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Concord Coalition: No gimmicks can solve long-term budget outlook

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The budget office notes that if current laws were to remain generally unchanged, the federal debt held by the public -- already high by historical standards at roughly equal to 74% of GDP -- would decline slightly over the next few years. After that, growing deficits would push the debt higher and higher. CBO estimates that 25 years from now the debt would exceed 100% of GDP, and would continue to rise after that.

The CBO projects that federal spending for Social Security and the major federal health care programs will rise to 14 percent of GDP by 2039, twice the past average. Interest costs would rise rapidly as well.

Everything else in the federal budget, however, would decline to only 7% of GDP in 25 years, far below the 11% average of recent decades. In fact, it would represent a smaller share of GDP than at any time since the late 1930s.

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"The CBO's projections show how tightly much of the federal government would be squeezed under current law," Bixby said. "It raises serious questions about how realistic these plans are."

As the budget office stresses, there is considerable uncertainty in such long-term projections. One problem is that Congress often has trouble following through on deficit-reduction plans once they start to actually have a substantial effect. So there is a considerable risk that the fiscal picture could be even darker than today's current-law projections indicate.

The CBO also offers several illustrative scenarios that underscore the benefits of taking corrective action sooner rather than later, with the potential to substantially lower projected debt levels in the coming decades.

But to put the federal budget on a sustainable long-term path, CBO says, lawmakers would have to make "significant changes to tax and spending policies: reducing spending for large benefit programs below the projected levels, letting revenues rise more than they would under current law, or adopting some combination of those approaches."

That is a warning that responsible elected officials should heed.

 

 

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