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 »
Hillary Clinton's transition team has in place strict rules to limit the influence that lobbyists could have "in crafting the nominee’s policy agenda." The move makes it unlikely, at least for now, that Clinton would overturn Obama's executive order limiting the role that lobbyists play in government
Federal employees from 14 agencies have given nearly $2 million in campaign donations in the presidential race thus far, and 95 percent of the donations, totaling $1.9 million, have been to the Clinton campaign. Employees at the State Department, which Clinton lead for four years, has given 99 percent of its donations to the Democratic nominee.
Trying to save control of the Senate, the Senate Leadership Fund, a super PAC with ties to Majority Leader Mitch McConnell, is spending $25 million on six races over the last two weeks of the race. Republicans have been consistently outspent in a majority of the Senate races this cycle. Aside from spending in Nevada, all the spending will come in defense of Republican-held seats.
In an NBC News interview, Defense Secretary Ash Carter said the campaign against ISIS will expand to its headquarters in Raqqa in the "next few weeks." He also reiterated that U.S. forces will not be part of any occupation of territory should it be retaken from ISIS.
Priorities USA, the super PAC aligned with the Clinton campaign, which has already gotten involved in two Senate races, is now expanding into House races. The group released a 30 second spot which serves to hit Donald Trump and Iowa Rep. Rod Blum, who is in a tough race to win re-election in Iowa's first congressional district. The super PAC's expansion into House and Senate races shows a high level of confidence in Clinton's standing against Trump.