Budget dilemma is the most severe in 100 years
Wednesday 20 July 2011 - by Lawrence Goodman and Susan Hering
The stakes for the US economy are growing with each passing day of inaction on the fiscal front.
Such rules will face a greater challenge this time around, though. The deficit is deeper now. Mitigating factors that enhanced rules' success in the 1990s are absent now.
Most critically, it will be harder to design and enforce rules to control entitlements than to contain discretionary outlays.
- Third, the greatest deficit reduction historically has been achieved not by rules, but by bipartisan agreements to permanently reform spending and taxes.
The present budget dilemma is the most severe in at least 100 years. History suggests that what failed in the past will likely fail again.
Unfortunately, what worked in the past will succeed if and only if a negotiated agreement mandates sweeping changes in spending and definitive shifts in taxes.
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