Budget Issues Being Overlooked
July 28, 2016 at 4:25 p.m.
By Gary [email protected]
While we are being regaled with news of shootings, the latest Donald Trump foibles or Miley Cyrus’ rear end, there are some significant things going on that command very little attention.
Earlier this summer, the Congressional Budge Office released its long-term budget outlook.
I realize that CBO reports can be a bit wonky, but seriously, this is the stuff that has the potential to sink this nation and nobody – I mean nobody – seems to care.
Here you go:
The long-term outlook for the federal budget has worsened dramatically over the past several years, in the wake of the 2007–2009 recession and slow recovery.
Between 2008 and 2012, financial turmoil and a severe drop in economic activity, combined with various policies implemented in response to those conditions, sharply reduced federal revenues and increased spending. As a result, budget deficits rose: They totaled $5.6 trillion in those five years, and in four of the five years, they were larger relative to the size of the economy than they had been in any year since 1946. Because of the large deficits, federal debt held by the public soared, nearly doubling during the period. It is now equivalent to about 74 percent of the economy’s annual output, or gross domestic product (GDP) — a higher percentage than at any point in U.S. history except a seven-year period around World War II.
So what’s the budget outlook for the next 10 years?
The economy’s gradual recovery from the recession, the waning budgetary effects of policies enacted in response to the weak economy, and other changes to tax and spending laws will cause the deficit to shrink in 2015 to its smallest percentage of GDP since 2007, CBO projects — 2.7 percent, a much smaller percentage than the recent peak of nearly 10 percent in 2009. Throughout the next decade, however, an aging population, rising health care costs per person, and an increasing number of recipients of exchange subsidies and Medicaid benefits attributable to the Affordable Care Act would push up spending for some of the largest federal programs if current laws governing those programs remained unchanged
Moreover, CBO expects interest rates to rebound in coming years from their current unusually low levels, raising the government’s interest payments on debt.
Long term, the CBO said spending on Social Security, Medicare, Medicaid, Obamacare subsidies and other healthcare programs will rise from an average 6.5 percent of gross domestic product over the past 50 years to 14.2 percent of GDP by 2040.
The federal debt will rise from 74 percent of economic output today to 103 percent by 2040.
See, that’s just no way to run a country
I like how the CBO always notes that their projections are based on the assumption that “current laws governing those programs remain unchanged.”
The implication is that things might just get better if policymakers in Washington change those programs.
But if history is any guide, I can say with certainty that they’ll change the programs, all right. Only not for the better. They’ll likely find a way to spend more tax dollars, not fewer.
The net result, of course, could be disastrous. This country has a serious debt problem and we really need to fix it.
We need to fix the tax code. It needs to be simplified. It needs to be fairer and less of an impediment to economic growth.
We need to alter the trajectory of Social Security spending to make it sustainable.
We have to figure out how to curb the cost of health care.
We have to deal with crumbling infrastructure.
None of this can happen unless we get the debt under control.
Now, these are some daunting problems to be sure, but it’s not like they’re insurmountable.
Problem is, our current “leaders” in Washington simply don’t have the courage to take the necessary steps.
They don’t even want to talk about it. Of all the things you’ve heard said by politicians so far in this election cycle, have you heard one of them say, “You know, we’ve got some hard fiscal choices to make?”
Have you heard any of them address any of these problems or propose solutions?
No way.
They don’t address it because they know it’s not what voters want to hear. Voters, apparently, just want to hear that somebody is going to “Make America Great Again” and that’s good enough for them.
Voters want all manner of federal goodies, and oh, by the way, how about some lower taxes to boot.
Politicians know it doesn’t work that way, but they simply refuse to make hard choices. They just punt the problem into the next election cycle.
Soon enough, these problems will threaten the very fabric of the nation as the government edges closer and closer to defaulting on its obligations.
It’s time for everyone – voters and politicians – to prepare for some leaner times.
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While we are being regaled with news of shootings, the latest Donald Trump foibles or Miley Cyrus’ rear end, there are some significant things going on that command very little attention.
Earlier this summer, the Congressional Budge Office released its long-term budget outlook.
I realize that CBO reports can be a bit wonky, but seriously, this is the stuff that has the potential to sink this nation and nobody – I mean nobody – seems to care.
Here you go:
The long-term outlook for the federal budget has worsened dramatically over the past several years, in the wake of the 2007–2009 recession and slow recovery.
Between 2008 and 2012, financial turmoil and a severe drop in economic activity, combined with various policies implemented in response to those conditions, sharply reduced federal revenues and increased spending. As a result, budget deficits rose: They totaled $5.6 trillion in those five years, and in four of the five years, they were larger relative to the size of the economy than they had been in any year since 1946. Because of the large deficits, federal debt held by the public soared, nearly doubling during the period. It is now equivalent to about 74 percent of the economy’s annual output, or gross domestic product (GDP) — a higher percentage than at any point in U.S. history except a seven-year period around World War II.
So what’s the budget outlook for the next 10 years?
The economy’s gradual recovery from the recession, the waning budgetary effects of policies enacted in response to the weak economy, and other changes to tax and spending laws will cause the deficit to shrink in 2015 to its smallest percentage of GDP since 2007, CBO projects — 2.7 percent, a much smaller percentage than the recent peak of nearly 10 percent in 2009. Throughout the next decade, however, an aging population, rising health care costs per person, and an increasing number of recipients of exchange subsidies and Medicaid benefits attributable to the Affordable Care Act would push up spending for some of the largest federal programs if current laws governing those programs remained unchanged
Moreover, CBO expects interest rates to rebound in coming years from their current unusually low levels, raising the government’s interest payments on debt.
Long term, the CBO said spending on Social Security, Medicare, Medicaid, Obamacare subsidies and other healthcare programs will rise from an average 6.5 percent of gross domestic product over the past 50 years to 14.2 percent of GDP by 2040.
The federal debt will rise from 74 percent of economic output today to 103 percent by 2040.
See, that’s just no way to run a country
I like how the CBO always notes that their projections are based on the assumption that “current laws governing those programs remain unchanged.”
The implication is that things might just get better if policymakers in Washington change those programs.
But if history is any guide, I can say with certainty that they’ll change the programs, all right. Only not for the better. They’ll likely find a way to spend more tax dollars, not fewer.
The net result, of course, could be disastrous. This country has a serious debt problem and we really need to fix it.
We need to fix the tax code. It needs to be simplified. It needs to be fairer and less of an impediment to economic growth.
We need to alter the trajectory of Social Security spending to make it sustainable.
We have to figure out how to curb the cost of health care.
We have to deal with crumbling infrastructure.
None of this can happen unless we get the debt under control.
Now, these are some daunting problems to be sure, but it’s not like they’re insurmountable.
Problem is, our current “leaders” in Washington simply don’t have the courage to take the necessary steps.
They don’t even want to talk about it. Of all the things you’ve heard said by politicians so far in this election cycle, have you heard one of them say, “You know, we’ve got some hard fiscal choices to make?”
Have you heard any of them address any of these problems or propose solutions?
No way.
They don’t address it because they know it’s not what voters want to hear. Voters, apparently, just want to hear that somebody is going to “Make America Great Again” and that’s good enough for them.
Voters want all manner of federal goodies, and oh, by the way, how about some lower taxes to boot.
Politicians know it doesn’t work that way, but they simply refuse to make hard choices. They just punt the problem into the next election cycle.
Soon enough, these problems will threaten the very fabric of the nation as the government edges closer and closer to defaulting on its obligations.
It’s time for everyone – voters and politicians – to prepare for some leaner times.
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