The looming deficit problem
THE CONGRESSIONAL Budget Office released an update to its budget outlook this week, projecting that the federal deficit will rise this fiscal year for the first time since 2009. Partly this is a quirk of the calendar that moved some payments to this year’s budget window. But the more significant part of the story is that spending on entitlement programs — mainly Medicare and Social Security — rose by 6 percent. The bigger deficit will push the national debt to 77 percent of gross domestic product, the highest level since 1950, this year.
Though the rise in the deficit undercuts Democrats’ boasts, at the moment neither that increase nor the debt level are cause for extreme alarm. What is alarming is the medium- and long-term trend. By 2026, the CBO expects that the federal government will spend 23.1 percent of GDP, up from 21.1 percent this year, an increase driven by a nominal 70 percent rise in entitlement spending and a nominal tripling of interest payments. The CBO even factored in spending constraints of the sort that Republicans typically call for — on discretionary programs such as public health and public broadcasting — assuming that discretionary spending would hit the lowest level since 1962.
The underlying problem is that the baby boomers will retire and draw on government benefits programs, particularly Medicare, even as medical costs rise. Without reforming the entitlement programs, raising taxes or, realistically, both, the debt will hit 86 percent of GDP by 2026 and get much worse from there. By 2046, the CBO warns, the debt could equal 154 percent of the economy. That is dangerous for many reasons.
In the face of this peril, Donald Trump has proposed a massive tax cut and Hillary Clinton has proposed expanding Social Security. Neither has a believable plan for dealing with the country’s long-term budget imbalance.
The CBO numbers do not argue for immediate, painful austerity. The country requires significant investment in infrastructure, among other things, and now would be a good time to get to it. The figures also do not mean that the country’s promise to seniors — providing decent health care and a baseline retirement income — need to be violated. For now, relatively modest reforms combined with reasonable tax increases would set the country on a much better path.
But if the nation’s leaders continue to stall in the face of demagogic opposition to these relatively modest measures, future generations will not have such benign options. They will instead have to decide between more radical reform of treasured entitlement programs, much larger tax hikes or hollowing out everything else Americans rely on the government to do, from building roads to disease control to defense.
THE CONGRESSIONAL Budget Office released an update to its budget outlook this week, projecting that the federal deficit will rise this fiscal year for the first time since 2009. Partly this is a quirk of the calendar that moved some payments to this year’s budget window. But the more significant part of the story is that spending on entitlement programs — mainly Medicare and Social Security — rose by 6 percent. The bigger deficit will push the national debt to 77 percent of gross domestic product, the highest level since 1950, this year.
Though the rise in the deficit undercuts Democrats’ boasts, at the moment neither that increase nor the debt level are cause for extreme alarm. What is alarming is the medium- and long-term trend. By 2026, the CBO expects that the federal government will spend 23.1 percent of GDP, up from 21.1 percent this year, an increase driven by a nominal 70 percent rise in entitlement spending and a nominal tripling of interest payments. The CBO even factored in spending constraints of the sort that Republicans typically call for — on discretionary programs such as public health and public broadcasting — assuming that discretionary spending would hit the lowest level since 1962.
The underlying problem is that the baby boomers will retire and draw on government benefits programs, particularly Medicare, even as medical costs rise. Without reforming the entitlement programs, raising taxes or, realistically, both, the debt will hit 86 percent of GDP by 2026 and get much worse from there. By 2046, the CBO warns, the debt could equal 154 percent of the economy. That is dangerous for many reasons.
In the face of this peril, Donald Trump has proposed a massive tax cut and Hillary Clinton has proposed expanding Social Security. Neither has a believable plan for dealing with the country’s long-term budget imbalance.
The CBO numbers do not argue for immediate, painful austerity. The country requires significant investment in infrastructure, among other things, and now would be a good time to get to it. The figures also do not mean that the country’s promise to seniors — providing decent health care and a baseline retirement income — need to be violated. For now, relatively modest reforms combined with reasonable tax increases would set the country on a much better path.
But if the nation’s leaders continue to stall in the face of demagogic opposition to these relatively modest measures, future generations will not have such benign options. They will instead have to decide between more radical reform of treasured entitlement programs, much larger tax hikes or hollowing out everything else Americans rely on the government to do, from building roads to disease control to defense.
