President Obama and Mitt Romney agree: America’s debt situation is perilously close to a crisis. Mr. Obama inherited a $10.6 trillion national debt, which topped $16 trillion this Sept. 4. The federal government is spending $100 billion more than it takes in every month and has racked up $1 trillion-plus deficits for the past four years. It is on track to hit the national debt limit, currently set at $16.4 trillion, by late December.
Both candidates worry that a revolt in the bond market would send interest rates on US debt soaring, forcing politicians to find drastic and immediate reductions in government spending to get its fiscal house in order. But they differ sharply on how to to cope with a soaring national debt. Here are their views on government spending reductions, debt reduction targets, tax reform, the "fiscal cliff," and the national debt ceiling.
The difference between the two candidates in terms of proposed overall spending is about $400 billion. Former Massachusetts Governor Romney wants to cap federal spending at about 20 percent of the output of the economy, or gross domestic product (GDP), by the end of his first term. In that year, Mr. Obama’s budget (as scored by the Congressional Budget Office) projects government spending at 22 percent of GDP. At present, the federal government spends about 23 percent of GDP.
Obama has not called for a specific cap on federal spending but anticipates federal spending at about 24 percent of GDP during the last two years of his administration.
To put that $400 billion difference in context, that’s about 10 percent of the total amount of deficit reduction the country needs during the next decade to put itself on to a sustainable fiscal path, according to the president's National Commission on Fiscal Responsibility and Reform, known as Simpson-Bowles after co-chairs Alan Simpson and Erskine Bowles.
In other words, if Romney achieved that level of spending reductions or increased government revenues every year for the next 10, he will have achieved what bipartisan experts say is necessary to put the US on a sustainable path. (Assuming GDP stays about level, that is. If GDP goes up, the outlook improves.)
Obama has explicitly cited the Simpson-Bowles $4-trillion-over-10-years debt-reduction figure as the goal for future government spending reductions.
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