The Congressional Budget Office put out a very scary report today. It’s scary for the country and our economic future and it’s scary for Democrats who have done nothing to address the looming debt crisis, preferring fear-mongering instead. The gist of CBO’s findings:
According to CBO’s projections, if current laws remained in place, spending on the major mandatory health care programs alone would grow from less than 6 percent of GDP today to about 9 percent in 2035 and would continue to increase thereafter. Spending on Social Security is projected to rise much less sharply, from less than 5 percent of GDP today to about 6 percent in 2030, and then to stabilize at roughly that level. Altogether, the aging of the population and the rising cost of health care would cause spending on the major mandatory health care programs and Social Security to grow from roughly 10 percent of GDP today to about 15 percent of GDP 25 years from now. (By comparison, spending on all of the federal government’s programs and activities, excluding interest payments on debt, has averaged about 18.5 percent of GDP over the past 40 years.) That combined increase of roughly 5 percentage points for such spending as a share of the economy is equivalent to about $750 billion today. If lawmakers ultimately modified some provisions of current law that might be difficult to sustain for a long period, that increase would be even larger.
The bottom line is that we are heading for the train wreck that Rep. Paul Ryan (R-Wis.), the president’s debt commission and most conservatives have been warning about for some time:
Higher levels of debt imply higher interest payments on that debt, which would eventually require either higher taxes or a reduction in government benefits and services.
Rising debt would increasingly restrict policymakers’ ability to use tax and spending policies to respond to unexpected challenges, such as economic downturns or financial crises. As a result, the effects of such developments on the economy and people’s well-being could be worse.
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. Such a crisis would confront policymakers with extremely difficult choices. To restore investors’ confidence, policymakers would probably need to enact spending cuts or tax increases more drastic and painful than those that would have been necessary had the adjustments come sooner. [Emphasis added.]
If that sounds like what House Republicans have been saying, you are right. Ryan put out a statement that emphasizes the risk Obama’s non-leadership entails:
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.”
The administration has tried to dodge and distract, preferring to demagogue reasonable attempts to address this crisis. But the facts are catching up with Obama. Doing nothing, it turns out is both an awful economy strategy and an electoral loser.