Why isn’t there serious talk of balancing the budget today?
The terminology has shifted in the face of reality. In Simpson-Bowles and Domenici-Rivlin, we focused on slowing down debt growth. The growth of debt is not sustainable currently. The goal is to keep it from growing faster than the GDP.
The new focus, then, is stabilizing the debt?
In terms of the deficit, stabilizing the debt means getting it to a position where it’s only growing at 1 or 2 percent of GDP. The more urgent, doable goal is stabilizing the debt. The question then became: What do you stabilize it at? The answer: About 60 percent.
Is this goal the new Holy Grail?
Most of us never thought balancing the budget was a sensible goal anyway. You don’t have to balance the budget, but you do need the debt growing at a sustainable rate. That’s less than say, 3 percent a year if you think you can grow your economy that fast.
Why is the trajectory we’re on dangerous?
You don’t want to destroy the economy’s growth when we’re in a halting, slow recovery. That’s part of it. But the trajectory we’re on is dangerous with respect to the future rise in debt. It’s not quick and easy.
When was the turning point in the thinking on this?
When things got out of control in the Great Recession. That escalated the deficit a lot. By the time people started saying, ‘What do we do?’ it didn’t seem feasible to get to a balanced budget any time soon.