The U.S. economy will rebound strongly over the next two years then settle into a more normal economic cycle with steady but slow growth, albeit significantly less than in the 1980s and 1990s, the Congressional Budget Office said Monday.
The strong short-term growth will help keep federal budget deficits level through 2018 before they turn south and exceed the $1 trillion mark within a decade, the budget analysts said in their latest budget and economic outlook, which will govern Congress’ decisions for the next year.
Obamacare is less costly than projected just a year ago and significantly below what was projected when the law was enacted in 2010. The Affordable Care Act will mean 19 million people will have health care coverage this year than would have without the law, the CBO said.
But the Social Security trust funds continue to face trouble. The old-age and disability funds are on track to pay out more than they take in by 2019. Excluding income from interest payments, both programs are already in the red on a cash-flow basis.
Indeed, the disability trust fund will be bankrupt by the end of 2016, and the government will have to cut disability payments unless President Obama and Congress can come up with a fix over the next two years.
“The past will catch up to us no matter how fast we run from it,” said Sen. Michael B. Enzi, Wyoming Republican and chairman of the Senate Budget Committee. “The Congressional Budget Office’s new figures show our failure to root out wasteful spending and live within our means. This has left us with an endless supply of debt that grows larger by the day.”
Democrats said the good news was that the deficit, which earlier in Mr. Obama’s tenure topped $1.4 trillion, are now just a third of that level.
But they said the good budget news does little to help a middle class still trying to recover from the Great Recession and looking at wages that have been stagnant for years.
“CBO’s report is important, but it only tells us part of the story. What we must never forget is that tens of millions of Americans today are struggling to keep their heads above water economically while the disparity between the rich and everyone else is growing wider every day,” said Sen. Bernard Sanders, a Vermont independent who is the Democrats’ new point man on the Budget Committee.
Although the economy improved last year, the federal government spent nearly $200 billion to combat the lingering effects of the December 2007 to June 2009 recession, marking the sixth straight year that at least 1 percent of gross domestic product was credited directly to the government’s deficit spending on safety net programs.
Even with that spending, the government ran a budget deficit of just $483 billion last year. It will fall $468 billion in the red this year and $467 billion short in 2016, the CBO said. Deficits will start to climb in 2017, pick up pace at the end of this decade and reach $1.1 trillion in 2025.
“The federal budget deficit, which has fallen sharply during the past few years, is projected to hold steady relative to the size of the economy through 2018. Beyond that point, however, the gap between spending and revenues is projected to grow, further increasing federal debt relative to the size of the economy — which is already historically high,” the CBO said in its report.
As the deficit holds steady, public debt will drop slightly when measured against gross domestic product, from 74.2 percent this year to 73.3 percent in 2018, before rising again. It will reach 78.7 percent in 2025, the budget analysts said.
The federal government’s tax take, which dropped to 15 percent of GDP during the depths of the recession, will rise to 18.4 percent in 2016 and remain at or above 18 percent for the next decade — higher than average for recent decades. Spending, by contrast, will be 20.8 percent of GDP next year and will rise to more than 22 percent in 2025 — also higher than average for recent decades.
Republicans said those figures show the government deficits are driven by overspending, not a lack of taxes.
• Stephen Dinan can be reached at sdinan@washingtontimes.com.
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