Debt & Deficit

Debt & Deficit

Research

Laurence Kotlikoff, Adam Michel | Jun 03, 2015
The true US debt is 16 times larger than what the government reports. Closing this fiscal gap with taxes alone would require a massive, immediate, and permanent tax increase on every American family. The burden grows with each year of congressional and presidential inaction, threatening future standards of living. How would such a tax hike affect individual American households? A new study published by the Mercatus Center at George Mason University details how much Americans would have to pay to actually close the true fiscal gap with tax increases.
James C. Capretta | Mar 25, 2015
Reforming the congressional budget process is no substitute for actual policy changes that can correct the government’s fiscal problems. Yet according to a new study published by the Mercatus Center at George Mason University, the right kinds of process reforms can open up new potential for agreement between Congress and the president and can focus attention on long-term spending commitments.
Jason E. Taylor, Andrea Castillo | Jan 13, 2015
A new study published by the Mercatus Center at George Mason University examines the use of expansionary fiscal policy to stimulate a contracting economy. The study concludes that attempts to use fiscal policy to solve broader economic troubles have failed even by the theory proponents’ own standards. In addition to being poorly timed and targeted, stimulus spending has led to permanent increases in the size and scope of government.
Veronique de Rugy, Jason J. Fichtner | Aug 21, 2014
The recent decline in federal deficits should not create a false sense that the national debt is no longer a clear and present threat. While this improvement may be encouraging, it represents only a temporary respite from the government’s growing fiscal imbalances.
David M. Primo | Mar 11, 2014
Alternative presentations of the same budget data tend to offer very different impressions, creating opportunities for a deeper understanding of fiscal health. However, these measures sometimes reflect hidden assumptions about government finances, so even a seemingly neutral way of presenting data often isn’t so neutral. The ability to give different impressions with the same budget data creates the opportunity for policy mischief, as one can tell very different stories about fiscal policy depending on the measure used. We can assess the appropriateness of various spending adjustments by understanding the underlying assumptions in the measures, how to use the measures analytically, and how they might be used strategically. The paper looks at measures of government spending over time, as well as budget forecasts, to demonstrate this logic in practice. It concludes with a case study of President Obama’s fiscal year 2014 budget.
David M. Primo | Jan 21, 2014
The United States faces severe fiscal challenges—most notably, the unsustainable growth of entitlement spending and a mounting debt burden that raises concerns about the government’s ability to pay it back without strangling economic growth. These threats reflect the inability of Congress and presidents to make the hard choices necessary to restore fiscal responsibility to the federal budget. …

Testimony & Comments

David M. Primo | Jul 24, 2014
Constitutional rules, unlike statutory or internal rules, are difficult to change. If written to cover the entire budget, avoid loopholes, and make waivers difficult to obtain, Constitutional rules can provide the enforcement mechanism that will help ensure that specific reforms to entitlements, defense, and other spending areas will not be undone by future Congresses.
Jason J. Fichtner | May 21, 2014
Social Security faces real financial challenges. Dismissing the real and current fiscal challenges facing the Social Security system and kicking the “reform can” further down the road will only increase the severity of the burden associated with reforms when they inevitably must take place.
| Dec 15, 2011
Anthony Sanders testified before the U.S. House Committee on Oversight and Government Reform Subcommittee on TARP, Financial Services and Bailouts of Public and Private Programs on the role of the U.S. in addressing the European debt crisis.
David M. Primo | May 13, 2011
David Primo testified before the House Committee on the Judiciary on whether the Constitution should be amended to address the federal deficit.
Veronique de Rugy | Feb 17, 2011
Veronique de Rugy testified before the House Committee on Oversight and Government Reform about wasteful government spending.
Veronique de Rugy | Jun 30, 2010
Well over a decade of irresponsible fiscal policy has created an unsustainable fiscal situation for the United States. The longer we delay serious consideration of meaningful solutions, the larger the problem will become.

Research Summaries & Toolkits

Veronique de Rugy, Jason J. Fichtner | Oct 10, 2013
As federal government borrowing is set to exceed yet another debt limit, most are quick to recall—and wish to avoid a repeat of—the 2011 debt-limit showdown. If current rhetoric is any indication, it appears many of the last debate’s lessons have been forgotten. Regrettably, it seems many of the debate’s facts have been forgotten as well.
| Sep 24, 2013
The Mercatus State Policy Guide is intended to summarize and condense the best research available on the most relevant topics. It’s a starting point for discussion, not a comprehensive overview of economic policy. Each statement is supported by academic research, with links provided in the endnotes. Mercatus scholars are available to further explain the results of their studies. We hope the guide will prove to be a valuable tool in your economic policy research.
| Jul 23, 2013
The Mercatus Policy Guide is intended to summarize and condense the best research available on the most pressing topics. It serves as a starting point for discussion, not a comprehensive overview of economic policy. Anyone who wants to go deeper into these studies should consult the references listed at the back. Mercatus scholars are available to further explain the results of their studies. We hope the guide will prove to be a valuable tool in your evaluation of economic policy.
Veronique de Rugy, Jason J. Fichtner, Charles Blahous, Matthew Mitchell | Mar 15, 2013
Despite years without a federal budget, trillion-dollar deficits, and ad hoc, crisis-driven fiscal and economic policies that failed to deal with the looming entitlement crisis, leaders on both sides in Washington are now touting seemingly miraculous progress toward a “fix” to our budgetary woes.
Jason J. Fichtner, Veronique de Rugy | Jan 25, 2013
The debt ceiling, or the legal limit the federal government may borrow, is set currently at $16.4 trillion.[1] In his latest report, Secretary of the Treasury Timothy Geithner predicts that the United States will need to increase the debt ceiling sometime between February 15, 2013, and early March 2013.[2] The Congressional Research Service estimates the federal government will have to issue an additional $700 billion in debt above the current statutory limit to finance obligations for the remainder of FY2013…
| Feb 13, 2012
This policy brief takes a look at the president's FY2013 budget proposal and emphasizes the need for fundamental reform in the areas of spending, taxes, and the budget process.

Expert Commentary

Jun 24, 2015

Does it seem as if some lawmakers have the attention span of a toddler? Several years ago, concerns about the debt and overspending were all the rage. These worries have dissipated almost entirely as deficit levels have gone down from their sky-high summit in 2009. And just like that, lawmakers have gone back to overlooking our long-term fiscal situation and the unsustainable path the nation is on.
May 06, 2015

Efforts to add a new restructuring option to the mix may cast doubt on Puerto Rico's commitment to more substantive efforts to deal with its debt problem, such as shrinking its public sector and unleashing its private sector with regulatory reform. Retroactive changes to the law may cure creditors of their historically over-eagerness to finance Puerto Rico's public sector, which has not been good for the territory. But such changes also may cause the pendulum to swing too far the other way, as investors shy away from lending in the face of a potentially uncertain and shifting legal framework.
Apr 13, 2015

Taxes are obviously on everybody's mind this time of year, which makes it the perfect time to ask where — or to whom — all our money is going. First things first: In 2014, the government collected roughly $3 trillion. It spent $3.5 trillion. In other words, it had to borrow $500 billion to pay for all the spending on top of the taxes collected.
Feb 26, 2015

Remember Occupy Wall Street, when thousands across the country took to the streets, sleeping in tents to protest the ultra-rich 1 percent? The occupiers' frustration was real, but their ire was misdirected. They should have launched an Occupy the AARP movement instead.
Feb 02, 2015

President Barack Obama recently opined that he would like “to see the first two years of community college free for everybody who is willing to work for it.” This important proposal from the president’s State of the Union Address has already gained support from Dr. Amy Gutmann, president of the University of Pennsylvania. Obama, Gutmann and I all agree that higher education has a high value. Yet we likely disagree on its price.
Nov 23, 2014

Republicans have a rare opportunity to implement policies that are truly compassionate and transcend toxic identity politics. Whether they will seize the moment, or play the same old politics as usual, remains to be seen.

Charts

The Congressional Budget Office (CBO) recently released its annual report on the federal government’s long-term budget outlook, which unsurprisingly remains bleak. Policymakers have known for years that the federal government’s long-term fiscal situation is unsustainable. Unfortunately, they have taken little action to address the situation. The longer Washington waits to get its financial house in order, the more difficult it will be to rectify the situation.

Experts

Charles Blahous is the director of the Spending and Budget Initiative, a senior research fellow at the Mercatus Center at George Mason University and a public trustee for Social Security and Medicare. He specializes in domestic economic policy and retirement security (with an emphasis on Social Security), as well as federal fiscal policy, entitlements, demographic change, and health-care reform.
Antony Davies is a Mercatus Center–affiliated senior scholar at George Mason University and associate professor of economics at Duquesne University. He also is a member of the Research Program on Forecasting at George Washington University. He specializes in econometrics, public policy, and economic psychology.
Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University and a nationally syndicated columnist. Her primary research interests include the U.S. economy, the federal budget, homeland security, taxation, tax competition, and financial privacy. Her popular weekly charts, published by the Mercatus Center, address economic issues ranging from lessons on creating sustainable economic growth to the implications of government tax and fiscal policies. She has testified numerous times in front of Congress on the effects of fiscal stimulus, debt and deficits, and regulation on the economy.
Jason J. Fichtner is a senior research fellow at the Mercatus Center at George Mason University. His research focuses on Social Security, federal tax policy, federal budget policy, retirement security, and policy proposals to increase saving and investment.
Matthew Mitchell is a senior research fellow at the Mercatus Center at George Mason University, where he is the director of the Project for the Study of American Capitalism. He is also an adjunct professor of economics at Mason. In his writing and research, he specializes in economic freedom and economic growth, public-choice economics, and the economics of government favoritism toward particular businesses.

Podcasts

Veronique de Rugy | September 02, 2014
Veronique de Rugy discusses the CBO report on the federal debt on the John Batchelor Show.

Recent Events

Please join us for breakfast on Tuesday, May 6, with one of Mercatus’ affiliated scholars, Dr. Antony Davies, Associate Professor of Economics at Duquesne University, to discuss intended and unintended consequences of the current U.S. debt and deficit.

Media Clippings

Sarah Arnett | Jan 17, 2014
The Mercatus Center cited at Philly.com.
Veronique de Rugy | Oct 08, 2013
Veronique de Rugy cited at USA Today.
Charles Blahous | Aug 01, 2013
“It was never a short-term problem to begin with,” Blahous said in a telephone interview. “To say that the short-term outlook is better is irrelevant to the structural problem of promising more than we can pay for.”…
Veronique de Rugy | Jul 16, 2013
Mercatus Center Economist Veronique de Rugy found, “Between fiscal years 2007 and 2010, annual wind subsidies grew from $476 million to nearly $5 billion.”…
| Feb 27, 2013
Tyler Cowen cited at the Wall Street Journal.
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