1. PETERSON-PEW COMMISSION ON BUDGET REFORM
CO-CHAIRS As Policymakers Search for the Right Fiscal Tool,
BILL FRENZEL
Peterson-Pew Commission’s New Fiscal Toolbox Can Help
TIM PENNY
CHARLIE STENHOLM June 8, 2011
COMMISSIONERS In recent weeks, there has been significant talk about using targets, triggers,
BARRY ANDERSON
ROY ASH
caps, and failsafes in order to get our fiscal situation under control – in
CHARLES BOWSHER particular as policymakers like those involved in the Biden fiscal talks
STEVE COLL search for ways to couple a debt limit increase with deficit reduction. There
DAN CRIPPEN
VIC FAZIO
are plenty of tools available to help fix our broken budget, but which
WILLIAM GRADISON should we use? The new Fiscal Toolbox from the Peterson-Pew
WILLIAM GRAY, III Commission on Budget Reform (PPC) offers guidance in choosing the right
WILLIAM HOAGLAND
DOUGLAS HOLTZ-EAKIN instrument.
JIM JONES
LOU KERR
“We have lots of tools to choose from here – everything from spending
JIM KOLBE
JAMES MCINTYRE, JR. limits to balanced budget rules to debt targets,” said CRFB President and
DAVID MINGE PPC Commissioner Maya MacGuineas. “As we look at these various tools
JIM NUSSLE
to control our debt, it's important we use the right ones.”
MARNE OBERNAUER, JR.
JUNE O’NEILL
RUDOLPH PENNER The Peterson-Pew Commission, (www.budgetreform.org), comprised of a
PETER G. PETERSON
ROBERT REISCHAUER
bipartisan group of leading budget experts, has studied process tools like
ALICE RIVLIN targets and triggers for over two years and recommended a suite of
CHARLES ROBB reforms, including debt and savings targets to spur action, and spending
MARTIN SABO
GENE STEUERLE
caps to enforce a budget deal once it is in place. The Fiscal Toolbox is the
DAVID STOCKMAN latest resource from the Peterson-Pew Commission, which compares the
PAUL VOLCKER various mechanisms out there on a variety of measures.
CAROL COX WAIT
DAVID M. WALKER
JOSEPH WRIGHT, JR. “No one knows the perfect process changes to control the debt, and every
option has advantages and disadvantages,” said MacGuineas. “What we
PRESIDENT
MAYA MACGUINEAS
need to do is take the best parts of each plan to design the tool that will best
help policymakers to bring the debt under control.”
1899 L Street NW • Suite 400 • Washington, DC 20036 • Phone: 202-986-2700 • Fax: 202-986-3696 • www.crfb.org

2. The Committee for a Responsible Federal Budget
Targets, Triggers and Caps Comparison Grid
Peterson-Pew
Fiscal Commission President Obama Corker- Balanced Budget
Sustainable Debt Peterson-Pew Caps Bipartisan Policy Center
Debt Stabilization Debt Failsafe McCaskill CAP Amendments
Act (Longer-Term) SAVEGO
Process Trigger Act (S.J.Res. 10)*
(Medium-Term)
Stabilize the debt to
Stabilize the debt-to- Stabilize the debt Limit federal Eliminate the deficit and
Goals GDP ratio to 60% or Limit drivers of the debt Save agreed upon amount
GDP ratio to GDP ratio spending limit federal spending
below
Limits spending Balances the budget and
Sets annual savings targets
Sets annual savings After a budget plan has Uses rules to force Ensures stable or to 20.6% of limits outlays to 18% of
for discretionary spending,
targets by statute been put in place, limits action if budget is declining debt to GDP by the end GDP, beginning five
health care, and other
based on glide path Social Security, health projected to fall short of GDP ratio in of the decade fiscal years after
mandatory/revenue
Description intended to bring spending, and tax primary balance in second half of (GDP calculated ratification
initially crafted to achieve
debt to 60% of GDP expenditures to the 2015, or is projected to decade (or average based on
a fiscal target (60%
by the end of the amount that has been (or found to) rise as a deficit to GDP average of the (in addition, no
debt/GDP for BPC’s
decade budgeted for share of GDP after 2015 ratio of 2.8%) first 3 of the 4 legislation can increase
illustrative plan)
previous years) taxes)
Prohibition on
Across the board 3/5 majority requirement
consideration of any Sequestration for
Across the board spending to increase the debt
legislation that discretionary spending,
Enforcement spending cuts and Automatic adjustments Across the board sequestration ceiling
increases gross automatic spending cuts
Mechanism if revenue increases to Social Security, tax cuts on selected
spending or reduces and revenue increases for
Targets Not (possibly including expenditures, and health spending and tax 2/3 vote point of (Congress may enact
gross taxes health care and for other
Reached tax expenditure care spending expenditures order preventing additional enforcement
mandatory spending &
reductions) spending above to ensure
(Additional fail-safes revenue
the cap implementation)
can be considered)
None Exempts Social
Specified Courts cannot require
Security, Medicare
Exemptions from Exempts Social Security if increase in revenue to
Adjustments cannot None None benefits, and None
Enforcement scored as solvent enforce balanced budget
exceed 1% of GDP in means- tested
Mechanism requirement
a given year programs
Majority vote allows
Unspecified 2/3
additional spending or
mechanism to supermajority
Triggers waived after Process suspended if deficits during war and
ensure trigger does vote allows
two consecutive nominal GDP grows by 3/5 vote for “serious
not exacerbate spending cap to
Specified Escape quarters of negative less than 1% or a joint military threat to national
None economic None be exceeded
Valves real GDP growth or a resolution declares it security”
downturn or
similar measure of would exacerbate an
interfere with Emergency
economic weakness economic downturn 2/3 supermajority vote
national security spending is
allows any provision to
emergency exempt from cap
be waived
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3. The Committee for a Responsible Federal Budget
Peterson-Pew
Fiscal Commission President Obama Corker- Balanced Budget
Sustainable Debt Peterson-Pew Caps Bipartisan Policy Center
Debt Stabilization Debt Failsafe McCaskill CAP Amendments
Act (Longer-Term) SAVEGO
Process Trigger Act (S.J.Res. 10)*
(Medium-Term)
Debt/GDP and Entitlement Spending Deficit/GDP and Debt/GDP and Deficits and
What is Targeted? Debt/GDP and Savings Spending/GDP
Savings and Tax Expenditure Debt/GDP Deficit/GDP Spending/GDP
Is the Purpose to
Force Action or Force and Enforce Enforce Enforce Force Force Force Force
Enforce Decisions?
Temporary but
Is the Mechanism
replaced with new Permanent until new Temporary until savings
Temporary or Permanent Temporary Permanent Permanent
targets once initial budget enacted goal is reached
Permanent
goal is met
Does Enforcement
Mechanism
Include Automatic
Changes to Both Both Neither Both Both Spending Neither
Revenue,
Spending, Both, or
Neither?
Are Tax
Expenditures
Yes Yes Unspecified Yes Yes No No
Treated Similarly
to Spending?
Yes, a requirement for
Yes, opportunity for both the President’s
Yes, a requirement that
Congress to revisit Budget and
Is Proposal the President transmits a
policies, and the Congressional Budget
Accompanied by a budget which holds
President to exercise Unspecified Resolution include Unspecified No No
Process to outlays at or below
enhanced rescission proposals to stabilize
Facilitate Success? revenue and below 18
authority, if targets the debt and a fast-track
percent of GDP
are not met process for legislation
that does so
* Numerous balanced budget amendments have been proposed in the current Congress. Used here as an example is S.J.Res. 10, which is co-sponsored by all 47
Senate Republicans. For a more detailed list of balanced budget amendments and their provisions, go to http://crfb.org/blogs/scales-tip-among-senate-gop-
balanced-budget-amendment.
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