Ten Economists Call Deficit a 'Severe Threat' to US

The budget deficit is so serious an issue that it can no longer be ignored by splits in government, a group of former members of the President’s Council of Economic Advisers wrote in an open letter in The Politico magazine Thursday.

In a letter to Congress and the president, 10 ex-chairman and chairwoman called for intense negotiations between both parties to take place in the wake of a report by the bipartisan National Commission of Fiscal Responsibility and Reform entitled "The Moment of Truth," issued in December.

The report, by co-chairmen Erskine Bowles and Alan Simpson, argues that the long-run federal budget deficit will pose a serious threat to the long-term recovery of the economy.

It was supported by 11 out of a panel of 18 Democrats and Republicans.

The group argues that despite tentative signs of a recovery in the US economy, long-term issues such as an aging population and rapidly rising health-care costs threaten to derail the recovery.

While the budget deficit is likely to shrink over the coming years as the economy recovers, the growing gap between spending and revenue will take a toll on private investment and economic growth.

These combined factors will encourage bond markets to turn against the US threatening an even larger financial crisis than in 2008.

"The Moment of Truth" report documents that the “problem is real and the solution will be painful,” and the group said that cutting wasteful government spending and raising taxes will not solve the situation. (read more)