U.S. House lawmakers Thursday discussed a proposed framework for reducing federal deficits and slowing the growth of the national debt.
The federal debt surpassed $39 trillion on March 17 and continues to climb. Over the past year, it has grown by an average of more than $7 billion per day or over $5 million per minute, and budget deficits are the primary driver of its staggering rise. Budget deficits occur when Congress authorizes spending that exceeds what the government brings in through taxes, fees and other revenue streams.
A key part of reining in the national debt is curbing annual deficits.
Chairman of the House Budget Committee Jodey Arrington, R‑TX, proposed that Congress commit to not authorizing spending that would cause the annual deficit to exceed 3% of GDP in any year over the next decade.
“This 3%-over-10-year goal has been endorsed by financial experts like Ray Dalio and Warren Buffet,” Arrington said Thursday. He noted that it has also been endorsed by former President Barack Obama.
Later, Maya MacGuineas, president of the nonprofit Committee for a Responsible Federal Budget and one of the expert witnesses called to testify before the House committee, confirmed that multiple organizations also supported the plan, in addition to all of the nonprofit’s board members. Americans for Prosperity, the Bipartisan Policy Center, the National Taxpayers Union, the Peter G. Peterson Foundation, the Progressive Policy Institute and Third Way have all endorsed a target 3% deficit-to-GDP as a path to a more sustainable fiscal future.
“There’s widespread, broad-based support [for this] at a time when we can agree on very little,” MacGuineas told the committee. “These are organizations that do not often agree, and they all do on the 3% target.”
MacGuineas echoed what others who advocated for the 3% target said, namely that it strikes the right balance between aspirational and achievable.
“We need a metric aggressive enough to reassure markets and lenders, but realistic enough that lawmakers will not just throw in the towel or resort to gimmicky workarounds. So, given its balance between meaningful and doable, we believe the 3% appears to be the closest thing to a ‘Goldilocks’ target that we have,” MacGuineas said.
Jonathan Burks, executive vice president for economic and health policy at the Bipartisan Policy Center and a former policy director for the House budget committee, testified about the importance of finding a target that both parties could get behind.
“There has to be a genuine political consensus on the benefits of keeping deficits to modest levels if the rules are to be honored,” Burks said, giving examples of other similar targets that were ultimately abandoned after just a few years.
The European Union, Burks mentioned, agreed to a Stability and Growth Pact in the late 1990s that limited member states’ government deficits to 3% of their GDP. But the pact has been breached so many times that last June, the EU had to reprimand nearly one-third of its members for violating the Pact’s deficit ceiling, Burks said. (The EU is comprised of 27 countries, and nine ran deficits beyond the 3% threshold, as Bloomberg reported.)
Similarly, in 1985, Congress enacted a law that “established a series of deficit targets with the goal of balancing the budget by 1991.”
“However, honoring [the] deficit targets would have required more aggressive fiscal tightening than was politically bearable,” Burks said, and so Congress abandoned that approach just five years later.
Jared Bernstein, the chair of former President Joe Biden’s Council of Economic Advisers, said that the 3% target was a “laudable goal,” but lawmakers that consistently endorse reducing spending as the means of getting there were simply unrealistic.
“No matter how often policymakers say they are displeased with the fiscal outlook, their actions – what economists call their ‘revealed preferences’ – show that our deficits are born of an unwillingness to raise the revenue we need to meet the spending policymakers believe is warranted,” Bernstein said.
Though Bernstein opposes President Donald Trump’s tariffs because they act as “a regressive tax, hitting middle- and low-income households,” he used them to underscore that “we can raise new revenues.”
The government should replace tariffs with “other revenue raisers that are not targeted at families with the least ability to absorb them,” Bernstein said.
