6.2: Debt Stabilization
ESTABLISH A DEBT STABILIZATION PROCESS TO ENFORCE DEFICIT REDUCTION TARGETS. Other Information:
Establish a debt stabilization process to provide a backstop to enforce savings and keep the federal budget on path to achieve
long term targets. The Commission proposal includes recommendations that would achieve enough savings to more than restore
primary balance—that is, a federal budget balanced excluding interest payments on the debt—by 2015. Achieving primary balance
for the budget would also stabilize the debt, meaning the debt would not grow as a percentage of GDP. At the beginning of
each year, OMB would report to the President and CBO would report to the Congress whether 1) the budget is projected to be
in primary balance in 2015; 2) whether the debt held by the public as a percentage of GDP is projected to be stable at 2015
levels for the following five years; and 3) beginning in fiscal year 2016, whether the actual debt-to-GDP ratio will exceed
the prior year’s ratio. In a year in which OMB indicates any one of these conditions has not been met, the President’s budget
would be required to include legislative recommendations that would restore primary balance in 2015 or, after 2015, stabilize
the debt-to-GDP ratio. If the Congressional budget resolution also shows that one of these conditions has not been met, the
resolution would be required to include instructions for stabilization legislation to bring the budget back within the deficit
or debt targets. This legislation would be considered under fast-track procedures similar to reconciliation. The legislation
could include changes in law governing spending and/or taxes, including changes in discretionary spending limits. Discretion
would be left to the committees of jurisdiction to determine the specific policies by which these goals are met. If Congress
cannot agree upon a budget resolution in a timely manner, and CBO’s report predicts one of these conditions has not been met,
then any Member may introduce a stabilization bill, and a motion to proceed to that bill shall be considered on the floor
of each House. Congressional action on stabilization action would be enforced by a supermajority point of order against any
legislation that would provide new mandatory budget authority or reduce revenues until a stabilization bill has been passed
in years during which a budget resolution includes a stabilization instruction. The stabilization process would be suspended
if nominal GDP grew by less than one percent in the prior year. The process could also be suspended by the enactment of a
joint resolution stating that stabilization legislation would cause or exacerbate an economic downturn. Additional enforcement
provisions to ensure Congressional action on stabilization legislation would strengthen this process. The Commission recommends
Congress consider an automatic failsafe to keep the budget on course to meet these targets if future Congresses cannot agree
on policies that achieve this result. The Commission believes it is important for Congress and the President to remain vigilant
to ensure the budget remains on a course to primary balance and a stable debt to GDP ratio. Previous budget enforcement mechanisms
that placed limits on the deficit failed because they attempted to use budget process as a substitute for the tough choices
needed to reduce the deficit. By contrast, this proposal provides a failsafe ensuring the fiscal goals envisioned by the Commission’s
recommendations actually materialize in the future. The Commission recommends an enforcement mechanism to ensure the budget
achieves primary balance by 2015 and the debt is stabilized thereafter. The Commission’s proposal would require action by
the President and Congress on budget stabilization legislation if the budget (excluding interest costs) is projected to have
a deficit in 2015, or if the debt held by the public has not stabilized thereafter. The debt stabilization process would include
fast-track procedures to facilitate changes in law necessary to protect the fiscal health of the federal budget. The debt
stabilization process recommended by the Fiscal Commission reflects a new standard for the President and the Congress to react
in a timely manner to fiscal imbalance. Requiring the President to provide detailed legislative changes in law with his budget,
coupled by the enactment of the Congressional budget resolution with directives to committees of jurisdiction to act by a
date certain, will provide accountability and transparency to the federal budget process.
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