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The 2012 major party presidential candidates have put forward a variety of ideas and plans to deal with our huge deficits and mounting debt. All four of the GOP presidential candidates have proposed plans with varying degrees of specificity, and President Barack Obama set out his plan in his recently proposed budget.
Unfortunately, all the candidates need to go back to the drawing board. Why? Because none of their proposed plans are feasible.
For a fiscal responsibility and deficit reduction plan to be feasible, it must meet six criteria:
1. Make economic sense. A serious plan to reduce deficits and debt must not jeopardize our economic recovery. It should make selected investments to encourage growth and enhance our competitive posture, while including real and enforceable steps to address longer-term structural deficits.
2. Be socially equitable. The plan should not disproportionately affect different segments of society. It should also ensure that we have a solid and secure social safety net.
3. Be culturally acceptable. The proposal must be acceptable given America’s unique culture. For example, many European countries have tax levels that are much higher than ours, but such levels would not be acceptable to most Americans given our society’s preference for a more limited government.
4. Pass a basic math test. Yes, it’s a novel concept in Washington, D.C., but any feasible plan should actually reduce our debt burden (i.e., debt as a percentage of the gross domestic product) over time to a reasonable and sustainable level. It should also avoid using creative accounting and unreasonable assumptions that make it seem like the plan achieves more deficit reduction than would actually occur.
5. Be politically feasible. A feasible plan is one that can actually get passed into law — meaning that it must achieve majority support in the House, a 60-vote, filibuster-proof majority in the Senate and the signature of the president.
6. Achieve meaningful bipartisan support. Aside from becoming law, a plan must have some bipartisan support because otherwise it is not likely to be sustained over time. For example, the repeal of the recent health care reform legislation, which was passed without any bipartisan support, will be a top priority if Republicans retake the presidency and Senate.
So how do the major candidates’ plans measure up? They don’t.
For example — and perhaps most fundamentally — they all fail the basic math test. Most economists agree that to bring our debt burden to a reasonable and sustainable level would require enacting policies that reduce public debt as a percentage of the GDP to no more than 60 percent.
Measuring debt as a percentage of GDP is an important statistic, yet one that is often not focused on, nor is its importance well understood by the broader public. Similar to how a bank measures an individual’s debt as a percentage of their personal income during a loan application, economists measure government debt compared to a country’s total economic activity. This allows for comparison of debt burdens across countries of different-size economies, as well as the ability to compare debt burdens over time as the economy grows.
Neither Obama’s budget proposal nor any of the GOP candidates’ plans achieve the desirable debt-to-GDP ratio, according to an analysis by the Committee for a Responsible Federal Budget.