The economy simply cannot grow fast enough to cover the federal government’s generous promises to Americans, the Congressional Budget Office said Tuesday, laying out grim options of massive tax increases or withering cuts to spending that loom ahead.
After a few years of post-recession relief, deficits are roaring back, the CBO said, sounding a call to action for a Congress and White House that have instead been arguing over how much to increase spending.
But with health care costs rising, and an aging population already promised very generous Social Security and Medicare benefits, the government cannot come close to paying for its current promises, the CBO said.
“Revenues are projected to increase, but much more slowly than spending, leading to larger budget deficits and rising debt,” the analysts said in their long-term budget outlook.
The picture is substantially worse than just a year ago, when the CBO said debt held by the public would reach 107 percent of gross domestic product by 2040. Now, the CBO says, that figure will be 122 percent — a 15-point turn for the worse.
Analysts said Congress keeps cutting taxes and boosting spending, at a time when the budget hole calls for the exact opposite approach.
SEE ALSO: ‘Web of Denial’ turns Senate floor into Democrats’ pulpit against climate change skeptics
To get back to normal — which means a debt rate of about 40 percent of the economy — the government would have to cut $560 billion out of next year’s budget, and growing every year thereafter. Even to maintain the current level of already excessive debt, which is 75 percent of the economy, would require cuts of $330 billion in 2017.
“The longer lawmakers waited to act, the larger the necessary policy changes would become,” the CBO said.
Budget watchdog groups demanded Hillary Clinton and Donald Trump, the presumptive presidential nominees for Democrats and the GOP, begin to talk about the massive fiscal problems looming ahead.
“The presidential candidates should step up and address our dangerous long-term debt trajectory with constructive solutions and real leadership, not continuing to duck these challenges as they have so far,” said Maya MacGuineas, head of Fix the Debt.
Robert L. Bixby, executive director of the Concord Coalition, said the presidential hopefuls need to take the issue to voters so the public gets invested in the debate, and so the elections produce a mandate for the kinds of solutions needed to fix things.
The deficit was a dominant issue in 2010, as President Obama’s health law, the Wall Street bailout and the stimulus package were all making a major dent in the government’s finances. Deficits soared beyond the $1 trillion mark for the first time in history.
SEE ALSO: Newt Gingrich’s contributor agreement with Fox suspended amid VP speculation
The deficit has dropped dramatically over the last few years as spending limits, imposed by Congress, have kicked in, and as some of the post-recession tax breaks have expired.
But the CBO said things are about to get worse.
Revenue will remain low — at between 18 and 19 percent of GDP, which is about the average of the last 40 years. But spending will explode, rising from 21 percent today to more than 27 percent by 2040.
That means that 30 years from now, the government will regularly run deficits totaling $5 trillion a year — more than the size of the entire federal budget right now.
Social Security, which eats up 4.9 percent of GDP today, will average 6.3 percent in 25 years. Medicare, which stands at 3.8 percent today, will balloon to 6.6 percent surpassing Social Security to become the biggest entitlement program.
Meanwhile discretionary spending — the nuts and bolts government operations such as education, defense and homeland security — will drop to just 5.2 percent of GDP.
• Stephen Dinan can be reached at sdinan@washingtontimes.com.
Please read our comment policy before commenting.