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Subscribe to RSSUPDATED 4:09 p.m. ET -- The Congressional Budget Office projected Tuesday that the national debt will continue to grow over the next ten years even as the economy recovers, the unemployment rate falls, and tax revenues increase.
The report said, "At an estimated $845 billion, the 2013 imbalance would be the first deficit in five years below $1 trillion" and would be only half as large as the deficit was in 2009, relative to the size of the economy. But that improvement will be merely temporary: in the next several years, an aging population will drive entitlement spending higher at the very same time that rising interest rates increase the government’s debt-service costs, the CBO warned.
Recommended: Obama calls for at least short-term fix with cuts, revenue to avoid sequester
In its annual Budget and Economic Outlook, the CBO said debt held by the public will be bigger by 2023 than in any year since 1951 and will be at 77 percent of gross domestic product (GDP) by 2023, far above the 40-year average of 39 percent of GDP.
As a result, the CBO report said, the federal government’s interest costs “will be very high” and will be rising. Interest costs will more than double by the end of the ten-year forecasting period and will be at their highest share of GDP in the past five decades.
CBO director Douglas Elmendorf emphasized to reporters Tuesday that in the past several years, the federal government has benefited from “an extraordinarily long period of extraordinarily low interest rates.”
Elmendorf also stressed that the pressures on the federal budget continue to be driven by the cost of the entitlement programs for older Americans.
Even though the rate of increase in health care spending – including Medicare spending -- has slowed in the past few years, “we still see substantial growth in federal health care spending” over the next ten years and beyond, Elmendorf said.
He noted that in the next ten years the number of people eligible for Social Security retirement benefits will jump by 40 percent. Most of those people will be eligible for Medicare benefits as well.
“We are confronting now in our country changes of a sort we have not had to make in the past,” he said. If one looks at the 20 years before the 2007-2008 financial crisis, he said, “we had rising spending on Social Security and on the major health care programs that was offset as a share of GDP (gross domestic product) by a decline in defense spending.”
But “that’s not a strategy that can be repeated at that magnitude over the next 40 years, because defense spending has come way down as a share of GDP and because the demographic pressures” that are driving up Medicare, Medicaid and Social Security outlays “are so intense,” Elmendorf said.
“We have a large budget imbalance, we have large projected deficits, a debt that will remain at a historically high share of GDP and will be rising at the end of the coming decade. What that implies is that small changes in budget policy will not be sufficient to put the budget on a sustainable path,” he warned.
The CBO chief said a $4 trillion reduction in cumulative deficits over ten years would result in a balanced budget by the end of the ten-year period but to get that deficit reduction entirely from spending would require a two-thirds cut in all non-defense discretionary spending.
“The gap between spending and revenues is very large, and that means that changes you would need to eliminate that gap will be large relative to either outlays or taxes. It would even require large changes even if one split the impact between spending and taxes,” Elmendorf noted.
The CBO’s ten-year forecast assumes that the automatic spending cuts, or sequester, required by Congress and President Obama in the 2011 Budget Control Act, will remain in place.
But if Obama and Congress cancel the sequester’s spending cuts, the CBO said about $1.2 trillion more would be added to cumulative budget deficits over the next ten years.
The Budget Control Act’s spending cuts, which are scheduled to begin on March 1, will reduce defense outlays by about 8 percent and non-defense discretionary outlays by about 5 percent in the current fiscal year, the CBO report said.
On Tuesday Obama called on Congress to pass "a smaller package of spending cuts and tax reforms that would delay the economically damaging effects of the sequester for a few more months" while it comes up with a longer-term alternative.
If the Budget Control Act’s spending cuts are left in place, projected federal spending in the CBO’s forecast will average 22.1 percent of Gross Domestic Product over the period from 2014 to 2023, which is CBO's ten-year forecasting window.
That figure is less than the spending level in 2012, but it is high by the standards of the past 30 years, during which federal spending has averaged 21 percent of GDP.
The CBO estimates that tax revenues will increase by about $260 billion, or 11 percent, in the current fiscal year. About half of that increase in revenues is due to the Social Security payroll tax reverting to its normal 6.2 percent rate at the start of this year, after being cut to 4.2 percent as an economic stimulus measure in 2011 and 2012.
Elmendorf said the economy is growing stronger. “The good news is that the effects of the housing and financial crisis appear to be gradually waning,” he told reporters, predicting “a virtuous cycle of faster growth in employment, income, consumer spending and business over the next few years.”
But the tax increases enacted at the end of last year and spending curbs in the Budget Control Act will depress economic growth this year.
The CBO said the economy will grow at a real, inflation-adjusted rate of 1.4 percent this year and 3.4 percent next year, with the unemployment rate remaining high through 2014.
If the CBO forecast is correct, 2014 will be the sixth consecutive year with unemployment exceeding 7.5 percent, “the longest such period in the past 70 years.”
But the CBO forecast assumes that the jobless rate will fall to 5.5 percent by 2018. It was last at that level in the summer of 2008.
Each January, the CBO issues its budget projections for the next 10 years. The forecast is intended to guide Congress as it designs fiscal policy. The CBO projections assume that current law remains in place and that no new tax increases, spending cuts or fundamental restructuring of federal programs such as Medicare are enacted.
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Believe what you will, time will reveal the lies.
Democrats are Scum. Useless, Value-Less Scum.
Nice job on the debt, guys. Celebrate at Senator Menendez' next prostitution party. Hahahhahahahahahahahaha.
Just overhang? No one mentions:
-$200T unfunded liabilities for SS, M'Care, M'Caid
-$5T unfunded liabilities for pensions (public and private)
$1T student loan debt
Three words "Comprehensive Immigration Reform". Problem solved, right?
For three decades now, the Republican Party has employed a tactic that they call "starve the beast". The idea is that if you deprive the federal government of revenue, that eventually the debt will get so big that congress will be forced to cut spending. The spending cuts have never happened (in fact when the Republicans controlled both Houses and the White House under Bush they increased spending over 50%!). The debt certainly did happen. This failed policy of intentionally running up the debt is what caused this. The result will be that there will be no choice but to raise taxes, especially on the wealthy. The tactic has completely backfired on the GOP.
Nonsense. First of all we don't tax anyone based on how wealthy they might happen to be - not constitutional. Second, we just raised taxes on high income folks and you see what that did to CBO projections, almost nothing. There are too few high income people to tax to make much of a difference.
If you want to hold onto those big government spending programs, the middle class will have to see their taxes go up significantly. Lots of luck getting any in either political party to even float that idea - political suicide. The only alternative is spending cuts/restraint. Welcome to "gradual austerity" and the end of the era of Big Government.
Wrong. The estate tax is based on wealth.
There are plenty of loopholes and deductions that can be eliminated, especially the ones that the wealthy use. Carried Interest income is only taxed at 15%. That should be, and will be 39.6%. There is also plenty of room to raise capital gains rates. The wealthy will have the BeJesus taxed out of them before the middle class forks over a dime.
Estate tax is income to heirs. Once you are dead you are not an individual. Raising the tax rate on carried interest may well happen, but it is not even a ripple in our ocean of debt. Capital gains tax rates will stay where they are since raising them again will do little to bring in more revenue. The tax only applies when you choose to take your gain. In addition, the total now being brought in from capital gains taxes is only about $100 billion per year, and that includes everyone, not just high income folks. You are going to have to look elsewhere for the revenue.
I have not paid any capital gains taxes in five years. I have restructured my brokerage accounts so that only core holding appear in taxable accounts, and I have no plans to sell them and book the profit. All of my "trading" will be done in my non-taxable accounts, IRA and Roth IRA. I am certainly not in the 2% of incomes and if I am able to do that with a little coaching, you can only guess what the wealthy folks have been doing these past few years.
Since there are not enough high income folks to tax and bring in enough revenue to make much of a difference, if the middle class wants Big Government they are going to have to pay for it.
If you look at historic rates we take in on average 18% revenue as a percentage of GDP, no matter what the rates are. Moving rates up or down a bit doesn't really make much of a dent on averages, not since 1950 as far back as i looked. from rates in the 90% range down to 28% and back up we may go a little above and a little below 18% but it always comes back to it. 1950-1976 17.6% average. 1976-2010 18.3% average ....St. Louis Fed numbers. You just can't spend over 19% of revenue/GDP or you will get deficits.
Spending is what gets us into trouble. We promise everything to everybody cradle to grave and we just don't have the resources for it. The only time we got close to a balanced budget was in the late 90's when our SPENDING was around 19% of GDP. You spend more than that and you WILL get deficits looking back 60 years. BO has been spending in the 24 to 25% of GDP and no amount of taxes up, down or sideways will get the revenue to cover that.
There are plenty of taxes on the rich that can be levied before any are on the middle class. That is a fact and it will happen.
Funny how you say that Bush and his GOP Congress increased spending by so much and overlooked the FACT that that spending, as bad as it already was, INCREASED under a Democratic Congress.
And you could take all the money the wealthy earn and we would still have deficits if spending isn't cut.
Taxes won't barely make a dent, and probably no dent. BO will come after the middle class, in fact he already has as 75% of the taxes in Obamacare (300 - 400 Billion) fall on ALL income levels. Including low and middle class.
In fact his last tax increase, he turned around and gave a big chunk of it right back to the likes of Goldman Sachs, offshore account write offs, wind mills, etc. Have you ever seen a tax increase go to the debt? No, because it never happens. Send another $100 to Washington and they will spend another $200.
There is no economic recovery...this is the economy...corporations don't need the numbers of American workers they employed in the past...global telecommunications and shipping enable corporations to hire foreign workers that are not uneducated entitlement oriented narcissistic whiners like the American workers...the service industry needs workers but the Americans think they are too precious to do that kind of work so the Mexicans gladly come into the US and take those jobs...it's much better dealing with a Mexican Landscape Company than some America with an attitude...
By the way this isn't a GOP or Democrat Party issue...it's a law of economics issue...
I saw the other day that almost 10% of the workforce in the U.S. is now in the restaurant sector of the service side of the economy.
Wrong,
We don't need the corporations. Educated, secure Americans will provide the only true economy which is simply providing for each other. In history when any entity has taken so much more of the collective wealth created by the people, they have crashed. The only narcissistic whiners are on Wall Street and in corporate boardrooms. Those puffed up A-hole CEO's don't "earn" 1000 times more than the average worker, they make money the old fashioned way, they steal it from poor working people. I'll take the measure of work from a lower wage worker anyday over the fat cats. Lazy, it applies more to the CEO, hedge fund types, than to the waitress, janitors, construction workers.
More good news for you the people.
Chin up.
Forget about Obozo and his stupidity on running us further in debt. lets clean out Congress with new people like it happened in 2010. Lets show these idiots we mean business and we are tired of the gridlock and the outrageous debt and spending of our money!
These losers have plenty of money to last them for a lifetime. How about you? Do you have enough to make it and have a roof over your head and food, clothing for your and your children? These idiots keep spending and spending and making themselves rich with their lobbyist friends and relatives who they help get jobs on the inside while you continue to eat dirt and need welfare.
The liberal nuts don't care because they are stupid and stupid is what stupid does and votes for bigger government with more handouts for themselves on your back!
There are few military veterans in Congress and now most of these losers are lawyers, former CEO's and other rich people who want more of your money!
Lets vote them all out and start over again. Forget about if they are demorat or republican, independent or whatever, get them out on the street and lets start over.
There is no way this economy is going to get better with the recent re-election of an idiot in charge.
The current path we are on is very disturbing. Our 'leaders' who represent us in Washington are failing, on both sides of the table. More bickering, more pointing fingers, more nonsense... Something must be done soon!
There is no way between now and 2018 we will not have a recession. The last one ended in 2009. We've averaged one per 6 years so we're due for a recession in the next couple of years. That'll mess up the calculations. Always does.
No, they try to include the natural business cycle drawbacks to the economy in their original calculations. But not in the Obama ordered revised calculations... no no no....
Only thing it will take is inflation. Then the Fed will have to stop printing. They are holding down rates now stupid low with all the printing so rates would jump back up quickly. Now imagine in just a few short years BO will easily hit 20 Trillion in debt and put a 5% rate on it. Thats a Trillion a year in JUST INTEREST. That will put us about to the point where interest on the debt, Medicare, Medicaid and SS will eat up just about every dollar we take in.
Inflation isn't far fetched as many countries are now printing to debase their currencies. What if we hit 7% as no one will want our debt? Thats well over a Trillion in just interest.
Hold on to your hats boys and girls this massive printing and deficit spending is about to make the 2008 bubble look tame. The dollar will go to crap and the debt will have to be defaulted on. The only solution is to print 20 Trillion Obama bucks worth of bonds to ourselves, then take them to the parking lot and set them on fire.
It won't take til 2018, more likely 2014 to 2016. This one is gonna be real bad as the FED won't be able to help, seeing as how they are helping now to make it much worse.
Well, we have averaged a recession about every 7 years since WWII; they are a normal and necessary part of the economic cycle. It has been over 4 years since the last recession hit and over 5 years since the economy started to weaken prior to that recession. The next recession is likely just around the corner.
The last recession was anything but normal or necessary. It was in fact, the worst recession since the Great Depression. 8 million jobs were lost, the GDP fell nearly to negative 10 points. Over 400 banks failed, including ones that had survived the Great Depression.
No revisionist history allowed here.
And this "recovery" is anything but normal. In fact, it is the worst recovery since the Great Depression.
I dub thee numbers at 4%, and personal wealth up 50%, and everything else up up up! Or thee will be terminated and sent to thy unemployment line to create more jobs! I be da King.... and just ignore the real numbers.
We are watching the ultimate scenario for Keynsian theory. 6 Trillion in deficit spending and 4 Trillion added to the Fed balance sheet in four years. Chugging along at a meager 1.7 GDP growth. Assuming the last quarter contraction doesn't continue.
The only problem with debt..... at some point it has to be repaid.
Indeed our deficit will have serious long term consequences, however neither party has the will to confront our out of control spending. They do not have the will because we as a nation do not have the will to stop. We all want to cut spending, but not on anything that is important to or that affects us. As for our politicians from both parties, it is much easier to giveth (more spending, tax cuts) than to taketh away (tax increases, spending cuts).
100% correct. Everyone agrees we should cut, but not in my district. That's the problem, every place you could cut has a representative there fighting to not cut it ...... from both parties.
Only thing i could remotely see work is to freeze spending as is. I thought Obama was going to do it and started a freeze ...but ended up exempting over 90% of all spending so it didn't do much. I think our last true chance to turn it around was the debt ceiling fight 2 summers ago. The 6 Trillion dollar cut that passed the house and would have stopped the downgrade might have done it. This sequester thing they are fighting over now is the result of that debt ceiling debacle almost 2 years ago. Kicked the can that long.
We are passed the point of doing anything to keep the debt from blowing up i fear. The interest will consume us just as soon as rates go up.
As a reference we are paying about 2% on our interest now on our debt (artificially low from printing) and in normal times under Clinton we were paying 4.5 - 4.75% interest on our debt.
In a recent interview Erskin Bowles, the Democrat Obama chose to co-lead the deficit reduction commission, commented that for many decades voters have counted on their representatives in Congress to "bring home the bacon." He then added that "the pig is dead".
Ronald Reagan's choice for budget director David Stockman summed it up very well;
The “debt explosion has resulted not from big spending by the Democrats, but instead the Republican Party’s embrace, about three decades ago, of the insidious doctrine that deficits don’t matter if they result from tax cuts.”
The house and senate are made up of two parties that should be held equally responsible for this mess and those that continue to try to point the blame is being played as a fool.
Example the so called cliff deal last month with both parties walking away with the same tag line "its not as bad as it could have been" as if they have pulled off something great. I believe Democrat and Republican taxpayers both took pay cuts to fuel the spending of this administration.
Best thing to do is stop bending over taking in the rear by both parties stand up and start holding them all accountable for their actions or lack of actions.
Willard, they weren't accumulating debt at the rate of a $trillion a year in Reagan's time... or borrowing 42% of everything they spent... even Bush only racked up $3 Trillion in 8 yrs (and that horrified conservates)... these debt numbers are 2 1/2 times Bush's yearly average and they're squarely on you Libs... along with the train wreck that comes when the interest rates shoot back up...
I guess this is the new normal. Unemployment chronically high, deficits extremely high, welfare at record levels, an explosion in the amount of debt we carry.
Under Bush, our debt doubled. It will once again double under Obama. Will the next President also see it double under his guidance?
What will happen around 2035-2040 when the entire revenue the government takes in will be used on Social Security, Medicare/Medicaid, and the interest on our debt?
mike,
I've tried explaining it to people also. It doesn't seem to sink in. We are spending money we don't have for stuff we think we need. So called "Progressives" are the hardest to reach. It's simple math, but a lot of people don't seem to get it. Other people tend to blame it on people who want free stuff, Obamaphones, food stamps, free health care, etc. Well maybe, but that doesn't totally explain why our elected representatives are spending us into oblivion. Some day we'll run out of money, some day not too far off. Then this current recession will seem like good times.
The LifeLine Program was started under the Reagan Administration and cell phones were added by the GWB Administration.
No Federal/taxpayer dollars are used to fund the program.
It won't take 20 - 25 years Mike, probably 1 to 3. We are close now. The key thing to watch is the interest we pay on our debt. If you look at who is buying our debt most countries have slowed way down or stopped. The biggest buyer of our debt is ... us. The FED. Rates are ridiculously low now at about 2% only because the FED is buying tons of it at about 40 or 45 Billion per month and that is artificially holding it down. Historically rates are about 2-3 points above inflation. If the money printing machine was turned off today rates and what we pay as interest would double almost immediately. If you add SS, Medicare/ Medicaid and what we would pay in interest now if the Fed wasn't making money out of thin air we are real close right now. Throw in a bit of inflation and a 6% rate for our debt and we are probably there right now.
Re-Elect,
I admit I don't know which "free money" funds the Obamaphones (LifeLine). You are correct in one sense. LifeLine started under Reagan, was expanded by Clinton, and Bush added wireless (cell) phones in 2008. However, due to the growth in popularity of cell phones and the recession the cost of the program has sky rocketed under Obama. Under Bush in 2008 the program cost about $75 million, and has grown in about 4 years to $1.5 billion (not million, but billion) under Obama. Over 16 million Americans now have gov subsidized phones. Obama has done nothing to contain the cost as it keeps sky rocketing. He doesn't appear to understand budgeting and cost controls.
Here's one article I was able to find quickly:
http://www.nojitter.com/post/240009210/lifeline-the-new-breadline
Is it any wonder we have almost $17 trillion in debt and growing? How much free stuff is enough?
Atavist it's like any other govt program. They did an audit on it and found well over 400,000 people had multiple phones. It's like a tax as we pay for it through the USF fee on our cell bill. They should make it a land line only phone like it started as that would give emergency access to the poor and i'm fine with that.
Might be on youtube, guy goes up to a line of people getting these cell phones and a lot of the people in line already had cell phones. LOL
With all the partisanship in Washington (and let's be real - the entire U.S.), Mr. Elmendorf is a breath of fresh air.
This government and their cronies are going to spend us into bankrupcy.
Thank You George W Bush, hopefully the last republican president.
Oh, sure......the GOP is dead, right?
Maybe that explains why they were just re-elected to their second-largest majority in the House since 1948!
Did the Democrats die off when Bush won 2 terms?
And lets add Obamacare. Politico study and the IRS reporting .......... A 27 year old single person non smoker today if Obamacare was implemented fully will rise by 190%. i.e. if you pay $2k now you would be paying $5,800 under Obamacare.
A family of 5 will be paying $20,000 for insurance. That's the bronze plan, the lowest one.
Or you could carry no insurance and just pay the fine.
That should help everyone get back on their feet. Right?
And you ask the democrats how the economy is they start their BS with "OBAMA created 6 million jobs" or "Its Bush's fault".
Obama did create 6 million jobs. In China!!!!!
Hey NBC Did you intentionally decide not to report on the 7 million that will lose health insurance because of the DEMOCRAT Obama care!!!!! Yes voting does make a difference.. I wish to thank all of you uninformed voters......
http://www.breitbart.com/Big-Government/2013/02/05/CBO-2013-Forecast-Unemployment-GDP-Health-Insurance
IRS Says Obama care to cost family of 5 $20,000 a year.....
But just wait Anna, all those tax increases on businesses they got through will cause them to want to expand. Any, uh, minute now ..........
Auntie and ATC,
Bet you didn't have anything to say when W. created this mess, turning surplus into deficit. Anything from Breitbart is summarily dismissed as partisan BS., much like anything I hear you say. The difference I see is the cons prefer borrow and spend, hence the debt. Paygo went away under the cons.
And those are conservative estimates for Obamacare. I predict it will end up costing triple what is being projected.
When Medicare first started, it blew through it's initial 10-year budget projections in about 6 years, and then doubled about every 4 years for the next 12 years. I believe that Obamacare will make those projections look amazingly accurate in comparison!
And Pat, sure Bush and his GOP Congress spent way too much. Very bad. But would you care to explain why the spending actually went UP after the Dems took Congress for Bush's last 2 years? Or why it continues to this day? Or why it takes MORE than double for the government to operate today than it did 13 years ago? And since OF COURSE the reasoning used by libs is that "Bush did it" (doubling the national debt) it must be fine for Obama to do it too, right? Will the NEXT President get to double the debt because Obama did it?
I stopped worrying about bush, when comrade obama started
fundamentally transforming America, into amerikka!!!
If you have an Administration that is clearly anti-business, of course the economy will drag. And if you don't budget your money, of course you overspend. Is this really that hard for them to understand???
We will have growing debt, high unemployment and a barely moving economy as long as Obama is in office.
Once again, I must step in with a few facts. Remember 1999? That was tax and spending rates that worked. Remember 2001? yup- everyone bought into the tax cuts- not paid for, and 2 wars- not paid for. And that folks, is your deficit. The 1999 gives you a very workable model for tax and spending priorities and the repubs are the problem- just the facts mam
Now Obamacare- business has been taxed to death by the health insurance companies. As people get tossed out of the system, your insurance rises 15% every year to cover the ER's. You have been picking up the tab for the deadbeats. Obamacare makes them pay something into the system. As a business owner, at worse it will do nothing but I have already got rebates. The only reason business doesn't like Obamacare is because it will empower people to start new companies that may compete. Free enterprise girls.
But last, any fool knows that we can't afford to police the world. No, seniors and Mexicans are not the problem. It's the trust fund crowd that thinks they are so important. They produce nothing, destroy business and leave a path of destruction. Romney may have impressed you, but he made his money ripping off retirement funds. It's time to let the women and the dark folk fix the mess us spoiled white folk made. Obama, W. Even the wing nuts know Obama cleaned their clocks.
In 1999, we were spending 19% of GDP. Now Obama is spending 24-25% of GDP. There are your deficits. In 1999 there was also a Clinton tax CUT when he lowered cap gains from 28 to 20%. If you look at revenue from that it went up quite a bit. Also revenue was UP following the tax policy, not down. If you want to blame tax cuts and wars, how come after the 2003 rates went into effect the deficit was LOWER each of the following 4 years? It started back up in 2007 when the dems took congress and in 2008 when the mortgage mess blew up.