After years of delaying big decisions, the federal government faces daunting budget challenges, according to Congress‘ chief scorekeeper, which said Tuesday that a churlish economy, low tax rates, and growing spending on Social Security and health care are creating a volatile mixture.
Under the best of cases, that means a fourth straight year of trillion-dollar deficits, covering all of President Obama’s first term in office, and debt nearing a staggering $20 trillion by the end of this decade.
But if Congress continues to extend tax cuts and higher rates of spending, as it has done for the past two years, the situation will be much worse — a total of $10 trillion more in deficits each year for the next decade.
The bad news doesn’t stop there.
“Beyond the coming decade, the fiscal outlook is even more worrisome,” the Congressional Budget Office said in its report. “Although long-term budget projections are highly uncertain, the aging of the population and rising costs for health care would almost certainly push federal spending up sharply relative to GDP after 2022 if current laws remained in effect. Federal revenues also would continue to increase relative to GDP under current law, reaching significantly higher percentages of GDP than at any time in the nation’s history.”
For the current year, fiscal 2012, the CBO said the budget deficit will reach $1.1 trillion — down slightly from the past three record years, but still higher than any other president has ever recorded.
Among the other worrisome signs is that Social Security’s disability insurance trust fund and Medicare’s hospital insurance trust fund will be exhausted sometime during the next decade.
The CBO said the Troubled Asset Relief Program, or TARP, which had been a net positive for the government in 2010 and 2011, will become a net drag. The report said TARP costs will rise to $23 billion this year.
Watchdogs hoped the gloomy news would break a years-long deadlock that has given Democrats higher spending and Republicans lower tax rates, with sharp consequences for the budget.
But there was little sign Tuesday that either side was prepared to relent.
Democrats saw slightly lower unemployment rates and deficits as signs that their policies over the past three years have worked.
“It is clear that part of the progress we’ve made so far is due to the pro-growth policies championed by congressional Democrats and President Obama, and now is not the time to turn back the clock or return to the policies that got us into this mess in the first place,” said Rep. Chris Van Hollen of Maryland, the ranking Democrat on the House Budget Committee.
Republicans argue that the $831 billion stimulus did little to relieve the economic downturn and say the answer is to tighten belts on the spending side, though they argue against increasing taxes to further close the deficit.
“No nation can spend, tax, bail out or borrow its way back to prosperity,” said Rep. Jeb Hensarling of Texas, chairman of the House Republican Conference.
The CBO released two forecasts: One takes account of current laws, which call for the Bush-Obama tax cuts to expire and for spending to be cut dramatically in future years. But with Congress repeatedly rejecting those options, the CBO released a more likely forecast that predicts trillion-dollar deficits for the next decade.View Entire Story
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