The return of the D-word to American politics

Time’s a-wastin’.

That’s the key takeaway from the latest budget outlook from the Congressional Budget Office. A plateau in spending and modest growth in revenues over the past few years have allowed federal budget deficits to fall back toward their historical level of 2.7 percent of GDP. But they’ve also allowed Congress, the president and the public to get complacent about federal finances. And as we can see from the report the CBO issued Monday, we won’t have the luxury of complacency much longer.

Here’s the CBO’s picture for the next 10 years in a historical context:

CBO 2015 capture

So, the very best years of the current period will be merely average. And within a decade, deficits will be back to 4 percent of GDP — one and a half times the average — and growing. We can expect them to keep growing, given the CBO’s explanation of what will be driving the increased borrowing:

“In CBO’s projections, outlays rise from a little more than 20  percent of GDP this year (which is about what federal spending has averaged over the past 50 years) to a little more than 22 percent in 2025 …. Four key factors underlie that increase:

  • “The retirement of the baby-boom generation,

  • “The expansion of federal subsidies for health insurance,

  • “Increasing health care costs per beneficiary, and

  • “Rising interest rates on federal debt.”

So, the rising spending will be driven by Social Security, Medicare, Medicaid, Obamacare and debt payments. These increases are expected to overshadow declines in spending for everything else, including the military and discretionary programs. Those declines are what President Obama and the GOP House were able to agree on previously. But as many of us warned at the time, that was nibbling around the edges of the problem — which is being driven, and will continue to be driven, by entitlement spending.

And this is a best-case scenario. The CBO assumes revenues will continue to rise to almost 1 full percentage point above their 50-year average and stay there, even though we have never sustained such a bump for more than a few years. The forecast also does not take into account any future recessions, which history tells us will be coming well before this 10-year window ends in 2025. Keep in mind federal surpluses were forecast to be just around the corner as late at 2007, before the Great Recession hit. With domestic growth expected to be only average in the next few years (2.5-3 percent, according to the CBO) and markets and economies overseas looking shaky, Congress shouldn’t be budgeting based on such a rosy outlook — especially when that rosy outlook still shows rising deficits on the horizon.

That brings us back to the present. We have a lame-duck president who in the past has at least talked in the direction of modest entitlement reforms, and a GOP Congress that needs to show its base and the country it can deliver on its promises. This would seem to be the ideal time to take some steps toward avoiding that future deficit growth. Not least since reducing our borrowing as soon as possible not only avoids future borrowing but future interest payments as well.

The president’s defiant tone since the midterms doesn’t offer much optimism on this front. But if he truly wants to do something to help a Democrat succeed him, why not grab the proverbial third rail so she doesn’t have to?

Reader Comments 0

57 comments
Shar1
Shar1

Prescription drug costs are a big driver of health care cost increases.  There is absolutely no reason for continuing to allow Big Pharma to use federally-financed research for free and to charge Americans twice, thrice or more above the free market price for their products, especially when pharma companies continue to post record profits year on year.

Surely the two parties could at least agree that this unsustainable and massive subsidy to an industry that doesn't need it should end immediately.

332-206
332-206

Hellooooo, backlash: 

"Obama to Drop Proposal to End ‘529’ College Savings Plans"

RafeHollister
RafeHollister

"Wanna know the first site up. An Alex Jones site. ..."

... citing the same Daily Mail article Rafe did. Alex Jones isn't the source.


Right, the Daily Mail article cites a CBO report for the number.  


They took the 1.3 Trillion cost of Obamacare, and divided it by the number of new enrollees that CBO predicts will happen by 2025, and it comes out to $50,000 per uninsured, now covered. 

Jefferson1776
Jefferson1776

Quality of life cost tax money,  you can't keep it all.

RoadScholar
RoadScholar

"The president’s defiant tone since the midterms doesn’t offer much optimism on this front."

And how should he sound? Do ya think the Congress of "No" has anything to do with it? Or how about the lie/rumor de jour? Maybe if the repubs would get their heads out of their ,....you know, and pass some legislation that the President would sign, then maybe we can move forward. Oh, no abortion, guns, and religion legislation allowed. Period.

How about a comprehensive immigration plan? Transportation plan? Just how long does it take for the middle repubs to find someone to partner with on these topics? How many years has it been?

FIGMO2
FIGMO2

So, the rising spending will be driven by Social Security, Medicare, Medicaid...

All issues that GWB tried to address in his first term. An approach which I favored.

The burden of Obamacare is on Barack and the middle-class taxpayers. 

Finn-McCool
Finn-McCool

The CBO doesn't take into account the next Wall Street - caused economic crash. Gotta keep those in mind ya know?

Finn-McCool
Finn-McCool

Obama shouldn't work with anyone with a R on the end of their name. Veto everything that comes in.

Claver
Claver

"We have ... a GOP Congress that needs to show its base and the country it can deliver on its promises."  Well, so far the House can't even pass a bill on Republican staples like abortion and immigration, so I'm not holding my breath.

straker
straker

Kyle


If the rich pay into Social Security, I have no problem with them getting payments after age 62 or 65.


I don't think the rich need to be on Medicare.


However, my post was about the lower middle-class and poor, NOT the rich.

LogicalDude
LogicalDude

"Keep in mind federal surpluses were forecast to be just around the corner as late at 2007, before the Great Recession hit."


And that changed everything.  :) 


"That brings us back to the present.  We have a lame-duck president. . . " 


So, you bring a few criticisms regarding the state of affairs, but no solutions.  

How about:  adjusting COLA to preserve funds for later years of entitlement spending? 

How about: raising the retirement age, which gives the double-bonus of a year of extra income into entitlements and a year less of spending? 

How about: raising the salary cap of social security so that higher wages still pay into it at the same percentage? 


It's certainly easy to criticize the President who can really only sign off budgets, Congress who can actually create budgets, and other policy makers about "not doing enough."  

It's much much harder to make some recommendations that can actually move the country forward.   Your article is solid, in what it says, but lacking in what it doesn't. 

Jefferson1776
Jefferson1776

Most of the spending comes from the boomers.  Since people are living longer,  SS and Medicare taxes should be increased to pay for it. Anyone who thinks working past 65 is the answer, just goes to a job --- they don't work.

EdUktr
EdUktr

Meanwhile, real family incomes are down $4,200 since 2009, the share of people working has dipped to levels not seen in nearly four decades, and the technology sector is laying off people in massive numbers. Food stamp use remains at historic highs, while 1 in 4 Americans aged 25–54 are not employed. And the President will now violate federal law in order to provide work permits and benefits to 5 million illegal aliens. 

How will all this impact future social spending?

MANGLER
MANGLER

Entitlements like Medicare and Medicaid?  Yes, those entitlements.  The rest of the social programs combined pale in comparison.  So eliminating every single other social program won't do anything other than harm those in the greatest need.  The GOP will be hell bent to reduce those payments, since it's core constituency is receiving them.


And by the way, why is it that deficits matter now, under Obama, when as recently as Bush/Cheney, "deficits don't matter"?

GMFA
GMFA

I agree we need to deal with entitlements, but also we must ask the wealthy to pay their share and close loopholes used by the likes of Romney with off shore accounts. Raising the cap on SS taxes as well. It can't just be take more from the middle class as the "Fair Tax" enthusiasts would do.

RafeHollister
RafeHollister

Here is my solution for fixing social security, piggybacking on what Kyle said.  For people that are responsible and have saved for their retirement, give them a one time option at 65.  You can either sign up and get benefits for SocSec or you can receive an exemption on income tax on savings, interest and dividends and reduce their capital gains taxes to 50% of regular rate.


If we don't do something with Obamacare however, I don't see that we can stay afloat.  $50,000 in federal expenditures to insure every new insured is unsustainable. 

Tiberius-Constitutionus
Tiberius-Constitutionus

You're wrong Kyle.  The President would have, and still would, work with the GOP, in spite of everything they've done to him.  Problem is, they hate hate hate the fact that he's a successful black President.

IReportYouWhine#1
IReportYouWhine#1

As long as there are democrats around to shovel your grand children's money to the robber barons on Wall Street, we might as well revisit the retirement savings account idea the Republicans had. If you would have had an account with Big Bank stocks back when Obama showed up, it would have tripled by now.

332-206
332-206

Would be nice to see a unified Majority send common sense debt legislation to the President.

Anyone truly expect that to happen?

straker
straker

Sure, we can greatly reduce federal subsidies for health insurance and Social Security payments.


Then, the death rate for the lower middle-class and poor will greatly increase, leaving more scarce resources for the  affluent.


Is that the Republican way, Kyle?

HeadleyLamar
HeadleyLamar

So, the rising spending will be driven by Social Security, Medicare, Medicaid,


In other words baby boomers


Well all knew this was coming. Both my parents are 65 now.

Caius
Caius

“In CBO’s projections, outlays rise from a little more than 20  percent of GDP this year (which is about what federal spending has averaged over the past 50 years)..... 


Did someone mention fiscal conservatives?


Side note: my medical insurance is $360 lower for 2015 than it was for 2012 - 2014.  No one can tell me why.


Nick_Danger
Nick_Danger

@RafeHollister 

Ah.  So, that includes the initial start-up costs, which will be amortized over the length of the program, right?  That's what make the numbers look so high - they're inflated by being amortized over only a couple of years.

Kinda like when you buy a new care for $36,000, it costs you $6000 a month over the first six months, right?

Obviously not.

HeadleyLamar
HeadleyLamar

@RafeHollister Right, the Daily Mail article cites a CBO report for the number.


No one else is reporting that BS


Wanna guess why ?


Do you think Fox News would be reporting that number if it were true ?

332-206
332-206

@FIGMO2

Uhhh, the majority congressional Party during that first W term didn't help?

MHSmith
MHSmith

@straker 

The "rich" a.k.a. "The Evil Rich" also pay into Medicare and Obamacare.



Then again, your post, wasn't about to defend due process or equal rights under the law. 


Kyle_Wingfield
Kyle_Wingfield moderator

@LogicalDude "Your article is solid, in what it says, but lacking in what it doesn't."

When would that not be the case? Won't every article lack in what it doesn't say?

FWIW, if the Dems would go for the first two options you offer, I think the GOP should go for the third.

Robtown
Robtown

@EdUktr Should've thought about all this before you voted for W... not once... but twice...

DownInAlbany
DownInAlbany

@EdUktr And, let's not forget the 50% increase in folks on disability in the last 10 years.

HeadleyLamar
HeadleyLamar

@EdUktr  The share of people working has dipped to levels not seen in nearly four decades


baby Boomers.


!0,000 retire every day. Or do you want grandma to keep working ?

HeadleyLamar
HeadleyLamar

@RafeHollister You realize that 50,000 number is complete BS right ?


Do a google search for 50,000 Obamacare


Wanna know the first site up.


An Alex Jones site. And the rest are all far right wing sites.


You've fallen for it again Rafe. 


Find that 50,000 number for me on fox news and ill believe it.

Kyle_Wingfield
Kyle_Wingfield moderator

@straker Do we need to keep giving SS and Medicare to millionaires? That's where I'd start. I've never understood why liberals want to tax "the rich" more and more, but insist on keeping them in SS and Medicare.

Kyle_Wingfield
Kyle_Wingfield moderator

@HeadleyLamar Yes, we all knew this was coming. We've wasted a couple of decades in which we could've done something. We're running out of time.

Nick_Danger
Nick_Danger

@MHSmith @straker 

"Then again, your post, wasn't about to defend due process or equal rights under the law."

Do what?

RafeHollister
RafeHollister

@HeadleyLamar @EdUktr Not a true statement.  This 10,000 figure was the number, the census says, that were born each day during the baby boom.  A significant number (women) never worked, many died, many have already retired.  Bogus liberal propaganda!

Kyle_Wingfield
Kyle_Wingfield moderator

@HeadleyLamar "Wanna know the first site up. An Alex Jones site. ..."

... citing the same Daily Mail article Rafe did. Alex Jones isn't the source.

Nick_Danger
Nick_Danger

@DownInAlbany @Tiberius-Constitutionus 

It would be difficult to work with a politician who has such thin skin that he would pout for six years about something like that!!  LOL!

Do you seriously believe that Mr. Boehner is still pouting about that?

DawgDadII
DawgDadII

@Kyle_Wingfield @HeadleyLamar Sheesh. "could've done something"??? We now have Medicare Part D, expanded Medicare and Medicaid, Obamacare, not to mention food stamp expansion, etc. etc.  You want MORE "something"???


I just wish they'd stop cramming things down my throat I didn't ask for, with a tax bill attached.

HeadleyLamar
HeadleyLamar

@Kyle_Wingfield @HeadleyLamar Find me 1 legit news source reporting that 50,000 number


Kyle Obama didn't meet with the IRS chief and conspire to target Conservative groups either. 


And really...The Daily Mail ? A conservative British tabloid ?

Kyle_Wingfield
Kyle_Wingfield moderator

@Nick_Danger No more than Obama, et al. are still smarting about McConnell's "one-term president" line (from October 2010, I'll point out to get ahead of someone saying it was in Obama's first month, or first day, or before he was inaugurated, or before he was born).

Kyle_Wingfield
Kyle_Wingfield moderator

@Wascatlady Yes, but not for Medicare. In fact, there's a Medicare surcharge for upper incomes.