Friday, February 19, 2010

A Fiscally Sustainable Budget

Yesterday, the President signed an executive order to create a bi-partisan National Commission on Fiscal Responsibility and Reform. This commission, co-chaired by former Clinton White House Chief of Staff Erskine Bowles and former Republican Senate Whip Alan Simpson will consist of members appointed by the leaders from both political parties in both houses of Congress and the President. The commission’s goal is to balance the budget by 2015 (excluding interest on the debt) and to create a more sustainable fiscal plan for the future.

In testimony before the Senate Budget Committee last week, Alice M. Rivlin of the Brookings Institution explained why the U.S. budget is unsustainable, and why the budget process is in need of a significant move toward bi-partisan cooperation. Rivlin, who was the founding director of the Congressional Budget Office, made suggestions regarding stabilizing the debt increase (by setting a long-term debt to GDP ratio) as well as prerequisites for creating a credible plan to stabilize the debt.

As state governments continue to struggle with budget gaps, keeping a close watch on the federal budget, and the newly established National Commission on Fiscal Responsibility and Reform, will be important tools in anticipating shifts in federal budget and tax policy. Creating bi-partisan commissions to consider spending might also be a strategy for state’s looking to make significant changes in their budget and budget –making process.

For more information on setting a long-term debt to GDP ratio.

For more information on state fiscal concerns and budgets.

For federal budget basics.

For policies on family economic success.