WASHINGTON – Earlier today, the Congressional Budget Office (CBO) issued the latest update of The Long-Term Budget Outlook. This report outlines a bleak fiscal and economic future, and underscores the painful consequences for American families should policymakers fail to advance fiscally responsible reforms.
In response to yet another dire warning from CBO, House Budget Committee Chairman Paul Ryan issued the following statement:
“On the heels of last week’s dismal jobs report, today’s CBO report on the deteriorating fiscal situation underscores the obvious: The President’s policies are not working. The sobering reality of our economic challenges require leadership and action. The President and his party’s leaders have failed on both counts. The President’s own Treasury Secretary recently told the House Budget Committee: ‘We’re not coming before you today to say we have a definitive solution to the long-term problem. What we do know is we don’t like yours.’ The Democrat-controlled Senate has failed to pass a budget in 1,132 days – refusing to even propose a budget the past two years.
“Americans deserve better than the European-style austerity offered by the President’s broken promises and bankrupt policies. Repeating Europe’s mistakes, the President’s policies call for job-crushing tax increases and harsh disruptions for beneficiaries of government programs as the debt spirals out of control. House Republicans refuse to accept this diminished future. The House of Representatives passed a budget – The Path to Prosperity – that responsibly averts the looming debt crisis detailed in today’s CBO report. The House continues to advance solutions that foster a better environment for economic growth and job creation. CBO’s report is the latest is a series of warnings for policymakers to advance principled solutions that responsibly confront our generation’s most pressing challenges.”
Key points from CBO’s Long-Term Budget Outlook:
The Federal government’s unsustainable government spending increase 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.”
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 93 percent from 5.4 percent of GDP today to 10.4 percent of GDP over the next 25 years.
The CBO projects that government spending as a share of the economy will increase by nearly 53 percent between now and 2037, 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 long-term budget outlook continues to worsen with each passing year Congress fails to act. While total debt already eclipsed the size of the entire US economy, debt held by the public is on pace to eclipse the economy shortly after 2022.
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. Government spending on health care entitlements, Social Security, and interest on the national debt will consume 100 percent of total revenues by 2025.
According to the CBO report, the federal government’s interest payments alone are projected to consume 9.5 percent of our entire economy by 2037, up from about 1.4 percent today.
The CBO reports warns of the economic consequences of the President and his party’s leaders insistence on increasing tax rates and raising barriers to job creation and economic growth. With the respect to counterproductive efforts to reduce the deficit by increasing tax rates, CBO states that “the extent that additional tax revenues were generated by boosting marginal tax rates, those higher rates would discourage people from working and saving, further reducing output and income.”
To read the full report: http://cbo.gov/publication/43288