U.S. Long-Term Economic Outlook Gets Darker
In a Washington Post article last Friday, entitled, “CBO Paints Dire Portrait of Long-Term Revenue, Spending,” Lori Montgomery writes:
“The nation's long-term budget outlook has darkened considerably over the past six months, and President Obama's plan to extend an array of tax cuts and other policies adopted during the Bush administration has the potential to "create an explosive fiscal situation," congressional budget analysts reported yesterday.
“In a new report, the Congressional Budget Office found that extending the Bush administration tax cuts, reining in the alternative minimum tax and canceling a scheduled reduction in payments to Medicare doctors would dramatically slash tax collections at a time when federal spending would be "sharply rising." The resulting budget gap would drive the nation's debt over 100 percent of gross domestic product by 2023, the report says, and past 200 percent of GDP by the late 2030s.”
Yesterday, in one of their editorials, the Post raised the seriousness of their “dire” warning with the following title: “The Debt Tsunami: The CBO's latest warning on the long-term deficit is scarier than ever.” They point out:
“This huge mass of debt, which would stifle economic growth and reduce the American standard of living, can be avoided only through spending cuts, tax increases or some combination of the two. And the longer government waits to get its financial house in order, the more it will cost to do so, the CBO says.”
Here (require Adobe) is the Congressional Budget Office’s June “Long-Term Budget Outlook" that contains numerous charts and tables. In his blog about the release of their long-term outlook, the CBO director writes:
“CBO estimates that in the next two years, the federal government will record its largest budget deficits as a share of GDP since shortly after World War II. As a result of those deficits, federal debt held by the public will soar from 41 percent of GDP at the end of fiscal year 2008 to 60 percent at the end of fiscal year 2010. The higher debt results in permanently higher spending to pay interest on that debt (unless the debt is later paid off).”
Nicola Moore of the Heritage Foundation points out in a “web memo” today how entitlements “darken” the long-term outlook, noting the following from the CBO report:
“Almost all of the projected growth in federal spending other than interest payments on the debt comes from growth in spending on the three largest entitlement programs--Medicare, Medicaid, and Social Security.”
Finally, Sen. Judd Gregg (R) has an op-ed in Investor’s Business Daily wonders what The Founders would think of today’s debt, which could rise to 57% of GDP by the end of the year. Gregg concludes:
“The current budget plan puts us in over our heads, fiscally speaking, and we cannot continue to ignore the warning signals. Thomas Jefferson was right — no generation should take on more debt than it can pay off during its lifetime — and we should take his wise words to heart.”
And what does the House of Representatives do? Of course, they pass an energy/global warming/jobs bill that would make matters significantly worse.