News From the Swamp: CBO Debt Report
The CBO put a damper on Obama's rosy fiscal forecast with a warning about the long-term U.S. budget outlook.
The Congressional Budget Office put a damper on Barack Obama’s rosy fiscal forecast Tuesday with a warning about the long-term U.S. budget outlook. “Federal debt held by the public is now about 73 percent of the economy’s annual output, or gross domestic product (GDP),” according to the CBO report. “That percentage is higher than at any point in U.S. history except a brief period around World War II, and it is twice the percentage at the end of 2007” [emphasis added].
Furthermore, “CBO projects that federal debt held by the public would reach 100 percent of GDP in 2038, 25 years from now, even without accounting for the harmful effects that growing debt would have on the economy.” And make no mistake – there will be harmful effects.
Long-term projections are inherently uncertain given that Congress could raise taxes or increase spending even more in the interim. Anyone who thinks Congress will truly cut spending hasn’t been paying attention – spending only ever goes one direction, just at varying speeds. In fact, CBO projects federal spending will increase from 21% of GDP to an unsustainable 26% over the next quarter century.
Obama is busy crowing about “cut[ting] our deficits by more than half since I took office,” but increased tax revenue from his massive January tax hikes coupled with the slight reductions in spending growth that make up the sequester will only go so far. (As a side note, the current national debt of $16,699,396,000,000 is exactly the same as it has been for four straight months. Something’s quite fishy about that.)
The debt issue combined with ObamaCare are creating the perfect storm for potentially permanent economic decline. The looming debt-ceiling showdown is but a small part in a larger game.