Friday, July 17, 2009

'The Federal Budget is on An Unsustainable Path'

The director of the Congressional Budget Office, an officially non-partisan outfit that tries very hard to stay that way, testified before Congress on Thursday about the federal budget and the impact of new programs like health care reform.

Douglas Elmendorf also has a blog, and he posted this after his appearance:
Today I had the opportunity to testify before the Senate Budget Committee about CBO’s most recent analysis of the long-term budget outlook.

Under current law, the federal budget is on an unsustainable path, because federal debt will continue to grow much faster than the economy over the long run. Although great uncertainty surrounds long-term fiscal projections, rising costs for health care and the aging of the population will cause federal spending to increase rapidly under any plausible scenario for current law. Unless revenues increase just as rapidly, the rise in spending will produce growing budget deficits. Large budget deficits would reduce national saving, leading to more borrowing from abroad and less domestic investment, which in turn would depress economic growth in the United States. Over time, accumulating debt would cause substantial harm to the economy. The following chart shows our projection of federal debt relative to GDP under the two scenarios we modeled.

At least until ObamaCare is added, the two biggest culprits for unsustainable deficits are Medicaid and Medicare, the government's pre-existing health care programs that have rocketed out of control over the years.

Why would anyone think that a new program would actually curtail costs when the government hasn't been successful in its two previous medical programs?

Elmendorf had this interesting bit to add about the deficits for 2009 and 2010.
The current recession and policy responses have little effect on long-term projections of noninterest spending and revenues. But CBO estimates that in fiscal years 2009 and 2010, the federal government will record its largest budget deficits as a share of GDP since shortly after World War II. As a result of those deficits, federal debt held by the public will soar from 41 percent of GDP at the end of fiscal year 2008 to 60 percent at the end of fiscal year 2010.
Did you catch the "60 percent of Gross Domestic Product" by the end of next year?

Unsustainable is the word.

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