There are important considerations that recommend a gradual approach to bringing down the deficit. There is considerable uncertainty on the speed and vigor of the economic recovery, and continuing high levels of unemployment are almost a certainty. Dramatic cuts in spending or a rise in taxes could nip an economic recovery in the bud. Bringing unemployment down has to be a top priority. Furthermore, the current ambiguity surrounding several major aspects of the federal budget, including the cost of health care programs and defense spending, suggests we should take a gradual approach.
These uncertainties make it unwise to adopt a path to budget balance that is overly restrictive. This does not mean that we should postpone any action until all of the uncertainty disappears. It merely underscores the need to choose a path that is attainable and responsible, but will not excessively constrain policymakers as the appropriate course becomes clearer. Deadlines should not be too soon and the intermediate steps not too drastic.
Setting an ultimate target for complete budget balance in 2020 allows for a range of unexpected events along the way. This path serves the goal of sensible fiscal policy, as long as we return to the path, even as circumstances require deviation. But a long-term plan for addressing the deficit needs clear benchmarks along the way to be credible.
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