Balancing the Budget When Unemployment Is Low « The Washington Independent

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Congress should enact two statutes to dramatically reduce future deficits. The first would be a normal unemployment balanced budget rule (“NUBAR”), requiring Congress every year to enact a planned federal budget that technicians in the nonpartisan Congressional Budget Office (CBO) estimate would be balanced next year if the economy’s unemployment rate is 6 percent. Note that NUBAR would permit Congress to plan a surplus as well as a balance but not a deficit.

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The second would schedule a gradual change in benefit formulas and earmarked tax rates in federal programs that contain them such as Social Security, Medicare and Medicaid.

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At the same time, Congress should enact a set of temporary tax cuts and expenditures to stimulate the economy. This legislation must contain a phase-down schedule so that these temporary measures are phased out as the unemployment rate, which is currently over 9 percent, falls below 9 percent, then 8 percent, then 7 percent, and are completely terminated when the unemployment rate falls to 6 percent. Note that these temporary measures would have no effect on NUBAR, because they would be completely terminated when the unemployment rate falls to 6 percent.