Wall Street Journal Editorial Board on CBO Baseline: ‘A Warning to Congress’
WASHINGTON, D.C. — An article published by the Wall Street Journal Editorial Board highlights the Congressional Budget Office’s (CBO) updated baseline, which shows our $38.6 trillion debt will continue to grow and the structural imbalance in our federal budget caused by soaring entitlements.
WORD ON THE STREET
From the Wall Street Journal Editorial Board:
The Trump Administration is boasting about its success in reducing the deficit, and give it credit for curbing what had been ballooning growth in discretionary spending like climate pork. CBO reports a $1.8 trillion deficit in the 2025 fiscal year that ended on Sept. 30, which is $57 billion lower than in the prior year. But hold the apple-polishing.
CBO forecasts that deficits will total $24.4 trillion through 2036, largely because of entitlements on autopilot. Spending will increase to $11.4 trillion in 2036 from $7 trillion, while revenue grows more modestly to $8.3 trillion from $5.2 trillion. Medicaid is expected to grow 47%, Social Security 74% and Medicare 105% over the next decade....
CBO has a tendency to underestimate spending growth, especially in entitlements, as well as the revenue and economic growth from supply-side tax cuts. Its GDP forecast expects an anemic average growth of 1.8% a year...
It’s especially notable that Medicare spending has grown faster than projected since Democrats passed the Inflation Reduction Act in August 2022. CBO claimed the law’s changes to Medicare, including price controls, would save about $230 billion over 10 years. But it underestimated the cost of the IRA’s redesign of the Part D drug program, as it has acknowledged.
In November CBO noted that from 2017 to 2022 the “annual growth in projected per-enrollee costs for Part D plans with the basic benefit ranged from a 5 percent reduction to a 4 percent increase. Since then, those projections have increased substantially: by 20 percent in 2024, 42 percent in 2025, and 35 percent in 2026.”
It’s also worth underlining that Medicaid is expected to grow roughly twice as fast as inflation and defense spending over the next decade, notwithstanding the reforms in the GOP tax bill such as work requirements. Democrats and the hospital lobby accuse Republicans of slashing Medicaid, but the truth is that the reforms merely slow the program’s astronomical growth...
All told, spending is expected to increase to 24.4% of GDP in 2036 from 23.1% this past fiscal year and the pre-pandemic historical average of 20.1%. The U.S. has never before sustained such high levels of spending in peacetime. Revenue is expected to average 17.7% of GDP over the next decade, roughly the historical norm.
As the U.S. issues more debt, net interest payments are projected to double by 2036, increasing to 4.6% from 3.2% of GDP. This assumes the 10-year Treasury rate remains about 4.3% over the next decade. Some corporations have recently borrowed at lower rates than the U.S. Treasury, which suggests that monetary policy isn’t all that tight and the market appetite for U.S. debt isn’t inexorable.
That’s a warning to Congress, if Members want a legacy worth having.
THE BOTTOM LINE
The American people gave President Trump an historic mandate and unified Republican leadership to reverse course on the four years of failed Democrat policies and their disastrous consequences.
While Republicans have made meaningful strides to restore our nation’s fiscal health, both parties must work together to address the structural imbalance in our federal budget caused by soaring entitlements, which is why the House Budget Committee will continue to pursue a bipartisan debt commission. While this commission is not a panacea, it can offer a productive, depoliticized forum for educating the public and identifying solutions regarding our deficit spending and long-term unfunded liabilities.
