This week on Facing the Future, I spoke with Mike Murphy, Senior Vice President and Chief of Staff at the Committee for a Responsible Federal Budget (CRFB). We discussed the many daunting fiscal challenges awaiting the winner of the 2024 presidential election. These include rising deficits, near record debt, impending Social Security and Medicare trust fund insolvency, expiring tax cuts, and the need to raise the debt limit again. It’s not a pretty picture.
We began by looking at the most recent 10-year baseline prepared by the Congressional Budget Office (CBO), which shows where things are going if nothing changes. Annual deficits over the next 10 years average almost $2 trillion, or 5.6 percent of the gross domestic product (GDP). Over the past 50 years, annual deficits have averaged 3.6 percent of GDP, so we’re looking at a serious deterioration of the nation’s fiscal path.
Rising deficits add to the debt, which is projected to reach a record high as a share of GDP by 2029. A significant contributing factor to this is the steep increase in interest costs on the debt, which is projected to reach a record high as a share of GDP by 2031.
Adding to the daunting fiscal outlook is the projection by the Social Security and Medicare Trustees that the Medicare Hospital Insurance Trust Fund (HI) will become insolvent in 2031 and the combined Social Security trust funds (OASDI) will become insolvent in 2034.
“These things are driven by factors that we knew about years ago. They’re driven by automatic growth in Social Security and Medicare, mainly due to an aging population, rising healthcare costs, and an inadequate revenue stream to keep up with them. And that is leading to a big structural deficit,” Murphy said.
“Years ago, you wanted to plan for this, you wanted to be prudent for this. You wanted to be able to lock in some savings to get compounding working for you in advance of this coming. That’s the opportunity that we missed, and is why, hopefully, given that the numbers are as dire as they are, we might be able to inspire some people to get some control over this now,” he said.
Murphy noted that interest is now the fastest growing line item in the budget. “We’re going to spend more on interest than we do in a given year on defense within the next few years. And that’s crazy,” he said.
In Murphy’s view, presidential candidates and others need to be realistic about the fiscal promises they make. Citing estimates by the CRFB, he said that balancing the budget in 10 years “would require about $12.7 trillion in savings to do that.” Even trying to stabilize the debt to GDP ratio at the current level, he said, would require 10-year savings of about $6 trillion.
“So we know what the answer is here,” Murphy said. “You need to put a lot of things on the table. You can’t take anything off the table. It’s gonna have to be some combination of spending reductions and revenue increases if you’re really going to be honest about solving this problem. And that’s what people need to be looking for when they’re trying to hold to account the types of things that elected officials and certain candidates are saying.”
Given the magnitude of the fiscal challenge and the political difficulty of enacting policy options needed to put the budget on a more sustainable path, Murphy supports the creation of a new bipartisan fiscal commission.
“The commission principle is a good idea. The details matter. It has to be truly bipartisan, so you better have an equal number of Democrats and Republicans. Buy-in matters, so it matters who will ultimately be appointed to the commission so they act in good faith to actually get a solution. And then they must have procedures in place that if the Commission reports out recommendations and legislation, which requires a certain amount of them to support, that it gets a guaranteed vote expedited in the House and the Senate. That’s really important.”
“These issues always get demagogued to death,” Murphy noted. “A commission gets demagogued to death, too. People say they’re going to go behind closed doors, and there’s a secret mechanism to cut Social Security. Don’t believe any of that because it’s guaranteed to have a vote. They don’t have to approve it. If it’s something that Congress isn’t going to like, they’re not going to approve it. This isn’t some side way of doing this. This is a way to break the dysfunction.”
Hear more on Facing the Future. I host the program each week on WKXL in Concord N.H., and it is also available via podcast. Join us as we discuss issues relating to national fiscal policy with budget experts, industry leaders, and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, Pandora, iTunes, Google Podcasts, Stitcher, or with an RSS feed. Follow Facing the Future on Facebook, and watch videos from past episodes on The Concord Coalition YouTube channel.
