Judging the Merits of Fiscal Deal Proposals

As Congress returns from recess, it faces a convergence of fiscal policy deadlines. The fiscal year is drawing to a close at the end of the month. No appropriations bills have been agreed to by both chambers, and none are ready for the president to sign into law. Furthermore, the debt ceiling will need to be raised soon, possibly as soon as next month.

To avoid a government shutdown and/or the possibility of a default on U.S. debt, it is possible a fiscal deal of some sort could emerge. But how should proposals for such a deal be judged?

In broad strokes, Republicans are pushing for dramatic cuts to many federal programs, whereas the president and Democrats in Congress – while still advocating for fiscal responsibility and a gradual continued reduction of the deficit – want to preserve funding levels for most discretionary programs.

The Democratic side of the debate tracks closely with International Monetary Fund recommendations made in June for the United States to “[repeal] the sequester and [adopt] a more balanced and gradual pace of fiscal consolidation in the short term; expeditiously [raise] the debt ceiling to avoid a severe shock to the U.S. and the global economy; and [implement] a comprehensive and back-loaded set of measures to restore long-run fiscal sustainability.”

The Center on Budget and Policy Priorities (CBPP) has prepared a useful guide for evaluating emerging fiscal deal proposals this fall. The main questions one should ask of any set of proposals are:

  1. Do they strengthen the economic recovery, or do they weaken or slow the recovery?

  2. Do they protect low-income Americans and avoid increasing poverty and hardship, a principle embraced by leaders of both parties in past deficit-reduction efforts and by fiscal commission co-chairs Alan Simpson and Erskine Bowles?

  3. Do they permit adequate investment in core public services, including building blocks of economic growth, such as infrastructure, education, and research, as well as efforts to expand economic opportunity?

  4. Do they reflect a balanced approach, both between budget cuts and revenue increases and between defense and non-defense funding?


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