The Congressional Budget Office (CBO) released their latest “Long Term Budget Outlook” last week. Looking ahead thirty years, the report paints a dire picture of our fiscal future. Here are the three big topline takeaways:
Federal debt held by the public currently clocks in at 77 percent of gross domestic product (GDP), the highest level since the end of World War II.
This debt is expected to skyrocket to a whopping 150 percent of GDP by 2047 - a mere thirty years away.
The biggest debt-drivers are (unsurprisingly): Social Security, health care programs, and interest on the national debt - the costs of which will soon outpace revenues at practically an exponential rate.
It might be hard to imagine what a 150 percent debt-to-GDP ratio looks like, so here are some real life examples. CBO’s estimates would put our economy in the “a little worse than Lebanon, but not quite as bad as Greece” territory, hardly a rosy prospect.
Even record economic growth wouldn’t be enough to close the widening revenue and spending gap. The larger that grows, the harder it will be to reverse. That’s because the chance that we could experience enormous growth dims as debt increases, which in turn creates a drag on the economy. Taking on more debt comes with more interest payments. Over time, this hole we keep digging brings us ever closer to a fiscal crisis.
Fiscal watchdogs, including NTU, have been howling about entitlements for years, suggesting modest changes, such as increasing the retirement age and additional means testing. If done soon enough, such changes would create big savings in the long term. Unfortunately, based on the CBO’s latest figures, the window might be closing on these types of less drastic, commonsense measures. Dr. Laurence Kotlikoff of Boston University explained recently on Marketplace, “Most of these things that are being considered are too little, too late. We really need a very fundamental reform to fix this system for good.”
That’s just one of the reasons that taxpayers were disappointed the House of Representatives was unable to pass the American Health Care Act. In addition to critical Obamacare provisions, the legislation would have enacted one of the most significant entitlement reforms in decades in the form of Medicaid block grants and per-capita allotments. This Medicaid overhaul comprised the bulk of the more than $300 billion in deficit reductions taxpayers could have expected over the next ten years.
Fundamental entitlement reform is one area where Congress can’t expect leadership from the Administration and must have the political fortitude to go it alone. The recently released a “skinny budget,” but wholly ignored the pressing need to address entitlement spending. Likewise, a supplemental spending request for additional Pentagon dollars and a down payment on the proposed border wall, were only partially paid-for. Finally, it’s unclear, as of yet, whether the promised infrastructure package would further weigh down our debt.
As we teeter on the brink of “too little, too late,” it has never been more important for Congress to be bold, to buckle down, and make the tough decisions necessary to right this ship.