Huge debt is incompatible with long-term growth. Yet sequestration’s arbitrary cuts — particularly to certain defense and domestic programs that provide the foundation and seed for future growth — make it far from optimal as a deficit-cutting action.
Our priority should be to reduce, in a rational manner, the ratio of debt to gross domestic product, which is about 75 percent. We need to get the debt curve to begin declining to, say, 72 percent of GDP over the next 10 years. The objective should be to do this while avoiding measures that would choke off the still-modest recovery. Sequestration-scale cuts done wisely can achieve this goal. The key is to achieve a virtuous cycle in which economic growth yields greater revenue and government spending declines relative to the size of the economy.
How to do this? We suggest that, for the good of the nation, each party agrees to achieve equal amounts of something neither wants to do: Republicans should produce, say, $500 billion in additional revenue over 10 years, and Democrats should identify $500 billion worth of reforms to entitlement programs over the same period.
Sequestration would be repealed. (Reductions in discretionary spending beyond those mandated by the initial provisions of the 2011 Budget Control Act should be sought, although they need be only $100 billion or so, given the substantial cuts already locked in law.)
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