Great news: Debt as percentage of GDP rises to post-WWII high
posted at 12:55 pm on June 30, 2010 by Ed Morrissey
The CBO delivers the bad news, which squarely falls on the Democrats and their four-year spending spree. Thanks to falling revenues from an economy that still shows no signs of significant growth and runaway federal expansion, US debt in comparison to GDP will rise to a high not seen since the US vanquished Japan and Nazi Germany 65 years ago:
The national debt will reach 62 percent of gross domestic product (GDP) by the end of this year, the nonpartisan Congressional Budget Office (CBO) said Wednesday.
The budget office said the debt will reach its highest percentage of GDP since the end of World War II. The jump is driven by lower tax revenues and higher federal spending in the recent recession.
Let’s recap how we got here. The Democrats replaced a free-spending GOP leadership in Congress in 2007, whose final annual federal budget was $2.7 trillion — which had increased over $700 billion in annual federal spending in six years. In the next three years, Democrats made Republicans look like a combination of Ebenezer Scrooge and Silas Marner by adding over a trillion dollars in annual spending in just three years.
What about the fourth year, for FY2011? Democrats have refused to produce a budget for 2011, so we won’t know … until after the midterms.
Furthermore, the entire exercise of ObamaCare hasn’t done anything to reduce real pressure on future debt, CBO director Douglas Elmendorf says:
CBO Director Douglas Elmendorf wrote in a blog post explaining the new report that under current laws, “federal spending on major mandatory healthcare programs will grow from roughly 5 percent of GDP today to about 10 percent in 2035 and will continue to increase thereafter.”
Keeping current policies in place would almost certainly force lawmakers to make steep spending cuts and raise taxes, Elmendorf argued, unless changes to address the problems were made sooner rather than later.
Er, wasn’t that the entire expressed point of ObamaCare — to reduce federal deficits by lowering health-care costs? Instead, it appears that ObamaCare has made it worse, according to Elmendorf:
That estimate includes all of the effects of the recently enacted health care legislation. … All told, CBO projects, the aging of the population and the rising cost of health care will cause spending on the major mandatory health care programs and Social Security to grow from roughly 10 percent of GDP today to about 16 percent of GDP 25 years from now if current laws are not changed. (By comparison, spending on all of the federal government’s programs and activities, excluding interest payments on debt, has averaged 18.5 percent of GDP over the past 40 years.)
All of that government control didn’t deflect the course of the deficit and national debt to any significant extent. Elmendorf notes that ObamaCare will “slightly reduce” federal spending, but not anywhere near enough to stave off financial ruin. It did nothing to address the actual driving forces of spiraling medical costs to the federal government, namely an aging population and expansion of membership in Medicare, Medicaid, and so on.
By now it should be obvious that we cannot solve the problems of the national debt and annual deficits by spending more. It’s time to start cutting government substantially and rethink our entire approach to entitlement programs before we drown in their debt.
Breaking on Hot Air