- $2 Trillion in Deficit Savings Would Achieve Key Goal: Stabilizing the Debt Over the Next Decade. Some budget watchers are urging the President and Congress to enact $4 trillion in savings over the next ten years in order to address the deficit problem. The $4 trillion figure has assumed something of a life of its own. In fact, there is no single magic number. For example, policymakers could achieve the most essential goal -- stabilizing the public debt over the coming decade (that is, ensuring that the debt doesn't rise faster than the economy and, thus, risk eventual economic problems) -- by enacting $2 trillion in savings (see first chart). This $2 trillion would be on top of the budget cuts Congress has already enacted; see the next point.
- Congress Has Cut Discretionary Funding By $1.5 Trillion Over Ten Years. Debates over how -- and how much -- to reduce projected deficits often overlook the fact that the first stage of large-scale deficit reduction is already in law. Legislation enacted last year, most notably the Budget Control Act, will produce $1.5 trillion in savings in discretionary (that is, non-entitlement) spending for fiscal years 2013 through 2022. These cuts will shrink non-defense discretionary funding -- which includes an array of domestic programs ranging from education to law enforcement, food safety, and environmental protection, as well as international programs -- to its lowest level on record as a share of GDP, with data going back to 1976 (see second chart). The enactment of these budget cuts is one reason that an additional $2 trillion in deficit reduction, rather than some bigger number, would be sufficient to stabilize the debt ratio. (See the bullet above.)
- What Was Actually in Bowles-Simpson -- and How Can We Compare it With Other Plans? While many policymakers have expressed support for the budget plan that Erskine Bowles and Alan Simpson issued in December 2010, a number of policymakers and opinion leaders do not understand what the plan actually included.
When looked at over fiscal years 2013-2022, the period covered by current budget plans, Bowles-Simpson called for $6.3 trillion in deficit reduction: $5.5 trillion in policy savings and about $800 billion in interest savings. The policy savings consist of 53 percent program cuts (totaling $2.9 trillion) and 47 percent revenue increases (totaling $2.6 trillion), or almost a 1-to-1 ratio (see third chart).