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June 12, 2012

Finding a Bi-partisan Fiscal Rule for the US: An Interview with Maya MacGuineas

Posted By Carla Sateriale

Continuing our series of interviews with PFM professionals, research assistant Carla Sateriale spoke to Maya MacGuineas, president of the Committee for a Responsible Federal Budget and Director of the Fiscal Policy Program at the New America Foundation. Ms. MacGuineas is a non-partisan fiscal policy consultant and works to promote public understanding of budgetary issues.

Ms. MacGuineas, what originally captured your interest in budgeting issues?

I used to work on Wall Street during the mid-nineties, where I got the chance to observe how the bond market reacted to fiscal deficits. While the deficits at that time seem miniscule by today’s standards, they convinced me of the significance of sound fiscal policy.   

Is there a particular individual or publication which shaped your perspective?

One favorite book of mine is Hamilton’s Blessing by John Steel Gordon. It’s an economic history of the US debt, and paints a clear picture of both the positive and negative aspects of sovereign debt.  It’s quite engaging as both a policy debate and as a story.

It seems you are primarily a “policy person.” Do you feel that academia has a sufficiently important place in the fiscal policy arena?

Absolutely! Not only do I believe that academia has a place, but I am concerned that, if anything, academia does not produce enough research on fiscal policy. I frequently refer to the analysis of non-partisan organizations (including that of the IMF), and have done some research with Marty Feldstein about tax expenditures. However, I am not primarily an academic. My role is to take the academic studies and make them policy relevant.

We know that the US’ deficit issues have arisen from a variety of sources. What do you think is most critical for their resolution: institutional reform, educating the public, or simply restructuring large spending programs and/or raising taxes?

I think all three of these changes are necessary! Essentially, a broad-based campaign needs to be staged. The problem is not lack of solutions—we know what solutions will work, but we are not ready to face the oncoming fiscal ramifications of failing to act.

If you could make one institutional change within the US budgeting process, what would it be?

I believe that a big contributing cause of our budgeting problems is the partisan nature of budgeting. To overcome this, I would enforce stricter fiscal rules and limits on borrowing, so that the actual budget would follow through on what was planned.

If there was one message you’d like to convey to the public, what is it?

I can’t overstate that we are at a critical moment, in which we can either continue to delay the solution and spend too much, or we can come together as a nation and compromise. Ultimately, long-term entitlements need to be reformed; spending needs to be cut; and the tax code needs to be reformed to increase revenue. It’s a national challenge.

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