Fiscal Doom: What You Weren’t Told About the Latest Budget News

Political leaders and reporters miss the forest for the trees in CBO’s deficit and debt projections.

For more Congressional Budget Office slides, click here
National Journal
Ron Fournier
July 22, 2014, 5:45 a.m.

Only in Wash­ing­ton, the place where you land when you fall through the look­ing glass, could this be hailed as good news:

Between 2009 and 2012, the fed­er­al gov­ern­ment re­cor­ded the largest budget de­fi­cits re­l­at­ive to the size of the eco­nomy since 1946, caus­ing its debt to soar. The total amount of fed­er­al debt held by the pub­lic is now equi­val­ent to about 74 per­cent of the eco­nomy’s an­nu­al out­put, or gross do­mest­ic product (GDP) — a high­er per­cent­age than at any point in U.S. his­tory ex­cept a brief peri­od around World War II and al­most twice the per­cent­age at the end of 2008.

If cur­rent laws re­mained gen­er­ally un­changed in the fu­ture, fed­er­al debt held by the pub­lic would de­cline slightly re­l­at­ive to GDP over the next few years, CBO pro­jects. After that, however, grow­ing budget de­fi­cits would push debt back to and above its cur­rent high level. Twenty-five years from now, in 2039, fed­er­al debt held by the pub­lic would ex­ceed 100 per­cent of GDP, CBO pro­jects. Moreover, debt would be on an up­ward path re­l­at­ive to the size of the eco­nomy, a trend that could not be sus­tained in­def­in­itely.

Those are the first two para­graphs of the Con­gres­sion­al Budget Of­fice’s latest re­port. Our de­fi­cit levels (an­nu­al totals of red ink) are stalled at breath­tak­ingly high levels — and are pro­jec­ted to soar again in a few years, pier­cing the $1 tril­lion mark. Our debt (money owed to the United States’ cred­it­ors) is on pace to ex­ceed the GDP (the value of goods and ser­vices pro­duced) by the time today’s col­lege gradu­ates turn 50.

Scary news, right? Not ac­cord­ing to many me­dia out­lets and a cyn­ic­al lead­er­ship class in Wash­ing­ton. Some news or­gan­iz­a­tions fo­cused on the sug­ar-high of good news — the (tem­por­ary) dip in de­fi­cits. Politico‘s lede:

The fed­er­al budget out­look will con­tin­ue to im­prove this year, with the de­fi­cit pro­jec­ted to shrink to $514 bil­lion — the low­est level since Pres­id­ent Barack Obama took of­fice.

Think of a re­port­er cov­er­ing a shoot­ing. The po­lice tell him the vic­tim is dy­ing of blood loss. Is the head­line, “Shoot­ing Vic­tim Ex­pec­ted to Die” or “Blood Flow Slows for Shoot­ing Vic­tim”?

Al Ka­men of The Wash­ing­ton Post mocked de­fi­cit scolds un­der the head­line “Re­mem­ber the De­fi­cit?” In a clause six para­graphs in­to his column, he re­veals the de­fi­cit is “ex­pec­ted to rise sharply in com­ing years.”

Like many on the left, Mike Grun­wald of Time magazine cherry-picked the CBO num­bers to ar­gue against aus­ter­ity. He waited un­til his last para­graph to in­form read­ers that the debt is ex­pec­ted to grow from 74 per­cent of GDP today to 106 per­cent in 25 years, and then noted (cor­rectly) that Pres­id­ent Bush squandered the Clin­ton-era sur­pluses.  It’s nev­er too late for the news and a par­tis­an shot.

This is the sub­head on Grun­wald’s piece: “Fisc­al doom will be delayed thanks to lower health care in­fla­tion in re­cent years. But will Con­gress take no­tice?” Thanks to? Dooms­day is com­ing — a little later than feared — so let’s give thanks, and spend!

My col­league Billy House knows how to get to the heart of a story. His lede:

The na­tion is doomed to re­turn to tril­lion-dol­lar short­falls by 2024 if law­makers don’t al­ter ex­ist­ing tax and spend­ing policies, con­gres­sion­al aud­it­ors warned on Monday.

Billy dinged Demo­crats for seiz­ing “op­tim­ist­ic­ally on a smal­ler as­pect of the re­port: that the fed­er­al gov­ern­ment’s sub­sidies for the health care ex­change premi­ums un­der the Af­ford­able Care Act will be lower than pre­vi­ously pro­jec­ted.”

Ac­cord­ing to the non­par­tis­an CBO, the na­tion’s spend­ing pres­sures stem from an aging pop­u­la­tion, rising health care costs, and an ex­pan­sion of fed­er­al sub­sidies for health in­sur­ance. Moreover, in­terest rates are ex­pec­ted to climb, adding to the red ink.

CBO urged polit­ic­al lead­ers to ad­dress the prob­lem now, rather than wait to deal with few­er op­tions and worsen­ing con­sequences. The solu­tion is a budget deal that neither Pres­id­ent Obama nor House Speak­er John Boehner seems to pos­sess the cour­age and/or abil­ity to strike.

To put the fed­er­al budget on a sus­tain­able path for the long term, 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.  

High­er taxes, few­er en­ti­tle­ments. It’s go­ing to hap­pen soon­er or later, pain­fully or more pain­fully, and nobody in charge in Wash­ing­ton seems to care.

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