Are We Heading Back Toward $1 Trillion Budget Deficits?

Congressional auditors urge lawmakers to alter tax and spending policies to prevent a fiscal fiasco.

The morning sun begins to rise in front of the U.S. Capitol.
National Journal
Billy House
Add to Briefcase
Billy House
April 14, 2014, 1:25 p.m.

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.

The cul­prits? Rising health care costs, an aging pop­u­la­tion, grow­ing in­terest pay­ments on fed­er­al debt, and an ex­pan­sion of fed­er­al sub­sidies for health in­sur­ance, ac­cord­ing to the Con­gres­sion­al Budget Of­fice.

This rising debt would have ser­i­ous con­sequences, CBO warns. Fed­er­al spend­ing on in­terest pay­ments would in­crease con­sid­er­ably, and law­makers would have less flex­ib­il­ity to use tax and spend­ing policies to re­spond to un­ex­pec­ted chal­lenges.

“Fi­nally, high debt in­creases the risk of a fisc­al crisis in which in­vestors would lose so much con­fid­ence in the gov­ern­ment’s abil­ity to man­age its budget that the gov­ern­ment would be un­able to bor­row at af­ford­able rates,” the re­port states.

Des­pite the grim tid­ings, con­gres­sion­al Demo­crats seized op­tim­ist­ic­ally on a smal­ler as­pect of the re­port: that the fed­er­al gov­ern­ment’s sub­sudies for the health care ex­change premi­ums un­der the Af­ford­able Care Act will be lower than pre­vi­ously pro­jec­ted.

CBO found that be­cause the ex­change premi­ums them­selves will cost less, the gov­ern­ment’s share of those will amount to about $1.032 tril­lion between 2015 and 2024 — $104 bil­lion less than pre­vi­ously pro­jec­ted.

The news comes dur­ing a time when the U.S. has made a deep dent in its de­fi­cit. The fed­er­al de­fi­cit lingered above $1 tril­lion from 2009 to 2012, reach­ing high­er than $1.4 tril­lion in 2009 amid the re­ces­sion. But the short­fall dropped to $680 bil­lion in fisc­al 2013. And CBO’s latest pro­jec­tions Monday show the de­fi­cit con­tinu­ing to drop to $492 bil­lion this fisc­al year and then to $469 bil­lion in 2015.

CBO also notes that 2014 would be the fifth con­sec­ut­ive year in which the de­fi­cit has de­clined as a share of gross do­mest­ic product, since peak­ing at 9.8 per­cent in 2009 — a year in which gov­ern­ment spend­ing was revved up to help stim­u­late the eco­nomy.

Re­l­at­ive to the size of the over­all eco­nomy, the $492 bil­lion de­fi­cit for fisc­al 2014 — at 2.8 per­cent of GDP — will be nearly a third less than the $680 bil­lion short­fall in fisc­al 2013, which was equal to 4.1 per­cent of GDP.

But after 2015, CBO says that it will start to rise and could reach $1 tril­lion in 2022 through 2024.

CBO’s fig­ures are known as “baseline pro­jec­tions,” show­ing what would hap­pen to the fed­er­al budget if cur­rent laws re­mained in place. They are de­signed to give Con­gress a bench­mark against which to meas­ure the ef­fects of pro­posed spend­ing and taxes.

“The latest budget num­bers show that while we are ex­per­i­en­cing a tem­por­ary im­prove­ment to our de­fi­cit prob­lems, long-term debt trends re­main very troub­ling,” said Maya MacGuineas, pres­id­ent of the Com­mit­tee for a Re­spons­ible Fed­er­al Budget and head of the Cam­paign to Fix the Debt. “What’s more, the num­bers will likely be even worse after 2024 if we don’t take ac­tion soon on tax and en­ti­tle­ment re­form.”

“The ana­lys­is makes it clear that this is no time to put new policies on the na­tion’s cred­it card or use phantom sav­ings,” she ad­ded. “In­stead of pat­ting them­selves on the backs for mod­est im­prove­ment in the near term, poli­cy­makers should be us­ing this peri­od of re­l­at­ive calm to make real pro­gress on our long-term fisc­al chal­lenges.”

Mean­while, Sen­ate Budget Com­mit­tee Chair Patty Mur­ray, in a state­ment, honed in on CBO’s find­ings that the cost of the gov­ern­ment sub­sidies tied to ex­change premi­ums un­der the Af­ford­able Care Act will fall by $104 bil­lion over 10 years. The re­port also pro­jec­ted that 25 mil­lion people will buy in­sur­ance through those ex­changes by 2017, an in­crease of about 1 mil­lion over its earli­er pro­jec­tion.

“Today’s CBO up­date shows once again that the Af­ford­able Care Act will help re­duce our de­fi­cits while of­fer­ing more Amer­ic­ans ac­cess to qual­ity, af­ford­able health care,” Mur­ray said. “We need to keep build­ing on this pro­gress.”

What We're Following See More »
CITES CONFLICT OF INTEREST
Lieberman Withdraws from Consideration for FBI Job
3 days ago
THE LATEST
MINIMUM 2 PERCENT GDP
Trump Tells NATO Countries To Pay Up
3 days ago
BREAKING
MANAFORT AND FLYNN
Russians Discussed Influencing Trump Through Aides
3 days ago
THE DETAILS

"American spies collected information last summer revealing that senior Russian intelligence and political officials were discussing how to exert influence over Donald J. Trump through his advisers." The conversations centered around Paul Manafort, who was campaign chairman at the time, and Michael Flynn, former national security adviser and then a close campaign surrogate. Both men have been tied heavily with Russia and Flynn is currently at the center of the FBI investigation into possible collusion between the Trump campaign and Russia.

Source:
BUT WHITE HOUSE MAY USE AGAINST HIM ANYWAY
Ethics Cops Clear Mueller to Work on Trump Case
4 days ago
THE LATEST

"Former FBI Director Robert Mueller has been cleared by U.S. Department of Justice ethics experts to oversee an investigation into possible collusion between then-candidate Donald Trump's 2016 election campaign and Russia." Some had speculated that the White House would use "an ethics rule limiting government attorneys from investigating people their former law firm represented" to trip up Mueller's appointment. Jared Kushner is a client of Mueller's firm, WilmerHale. "Although Mueller has now been cleared by the Justice Department, the White House may still use his former law firm's connection to Manafort and Kushner to undermine the findings of his investigation, according to two sources close to the White House."

Source:
BUSINESSES CAN’T PLEAD FIFTH
Senate Intel to Subpoena Two of Flynn’s Businesses
4 days ago
THE LATEST

Senate Intelligence Committee chairman Richard Burr (R-NC) and ranking member Mark Warner (D-VA) will subpoena two businesses owned by former National Security Advisor Michael Flynn. Burr said, "We would like to hear from General Flynn. We'd like to see his documents. We'd like him to tell his story because he publicly said he had a story to tell."

×
×

Welcome to National Journal!

You are currently accessing National Journal from IP access. Please login to access this feature. If you have any questions, please contact your Dedicated Advisor.

Login