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President Obama Discusses Budget

A Short History of Deficit Reductions

Peter R. Orszag, Director

It’s been a day since the 2011 Budget was released, and analysts and journalists have written about what it means for individual agencies, specific issues, and states. But let’s not lose sight of the big picture. The President’s Budget represents an important step towards fiscal sustainability: it put forward $1.2 trillion in deficit reduction over the next ten years, even excluding savings from the assumed ramp-down in war funding over time. Including these war savings, the deficit reduction proposed in the President’s Budget rises to $2.1 trillion.

How does this compare with recent efforts at deficit reduction? As a share of the economy, this represents more deficit reduction than proposed in a President’s budget in over a decade. In fact, the previous Administration never submitted a budget that reduced the deficit, and this is the most deficit reduction in a budget as a share of the economy since President Clinton’s budget for 1997.

Let’s be clear: even with the substantial—and historic—deficit reduction proposed in this year’s Budget, we will still face unsustainable medium- and long-term deficits. And the Administration knows that more will need to be done to restore the nation to a fiscally sustainable path.

That’s why the President has called for the creation of a bipartisan Fiscal Commission to identify policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run. The only way to solve the remainder of our fiscal challenge is to solve it together, in a bipartisan fashion, and that’s what the Fiscal Commission will help to achieve. And over the long term, it’s imperative that we pass fiscally responsible health insurance reform that reduces the rate of health care cost growth over time.

All in all, this Budget spurs jobs creation, invests for future economic growth, and to support both goals over time, takes important steps toward fiscal sustainability.

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