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 »
AT ISSUE: COMEY FIRING, SESSIONS’S RECUSAL
Mueller Seeks Documents from DOJ
2 hours ago
THE LATEST

Special counsel Robert Mueller "is now demanding documents from the department overseeing his investigation." A source tells ABC News that "Mueller's investigators are keen to obtain emails related to the firing of FBI Director James Comey and the earlier decision of Attorney General Jeff Sessions to recuse himself from the entire matter."

Source:
MULVANEY SAYS PROVISION ISN’T A DEALBREAKER
Trump May Be OK with Dropping Mandate Repeal
3 hours ago
THE LATEST

"President Donald Trump would not insist on including repeal of an Obama-era health insurance mandate in a bill intended to enact the biggest overhaul of the tax code since the 1980s, a senior White House aide said on Sunday. The version of tax legislation put forward by Senate Republican leaders would remove a requirement in former President Barack Obama’s signature healthcare law that taxes Americans who decline to buy health insurance."

Source:
FRANKEN JUST THE BEGINNING?
Media Devoting More Resources to Lawmakers’ Sexual Misconduct
3 hours ago
THE LATEST

"Members of Congress with histories of mistreating women should be extremely nervous. Major outlets, including CNN, are dedicating substantial newsroom resources to investigating sexual harassment allegations against numerous lawmakers. A Republican source told me he's gotten calls from well-known D.C. reporters who are gathering stories about sleazy members."

Source:
STARTS LEGAL FUND FOR WH STAFF
Trump to Begin Covering His Own Legal Bills
2 days ago
THE DETAILS
DISCUSSED THE MATTER FOR A NEW BOOK
Steele Says Follow the Money
2 days ago
STAFF PICKS

"Christopher Steele, the former British intelligence officer who wrote the explosive dossier alleging ties between Donald Trump and Russia," says in a new book by The Guardian's Luke Harding that "Trump's land and hotel deals with Russians needed to be examined. ... Steele did not go into further detail, Harding said, but seemed to be referring to a 2008 home sale to the Russian oligarch Dmitry Rybolovlev. Richard Dearlove, who headed the UK foreign-intelligence unit MI6 between 1999 and 2004, said in April that Trump borrowed money from Russia for his business during the 2008 financial crisis."

Source:
×
×

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