CBO long-term budget outlook: The future's not looking so hot

Yep, it’s as daunting as the Congressional Budget Office director said it would be. The CBO today released the latest in its series of reports on the long-term budget outlook — and the Office’s nonpartisan projections show the national debt exploding at a mind-blowing pace in either of two scenarios. MarketWatch reports:

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The Congressional Budget Office said that under one scenario that adheres closely to laws now in place, total federal debt held by the public will grow from about 69% of GDP this year to 84% by 2035. That scenario assumes that the Bush-era tax cuts and other policies expire.

Under a second scenario that assumes changes to current law, the debt held by the public would reach 190% by 2035.

Importantly, the CBO found entitlements — Social Security, Medicare and Medicaid — and compounding interest payments on the debt to be the key drivers. The report also affirms the federal government’s latest entitlement program — Obamacare — will not lower health care costs. Mandatory federal spending on health care is projected to increase by 86 percent from 5.6 percent of GDP today to 10.4 percent of GDP over the next 24 years.

The American people understand spending cuts and tax cuts are the best way to grow the economy and create jobs — but they still fear changes to entitlement programs, according to a Bloomberg poll out today. The CBO report should remind voters why waiting to grapple with entitlement reform will only intensify the nation’s debt problem. Consider: Entitlement spending will increase from 10 percent of GDP in 2011 to 15 percent of GDP in 2035. As CBO budget director Doug Elmendorf has said, “Fiscal policy cannot be put on a sustainable path just by eliminating waste and inefficiency.”

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The report confirms a financial crisis is likely if the administration and Congress do nothing to reverse course.

“Growing debt also would increase the probability of a sudden fiscal crisis, during which investors would lose confidence in the government’s ability to manage its budget and the government would thereby lose its ability to borrow at affordable rates,” the report states.

Elmendorf will testify about the report at a hearing of Rep. Paul Ryan’s (R-Wis.) House Budget Committee tomorrow — but, so far, the Senate Budget Committee, under the leadership of Sen. Kent Conrad (D-ND), has not called a hearing to ask for additional details about this highly significant report. (Incidentally, Conrad’s press secretary has also not called me back to answer whether Conrad plans to call a hearing in the future.)

Ranking member Sen. Jeff Sessions (R-Ala.) said he finds that shockingly disappointing. His statement:

Today’s long-term outlook from the CBO reveals that [the] situation is even more dangerous than many realize. Our nation’s debt, driven by years of overspending, threatens us with a Greece-like calamity. CBO’s unnerving projections, released 784 days since the Democrat-led Senate has passed a budget, paint a sobering picture of what will occur if we do not act immediately to bring our spending under control. The CBO data also reaffirms that our surging debt is being spurred by excessive spending and insufficient growth—not because Washington isn’t taxing enough—and that excessive government borrowing is already slowing economic growth. …

Today’s report only further highlights the Democrats’ inexcusable refusal to pass a budget in 784 days, during which time we’ve spent more than $7 trillion. Making matters worse, Democrats haven’t scheduled a hearing to discuss this outlook—a hearing the GOP-led House Budget Committee has planned for tomorrow—another stunning decision in a time of fiscal crisis. I hope it’s a decision they will reverse.

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Same here.

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