The Sustainability of U.S. Debt and Potential Reforms: Fiscal Rules, Spending and Taxes, and a Fiscal Commission

Abstract In this study, we assess current projections of U.S. deficits and debt, establishing the recent history, causes, and consequences of the growing fiscal gap. We review the fiscal consolidation literature, finding successful debt reductions primarily focus on spending reforms. In the U.S. context, we assess options to reform the budget process, major spending programs, and taxes. We simulate six potential changes in U.S. tax policy that would substantially alter tax revenues, finding substantial effects on the economy over the long run that tend to reduce the impact on the debt burden, leaving the debt‐to‐GDP ratio on an unsustainable course.