Pew report shows no easy answers for taming debt

Findings by the Pew Fiscal Analysis Initiative show that without significant tax hikes or spending cuts, the federal debt will climb to the unprecedented level of 132 percent of annual gross domestic product (GDP), or $54 trillion, by 2035. 

Its study, "No Silver Bullet: Paths for Reducing the Federal Debt," was released Thursday and highlights the difficult task awaiting lawmakers that seek to rid the government of its debt. 

"Without policy changes, we risk significant damage to the long-term health and well-being of our economy," said Pew director Ingrid Schroeder in prepared remarks. "Lawmakers need to know how difficult it would be to solve the problem without following a multi-pronged strategy that includes changes in both spending and revenue."

Assuming the goal is to reach a debt-to-GDP ratio of 60 percent by 2025, getting there through cuts in discretionary spending alone would mean a 43 percent cut to programs by 2015.

A plan involving only entitlements would require a 22 percent cut, reducing the average Social Security benefit from $1,255 per month to $985 per month in 2015. 

And a strategy relying solely on tax increases would require a 32 percent increase in individual tax revenue, making the average tax liability go from $4,955 to $6,520.  

In contrast, the report finds combining both spending and revenue policies would require an across-the-board tax increase and a spending cut of about 7.5 percent for each in 2015 to achieve the debt-to-GDP ratio of 60 percent by 2025. 

The complete report can be found at www.pewtrusts.org.