This week on Facing the Future, Marc Goldwein, Senior Vice President and Senior Policy Director at the Committee for a Responsible Federal Budget (CRFB), discussed a comprehensive “break glass in case of emergency” plan designed to prepare policymakers for future economic crises.
Economic shocks are inevitable, but the United States faces a uniquely challenging moment as it confronts the next downturn, with debt approaching historic highs. Goldwein highlighted the precarious fiscal position: “Debt is as high as it’s ever been, interest costs are as high as they’ve ever been. We’re running 6% of GDP deficits per year. We do not have the same fiscal space that we used to.” Past recessions, such as those triggered by the 2008 financial crisis and the COVID-19 pandemic, saw large-scale borrowing enabled by low starting debt levels and interest rates. However, that fiscal flexibility is no longer present, making a new approach essential.
The CRFB’s plan is a four-point framework aimed at balancing immediate economic needs with long-term fiscal responsibility. The first step focuses on tailoring the near-term policy response to the specific nature of the crisis. Goldwein explained, “If you’re in a typical demand-driven recession, then what you want is your highest bang for buck… incremental changes to unemployment benefits, food stamps, possibly aid to states.” For supply-side shocks, which are more complex, the approach must minimize inflation risks and avoid exacerbating debt problems.
The second part of the plan emphasizes fiscal credibility through what CRFB calls “Super PAYGO.” This mechanism requires that for every dollar borrowed in the near term, two dollars of offsets are implemented over the next decade. Goldwein stressed that this approach will “show credibly that whatever we’re going to borrow in the near term, we’re going to pay back, and then some.” The offsets involve common-sense, bipartisan savings such as eliminating tax loopholes and adjusting Medicare payments, which collectively could amount to hundreds of billions of dollars in savings.
The third element introduces an innovative default deficit reduction mechanism, essentially a fiscal “battery recharge” after a crisis. This involves freezing automatic indexing in tax brackets, Medicare payments, Social Security cost-of-living adjustments (COLAs), and discretionary spending levels until deficits are reduced to sustainable levels. Goldwein described it as “freezing things in place… until the time that Congress comes up with a better idea, or the deficit is under control.” The plan also includes a modest surtax on high earners and corporations. While a freeze is not the most targeted solution, Goldwein argued it is “far better than the alternative of waiting for the crisis to occur, or of inflating our way out of the situation.”
Finally, the fourth component calls for the establishment of a bipartisan fiscal commission charged with developing thoughtful, comprehensive reforms to replace the default deficit reduction measures. Goldwein underscored the importance of including members of Congress alongside independent experts to ensure the commission’s proposals are both practical and politically viable. “You can’t start by saying, we’re going to fix the debt, but we’re not going to look at Social Security, Medicare, or defense… Everything needs to be on the table.”
Goldwein also warned of the dangers if decisive action is not taken. The U.S. faces a potential debt crisis as interest rates rise above economic growth rates—a condition that can trigger a debt spiral. He explained, “When the debt does spin out of control, the markets aren’t gonna like it and I think the biggest risk is there’s a financial crisis. The markets look at the situation and they say, we don’t see a scenario that the U.S. is going to correct in time without some type of debt restructuring or inflation or default, and so they start demanding higher interest rates…there’s about $15 trillion of debt around the world that’s backing up the global financial system. All of a sudden, that loses value. Banks sell off. Banks’ balance sheets go under, we see failures of financial institutions, and basically a global financial crisis.”
Despite these challenges, Goldwein remains cautiously hopeful: “The United States always does the right thing when it runs out of all the other options.”
Hear more on Facing the Future. Concord Coalition Senior Advisor Bob Bixby hosts the program each week on WKXL in Concord, N.H., and it is also available via podcast. Join us as The Concord Coalition team discusses issues relating to national fiscal policy with budget experts, industry leaders, and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, Pandora, iTunes, Google Podcasts, Stitcher, or with an RSS feed. Follow Facing the Future on Facebook, and watch videos from past episodes on The Concord Coalition YouTube channel.
