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The debate over the US federal budget is polarized. Republicans and Democrats want to cut the deficit and national debt – but agree on little else. The Hamilton Project brought experts together to examine the root causes of the deficit. Drawing on existing research and recommendations, they offer ideas based more on facts than on ideology. Their suggestions highlight a range of issues, including misplaced incentives and moral hazards that encourage excessive expenditure and imprudent behavior. The proposals are not easy reading – the terminology is often technical, and some of the ideas are more controversial than they might seem at first blush – yet the insights are fresh. getAbstract recommends this compilation to policy makers, economists, and students of finance and economic development.


The Nation’s Future

Those debating the US federal budget deficit agree that the current level of debt is unsustainable, but they concur on little else, since they are disputing a vision not just of fiscal policy but of the nation’s future. The US confronts high unemployment, falling real wages and increasing inequality, plus the threat of declining competitiveness in the global economy. Any proposal to cut the deficit will affect these concerns, and the health and nature of American society. In the past, the federal government played a key role in issues that shaped the future vitality of the nation, such as infrastructure, education and research. However, the 2013 sequester is set up to reduce the budget for “domestic nondefense discretionary spending” to “historic lows as a share of GDP,” limiting government’s role in these sectors. In the short term, policy makers have been able to curb the budget deficit with a range of measures, including the sequester. Expansion of earned benefits payments could mean the deficit will increase in the long term, and a mounting deficit would limit the US government’s ability to respond to its challenges.

The Hamilton Project commissioned...

About the Authors

Michael Greenstone and Adam Looney are senior fellows at the Brookings Institute’s Hamilton Project, a nonprofit public policy organization, where Karen Li is a policy coordinator and Max Harris and Jeremy Patashnik are research assistants.

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