A Balanced Plan to Avert the Sequester and Reduce the Deficit

President  Obamas plan to a avert the forthcoming sequester.
 A Balanced Plan to Avert the Sequester

CBO ANALYSIS OF AUGUST 1 BUDGET CONTROL ACT
"The Congressional Budget Office (CBO) has estimated the impact on the deficit of the Budget Control Act of 2011, as posted on the Web site of the House Committee on Rules on August 1, 2011. The legislation would:

Establish caps on discretionary spending through 2021;
Allow for certain amounts of additional spending for "program integrity" initiatives aimed at reducing the amount of improper benefit payments;

Make changes to the Pell Grant and student loan programs;

Require that the House of Representatives and the Senate vote on a joint resolution proposing a balanced budget amendment to the Constitution;

Establish a procedure to increase the debt limit by $400 billion initially and procedures that would allow the limit to be raised further in two additional steps, for a cumulative increase of between $2.1 trillion and $2.4 trillion;

Reinstate and modify certain budget process rules;

Create a Congressional Joint Select Committee on Deficit Reduction to propose further deficit reduction, with a stated goal of achieving at least $1.5 trillion in budgetary savings over 10 years; and

Establish automatic procedures for reducing spending by as much as $1.2 trillion if legislation originating with the new joint select committee does not achieve such savings..."

Reducing the Budget Deficit: The President’s Fiscal Commission and Other Initiative
"President Obama created a bipartisan fiscal commission tasked with putting the nation on a
sustainable fiscal path. The commission had two main goals: balancing the budget excluding net
interest payments by FY2015 and examining ways to achieve fiscal sustainability over the long
run. The Fiscal Commission’s final report contained recommendations that would 1) reduce the
deficit by a combined $4 trillion by FY2020; 2) lower the budget deficit to 2.3% of GDP by
FY2015; 3) reduce tax rates and tax expenditures; 4) cap revenue collection at 21% of GDP; 5)
ensure the solvency of Social Security; and 6) reduce the federal debt to 60% of GDP by FY2023
and 40% by FY2035. In order to achieve these savings, the plan includes cuts to both security and
non-security discretionary programs, health care cost containment, additional mandatory savings
through cutting agriculture subsidies and the civil service retirement system, Social Security
reforms, comprehensive tax reform, and budget process changes.

This report discusses why the federal government’s fiscal path is unsustainable and provides an
overview of proposals of selected groups that have published detailed recommendations on how
to return the federal budget to a sustainable course..."

Is the U.S. Current Account Deficit Sustainable?
"America’s current account (CA) deficit (the trade deficit plus net income payments and net unilateral transfers) rose as a share of gross domestic product (GDP) from 1991 to a record high of about 6% of GDP in 2006. It began falling in 2007, and reached 3% of GDP in 2009. The CA deficit is financed by foreign capital inflows. Many observers have questioned whether such large inflows are sustainable. Even at 3% of GDP, the deficit is probably still too large to be permanently sustained, and many economists fear that the decline is temporary and caused by the recession. Further, a large share of the capital inflows have come from foreign central banks in recent years, and some are concerned about the economic and political implications of this
reliance. Some fear that a rapid decline in capital inflows would trigger a sharp drop in the value of the dollar and an increase in interest rates that could lower asset values and disrupt economic activity. However, economic theory and empirical evidence suggest that the most plausible scenario is a slow decline in the CA deficit, which would not greatly disrupt economic activity because production in the traded goods sector would be stimulated..."