about the sustainability of federal retirement and medical insurance programs, many are pressing to supplement or expand those commitments.
There is no escape from the arithmetic of the long-term fiscal challenge. No one can estimate with any accuracy the risk of any crisis in the financing of the federal government, nor when any such crisis might occur. The committee considers it unlikely the federal government would default outright on its debt. Nor does it believe it likely that the United States would pursue a policy of deliberately inflating its currency to reduce the real cost of repaying debt. Such a policy, in any case, would not be sufficient by itself to escape the debt obligation, partly because much of the debt is short term or indexed for inflation and partly because benefits of the three biggest entitlement programs rise in tandem with inflation. The greater risk of a sudden government fiscal crisis caused by rising interest rates is that the nation would be forced to respond precipitously. A rushed, ill-considered budget response to the threat of a debt crisis might deprive people of needed public services or hobble the economy for many years. The damage to the country’s residents would be immediate, but the damage to the nation’s credibility and ability to manage its finances could be profound and long lasting. Even if the United States is able to avoid a full-blown financial crisis, it would increasingly find its options narrowed as it juggled competing demands. Policy makers would lose flexibility to cope with such events as recession, natural disaster, war, or terrorist attack.
Setting aside other priorities to address a seemingly distant, abstract fiscal challenge is asking a great deal of both leaders and the public. Both groups already must deal with many urgent matters. Yet the costs of inaction are potentially enormous. In a sense, all of the other goals that people value and pursue through government already are hostage to finding a politically feasible way to address the looming fiscal challenge.
The committee believes that this report will be helpful to both the public and the nation’s leaders in addressing the fiscal challenge through a distinctive approach:
We present a range of possible paths rather than a single solution. Because current policies cannot be sustained, Americans and their leaders must find a way to construct a sustainable budget. People hold many views on critical policy issues that reflect sharp differences in values and interests: These must be considered and balanced before the nation can find such a sustainable way. The committee’s paths can be a starting point for dialogue and compromise.