By John Shaw

WASHINGTON (MNI) - A group of leading U.S. budget experts, working under the auspices of the Peterson-Pew Commission on Budget Reform, issued a detailed report Monday which calls on the American policymakers to work to stabilize the debt to GDP level at 60% -- and then gradually bring it down to about 40%

In the report, the group said the magnitude of the U.S.'s fiscal problems can't be fixed immediately and it even warned that "rushing the process could harm the economy, choking off the budding recovery."

"But to buy some breathing room, the United States must show its creditors that it is serious about stabilizing the federal debt over a reasonable timeframe. Both spending cuts and tax increases will be necessary," the panel said.

The panel outlined a process to begin stabilizing the nation's public debt which grew from 41% of GDP to 53% of GDP in one year and is on pace to reach 85% of GDP in 2018, 100% of GDP in 2022 and 200% of GDP in 2038.

The first goal, the group argued, is for policymakers to commit to stabilize debt at 60% of GDP by 2018.

"We believe that the 60% goal is the most ambitious yet realistic goal that can be achieved in this timeframe," the commission said.

"A more ambitious target could easily prove to be such a heavy political lift that lawmakers would not embrace it or it would not be credible," it added.

The panel said that policymakers should develop a "specific and credible debt stablization plan" by 2010 and begin implementing it in 2012.

"Some policymakers will no doubt try to use the struggling economy as an excuse for delay. Keep in mind however, that not putting a plan in place could derail the economic recovery," the panel said.

The commission added that policymakers should pledge to reach the goal of debt at 60% of GDP by 2018 and then gradually ratchet it down toward the U.S.'s fifty year average of below 40%.

To accomplish this, both spending cuts and tax increases must be part of a deficit reduction package, the commission said.

"Reforms in programs that are growing faster than the economy -- notably Medicare, Medicaid, Social Security and certain tax policies -- afford the best opportunities for savings and will provide the greatest benefits to longer term debt stability," it added.

"Implementing reforms that slow the growth of government spending, keep revenue apace with spending, and are conducive to economic growth will be critical to bringing down the debt levels further," the panel said.

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