The Congressional Budget Office (CBO) released updated numbers yesterday showing a short-term decline in projected deficits, but elected officials and the public should not be lulled into a false sense of security.
“A lower deficit is good news but hardly the end of the story,” said Robert L. Bixby, Concord’s executive director. “For the most part, it reflects a recovering economy and other factors that do not affect the long-term structural mismatch between spending and revenues.”
The budget office projects the deficit will fall to $642 billion this year, about $200 billion below the CBO’s February estimate. Annual deficits would continue to decline through 2015, but would then rise to $895 billion by 2023. Over the next decade, CBO projects, the deficits will total $6.3 trillion.
While much work remains to be done on fiscal reform, Bixby points out that there is no mystery about why the long-term challenges remain: “Our population is aging and that means relentlessly higher spending on Social Security, Medicare and Medicaid, which already comprise 45 percent of the budget. Steps that have been taken so far to control the deficit have failed to address this core problem and will soon be overwhelmed by it.”
The recent slowdown in health care inflation has led the CBO over the last year to re-estimate 10-year health care spending by $740 billion. Given the uncertainty about this trend, however, policymakers should heed recent calls from bipartisan groups to encourage further cost control and transformation in the health care system.
Despite the clear warning signs, budget negotiations have come to a halt.
“Conventional wisdom seems to be that nothing will happen until the debt limit brings on another crisis later this year,” Bixby said. “That reckless strategy is likely to end in another short-term ‘fix’ that accomplishes little other than political face-saving.”