President Obama and Congress have already pushed through about $2.4 trillion in deficit reduction since the beginning of 2011, according to some calculations. For the deficit hawks that's been far too little, and for the deficit owls, it's been more than enough.
The Center for Budget and Policy Priorities puts itself somewhere in between, arguing that legislators need about $1.4 trillion more in deficit reduction over the next 10 years to put government spending on a sustainable trajectory.
That's the amount of deficit reduction that we'll need to achieve a 73 percent debt-to-GDP ratio by 2022, the CBPP calculates in a new paper. The group believes that ratio will be enough to ward off the potential negative consequences of excessive debt: crowding out domestic investment and prompting international credit markets to turn against the United States. "Stabilizing the debt during this decade will not permanently solve our fiscal problems; policymakers will need to enact additional deficit reduction for the long term," writes the CBPP's Richard Kogan. "But it would represent an important accomplishment."
Combined with the deficit reduction that's already been enacted through the Budget Control Act and the recent fiscal cliff deal, putting through $1.4 trillion more in deficit reduction would mean about $3.7 trillion in total fiscal contraction since the beginning of 2011.
The CBPP's baseline doesn't assume that the rest of the sequester will take effect or that Congress will have paid for a Medicare doc fix. So if Congress either let the $1.2 trillion sequester happen or replaced it with equal amount of deficit reduction, it would need just $200 billion more in deficit reduction to achieve the CBPP's target.
However, the CBPP also assumes that the business tax extenders would be paid for if they're extended again. If not, that would require an additional $400 billion in total deficit reduction to achieve a 73 percent debt-to-GDP ratio, raising the total deficit reduction needed to $1.8 trillion. Either way, legislators wouldn't have to do that much more than solve the sequester—or just do nothing and let the rest of the sequester take effect—to reduce the deficit to the CBPP's satisfactions.
Hawkish critics will argue that a 73 percent debt-to-GDP ratio is too high. The International Monetary Fund and the European Union have set the optimal ratio at 60 percent, for instance, to ensure that high deficits don't weigh down economic growth. On the flip side, the deficit owls believe that such targets (or any targets at all) for deficit reduction are arbitrary and end up hampering growth through austerity.