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CBO Warns: Long-term Debt Threatens to 'Overwhelm' Federal Budget
Guy Benson
Sep 17, 2013

The nonpartisan Congressional Budget Office is out with new debt and deficit projections, and has concluded that America's fiscal house remains in a state of dire disrepair. Despite some marginally positive news on medium-term deficits -- Kevin has more here -- our long-term debts and obligations are dangerously unsustainable. The Associated Presssummarizes CBO's core findings:

A new government study says federal health care and retirement programs are threatening to overwhelm the federal budget and harm the economy in coming decades unless Washington finds the political will to restrain their growth. The Congressional Budget Office report says government spending on health care and Social Security would double, relative to the size of the economy, in 25 years and that spending on other programs like defense, transportation and education would decline to its smallest level by the same measure since the Great Depression. The report is one of a series by the agency and other budget watchdogs warning that spiraling long-term debt threatens to crowd out private investment, raise interest rates and limit Washington's ability to respond to a financial crisis.

House Budget Committee Chairman Paul Ryan, perhaps best known for his string of attempts to corral these issues with needed reforms, pounced on the news. His bullet-point analysis:

A Large Debt Hurts Jobs — Debt held by the public is projected to grow rapidly as a share of the economy in the years ahead from 73 percent today to 100 percent in 2038. CBO warns that “the high and rising amount of [projected] debt . . . would have significant negative consequences for both the economy and the federal budget.”

Spending Drives the Debt — CBO projects that government spending will increase as a share of the economy from 20.8 percent today to 26.2 percent by 2038—a nearly 26 percent increase. The aging of the baby-boom generation, rising health-care costs, and Obamacare are “expected to steadily boost the government’s spending.”

Obamacare Won’t Help — The report warns that the President’s health-care law won’t stop the explosion in health-care costs. Mandatory spending on health care will increase by 74 percent from 4.6 percent of GDP today to 8.0 percent of GDP over the next 25 years. Over the next decade, Obamacare will account for over half the growth in government spending on health care.

Higher Taxes Will Cost Jobs — CBO warns that if we raise taxes, as the President and his party’s leaders insist, our economy will hit the brakes. The report says higher tax rates “would discourage people from working and saving, further reducing output and income.”

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