The Congressional Budget Office released its latest forecast of the federal government’s financial future today. It’s awful. Really, really awful. Here are some lowlights, courtesy of the House Budget Committee:
Government spending will increase by nearly 70 percent over the next 25 years, driving “an unsustainable explosion of debt.”
Growing debt will increase “the likelihood of a devastating crisis,” in which “investors lose confidence in the government’s ability to manage its budget, and the government would thereby lose its ability to borrow at affordable rates.” It’s a point that bears repeating: fiscal Armageddon will begin, not when all the budget spreadsheets crash, but when the smart investors believe such a crash is inevitable, and it’s time to head for the hills.
Interest on the national debt will consume 9 percent of our entire economy by 2035. They’re gobbling up about 1 percent today. Keep that in mind the next time some Keynesian academic tries to convince you that government spending does not destroy jobs, and what we really need is a fresh round of slush-fund “stimulus” spending.
The CBO report, by the way, allows for “both debt and interest rates rising over time,” but I don’t believe it factors in the enormous increase in interest rates that would hit us if America loses its AAA credit rating. That would be the kind of “devastating crisis” they warned about, and which some analysts believe has become highly probable, but the CBO doesn’t usually account for such variables. The interest on the debt could easily double or triple if our credit rating heads south.
The national debt is growing at a rapidly accelerating pace. Total debt will “overtake the size of the entire U.S. economy this year.” Last year, the CBO projected our debt would reach 80 percent of Gross Domestic Product in 2035. It has now revised this projection to a staggering one hundred and ninety percent of GDP.
Mandatory government spending on health care will increase by 86% over the next 25 years. Again, that figure does not take the ObamaCare-prompted collapse of private insurance companies and health care providers into account. Wait until the tidal wave of newly uninsured employees slams into the federal exchange programs, and Medicaid eligibility is expanded again.
Responding to the new CBO report, Rep. Paul Ryan (R-WI), author of the Republicans’ “Path to Prosperity” budget proposal, warned: “The oncoming crisis is not just a problem for the future. It is actively hurting job creation today, as businesses hold back on expansion out of concerns that we are headed for a future of massive tax increases and higher interest rates. The President has yet to produce a serious budget that would prevent this crisis, and the Senate has failed to pass any budget for 784 days. This leadership deficit fails to inspire confidence and contributes to the jobs deficit millions of American families are experiencing today.”
The absolute and total failure of leadership from the Democrat Party on this issue is simply staggering. They’re not presenting debatable alternatives. They’re shrieking that anyone who takes the coming crisis seriously wants to kill women and old people. Tiny spending cuts amounting to no more than $35 billion were treated as an assault on democracy. Senate Majority Leader Harry Reid famously said that he doesn’t plan to worry about Social Security for another 20 years.
There is a tendency to treat our debt and deficit as imaginary numbers – variables that can be adjusted through political will. If $14 trillion in debt is not enough, then Congress can just wave its magic wand and raise the debt ceiling to $16 trillion, $20 trillion, or whatever they want.
In reality, the debt ceiling is not an alarm with a snooze bar. Debt must be financed, and the CBO report makes it clear that the government is running out of even the most desperate methods of doing so. Recourse to previous desperate measures has left us buried under insane interest payments.
The CBO generally undersells government fiscal crises, as you can see from the dramatically revised projections of the national debt in this year’s report. That’s because they work under certain assumptions, which do not account for the feedback loop of the private sector reacting to government actions, and therefore affecting the amount of funding available for the government. As horrible as today’s report is, remember that it’s also unrealistically optimistic.
Today, a group of House and Senate representatives is holding a press conference to announce their support for the “Cut, Cap, and Balance” pledge. Signatories include Senators Jim DeMint (R-SC) and Marco Rubio (R-FL), and Representative Ron Paul (R-TX), who was the first 2012 presidential candidate to sign. They’re staking out ground for insisting on a spending cap and balanced budget amendment, in advance of the latest “debt ceiling” crisis flashpoint, which is due on August 2.
Florida Republican Senate candidate Adam Hasner, the first national candidate to sign the pledge, responded to the new CBO report by declaring, “Anyone who says we can save America without entitlement reform is lying.” They won’t be able to get away with lying for much longer. Unfortunately, you won’t be able to do anything about it for much longer.
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