deficits. Boccia previously spotlighted five major reforms from the same report. Both NTUF and Boccia recommend reducing Social Security benefits for higher earners and increasing the Social Security retirement age.
Entitlement reforms unlikely without bipartisan support. Social Security’s trust funds are expected to run short by 2035. The American Enterprise Institute’s (AEI) James C. Capretta analyzes the political feasibility of reform through major tax hikes. The most prominent plan, Democrat’s Social Security 2100, illustrates the difficulty with primarily raising taxes. Budget rules, party infighting, and other political hurdles most likely mean “Congress will have to address the fiscal stress caused by rising costs for Social Security and Medicare on a bipartisan basis.” There is no shortage of commonsense reforms which can help make Social Security solvent. A broader restructuring would be welcome, given the program’s outdated nature. One example: AEI’s Andrew G. Biggs recommends transitioning Social Security to a flat minimum benefit and auto-enrolling employees in private retirement plans to build savings.
CBO misses the mark on budget projections. Compared to estimates made in 2021, CBO underestimated FY2022 revenues and outlays by 10% and 5%, respectively. Economic fluctuations are primarily to blame. Cato’s Chris Edwards explores economists poor forecasting track record for the stock market, inflation, and interest rates. “This is important for public policy because if economists cannot predict the macroeconomy, then governments cannot successfully intervene and manipulate.”