EPI News – A Dangerous Approach to Deficit Reduction

Last week, the co-chairs of the National Commission on Fiscal Responsibility and Reform and the Peterson-Pew Commission on Deficit Reform released proposals for reducing the federal deficit. EPI’s analysis shows both are seriously misguided plans that could undermine badly needed job creation, prolong the jobs crisis, and ultimately further weaken the country’s fiscal health.

In response, EPI’s Research and Policy Director John Irons issued a statement that the National Commission on Fiscal Responsibility and Reform “is running seriously off track.” Irons noted that almost half of the adjustments suggested in the Commission’s co-chairs proposal would come from cuts to discretionary spending, a portion of the budget that is not responsible for long-term deficits. At the same time, it proposes little to increase tax revenue and gives barely a nod to the prime driver of longer-term deficits, rising health care costs, suggesting only that lawmakers establish a process to control health care cost growth. The plan’s proposed changes to Social Security would result in reduced benefits for most people, Irons stressed. This initial proposal was drafted by co-chairs Alan Simpson and Erskine Bowles to stimulate discussion. It will be followed on December 1 by a final report.

In a separate response, Irons and Policy Analyst Andrew Fieldhouse called the Peterson-Pew deficit reduction target dangerous and misguided. They stressed that the Pew-Peterson plan, which calls for immediate deficit reduction aimed at reducing public debt to 60% of gross domestic product by the year 2018, “would slow the economic recovery enough to possibly risk a double dip recession.”

EPI believes that the current economic downturn is not a reason to adopt fiscal austerity. Rather it is time to invest in the middle class, create jobs, and spur economic growth. In the coming weeks, EPI, together with Demos and The Century Foundation, will release a Fiscal Blueprint that details the policies we believe will create jobs now and achieve long-run fiscal sustainability.

via EPI News.

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