WASHINGTON — The Concord Coalition said today that worrisome long-term projections from the Congressional Budget Office (CBO) show why comprehensive budget reforms are crucial to the country’s future — and should be a central focus of the 2016 presidential candidates.
WASHINGTON — The Concord Coalition said today that worrisome long-term projections from the Congressional Budget Office (CBO) show why comprehensive budget reforms are crucial to the country’s future — and should be a central focus of the 2016 presidential candidates.
“Today’s Long-Term Budget Outlook should be considered an essential campaign primer for the presidential candidates in both parties,” says Concord Coalition Executive Director Robert L. Bixby. “It shows why the next president, working with Congress, must move quickly and effectively to put the country on a more sustainable course. Otherwise we can expect increasingly severe budgetary difficulties, rapidly growing government debt and a weaker economy. These challenges and proposed solutions must be discussed during the presidential campaign so that the person who enters the Oval Office in early 2017 will have a clear mandate to act.”
Earlier this year the budget office warned that under current law the federal deficit, after dropping in recent years, would begin rising again after 2016, with the government adding trillions of dollars to its accumulated debt over the next decade. Today’s report, looking out over the next 25 years, projects even greater difficulties beyond 2025.
The federal debt held by the public is already quite high by historical standards at 74 percent of GDP. The budget office projects that if current laws were to remain generally unchanged, by 2040 the debt could reach or even exceed 103 percent of GDP — harming the economy while still continuing on an upward path.
The CBO issued sobering guidance about the magnitude of the changes that policymakers need to contemplate. Achieving the same level of debt relative to the economy by 2040 as we have now would require a $210 billion cut in spending or increase in revenues — about $1,450 per person — every year for 25 years from the levels assumed in current projections.
To reduce the debt to its 50-year average (38 percent of GDP) would require a $480 billion cut in spending or increase in taxes every year.
The CBO report makes clear that an aging population and rising health costs represent the dominant factors driving long-term debt projections. As more baby boomers retire, the government must spend larger and larger sums of money just to provide them with the same level of benefits per person as in the past.
Federal spending on Social Security and the government’s major health programs would rise to 14.2 percent of GDP in 2040, more than twice the 6.5 percent average for the past half-century.
Interest payments on the debt would become more and more burdensome for taxpayers, rising to 4.3 percent of GDP in 2040, up from the average of only 2 percent for the past 50 years.
Other federal programs, meanwhile, are being squeezed harder and harder. CBO projects that in 25 years spending on everything other than Social Security, health care and interest would drop to 6.9 percent of GDP, far below the 11.6 percent average for the past 50 years. As The Concord Coalition has warned in the past, plans for such low levels of spending may well prove to be unrealistic and not necessarily desirable as public policy.
“The CBO’s long-term outlook makes clear that campaign promises to fight waste, fraud and abuse are insufficient,” Bixby said. “Nor can we simply raises taxes on the wealthiest Americans or assume that a burst of economic growth would alone solve the problem. We must take a broader, bipartisan approach to build a brighter future for the country and protect coming generations from massive government debt. Ideally, this effort will include comprehensive tax reform as well as necessitate changes throughout the entire federal budget, not just a few targeted areas.”
“First Budget,” a non-partisan initiative of The Concord Coalition and the Campaign to Fix the Debt, is working with concerned citizens in Iowa and New Hampshire to encourage the presidential candidates to explain in specific terms how they would deal with the federal debt and related issues such as tax and entitlement reforms.
Media Contact: Steve Winn, (703)-254-7828, [email protected]
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The Concord Coalition is a nonpartisan, grassroots organization dedicated to fiscal responsibility. Since 1992, Concord has worked to educate the public about the causes and consequences of the federal deficit and debt, and to develop realistic solutions for sustainable budgets. For more fiscal news and analysis, visit concordcoalition.org and follow us on Twitter: @ConcordC
