Tackling huge budget deficits and growing debt is essential for the United States to avoid a financial market crisis that would push interest rates higher and severely damage the U.S. economy, many economists have warned.
Compromise and statesmanship will be needed to cut spending and raise revenues to narrow the budget gap, and that might not be possible in the current political environment, says at least one experienced budget expert.
“We’re certainly going to have a more fiscally conservative Congress next year,” Rudolph Penner, a former Congressional Budget Office director told a U.S. Chamber of Commerce forum. “The Tea Party, if nothing else, has certainly moved both the Republicans and Democratic Party to the right.”
However, that may not translate into a deficit-reducing budget deal that can pass the House of Representatives and the Senate and then get signed by President Barack Obama, he said.
“A real problem here is that the Tea Party is going to scare the bejeebers out of any Republican that is talking about compromise for fear of what will happen in the next primary,” Penner said. “There is no way we’re going to get out of this problem without a compromise between the two parties.”