Reducing Long-Term Deficits

Federal Spending Target of 21% of GDP Is Inappropriate Benchmark

Some have suggested that the President’s Commission on Fiscal Responsibility and Reform should target spending at no more than 21 percent of GDP, the historical average of the last four decades.

Such recommendations, however, fail to take account of fundamental changes in society and government — the aging of the population, substantial increases in health care costs, and new federal responsibilities in areas such as homeland security, education, and prescription drug coverage for seniors.  These factors make the expenditure levels of several decades ago inapplicable today. 

Targeting federal expenditures at their average level for decades back to 1970 risks draconian cuts in Social Security, Medicare, and an array of other vital federal activities.

Read more

More: Federal Budget Analyses