WASHINGTON – Earlier today, the Congressional Budget Office [CBO] released a report on the fiscal future of the federal budget. In its latest update of The Long-Term Budget Outlook, the CBO provides an overview of the looming debt crisis, the prospect of which is hindering economic recovery and job creation right now.
In response to the dire warning from the CBO, House Budget Committee Chairman Paul Ryan (WI) issued the following statement:
“Today the CBO reiterated what the American people know, but too many in Washington simply refuse to acknowledge: We are headed for the most predictable economic crisis in American history, and Washington is not providing the leadership we need to avoid it. As Congress debates the President’s request for an increase in the statutory debt ceiling, the CBO warns of a more ominous credit cliff – a sudden drop-off in our ability to borrow imposed by credit markets in a state of panic.
“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.
“Americans are ahead of Washington’s political class on this issue, and they are demanding leaders who are willing to be honest about the challenges we face. The House of Representatives has passed a budget that averts this crisis. The House-passed Path to Prosperity curbs the explosive growth of government spending, promotes economic growth, and leaves the next generation with a stronger nation. It’s time for leaders to step up, listen to those we serve, and advance real solutions to our greatest fiscal challenges.”
CBO’s report includes the following key findings:
The CBO projects that government spending as a share of the economy will increase by nearly 70 percent between now and 2035, up from its historical average of roughly 20 percent. Taxes are projected to rise to the historical average in the years ahead, yet the unprecedented growth in government spending is projected to rise much faster, driving an unsustainable explosion in debt.
The crushing burden of debt is driven primarily by the nation’s largest entitlement programs – Social Security, Medicare, and Medicaid – along with the compounding growth in interest payments on the debt.
Our unsustainable policies are increasing the likelihood of a devastating crisis: The CBO report states that “Growing debt also would increase the probability of a sudden fiscal crisis, during which investors would lose confidence in the government’s ability to manage its budget and the government would thereby lose its ability to borrow at affordable rates.”
According to the CBO report, the federal government’s interest payments alone are projected to consume 9 percent of our entire economy by 2035, up from about 1 percent today.
The CBO report affirms that the massive health-care overhaul fails to address the explosion in health care costs. Mandatory federal spending on health care will increase by 86 percent from 5.6 percent of GDP today to 10.4 percent of GDP over the next 24 years.
The long-term budget outlook continues to worsen with each passing year Congress fails to act. While total debt will overtake the size of the entire US economy this year, debt held by the public will eclipse the economy by the year 2021.
To learn more about the House GOP’s plan to avert this crisis, visit http://budget.house.gov/fy2012budget/
Tomorrow at 10:00 AM, the House Budget Committee will hear testimony from CBO Director Elmendorf on the report’s findings. For more information on tomorrow’s hearing: http://budget.house.gov/HearingSchedule/#6232011
 “Federal Budget Math: We Can’t Repeat the Past”, Presentation to the Federal Reserve Bank of New York, Douglas Elmendorf, Director of the Congressional Budget Office, June 16, 2011. http://www.cbo.gov/ftpdocs/122xx/doc12252/CBO_Presentation_to_Fed_Reserve_Bank_of_New_York_6-16-11.pdf