I tend to look for a bright side to any issue, but reading through the just-released Long-Term Budget Outlook from the Congressional Budget Office (CBO), it is hard to find much to be optimistic about. First, the report maps out a bleak future where, over the next few years, the Obama administration raises taxes by one third – from 15 percent of gross domestic product (GDP) to 20 percent of GDP – while reducing federal spending by just under ten percent — from roughly 24 percent of GDP to 22 percent of GDP (the fall-off from the stimulus). A large cut to personal income with a simultaneous drop in government spending seems destined to produce a negative impact on an already weak economy.
What is particularly striking about the CBO report is that it makes clear that, despite spending more than a year on passage of health care legislation based at least in part on the notion that the old health care system was bankrupting our country, the new health care system actually will bankrupt our country. As the report states:
CBO projects that if current laws do not change, federal spending on major mandatory health care programs will grow from roughly 5 percent of GDP today to about 10 percent in 2035 and will continue to increase thereafter. Those projections include all of the effects of the recently enacted health care legislation, which is expected to increase federal spending in the next 10 years and for most of the following decade.
Equally troubling is the fact that taxes as a percent of GDP continue to rise into the foreseeable future. All this pain and we still end-up with a federal budget debt of over 100 percent of GDP and an ever-increasing interest burden.
This is not a pretty picture and one obvious challenge facing the next Congress and the current administration is how they will dramatically pare back federal health care spending less than a year after expanding it. The economic and political impacts of the massive tax increases are self-evident.
Author’s Note: The economic and political impacts of the massive tax increases are self-evident. I discussed the impact of the pending budget cuts in a March Daily Caller article.
Richard M. Russell founded Pinyon Labs LLC and is CEO of VIAforward, a technology consulting company. Prior to founding Pinyon Labs, Russell spent a combined two decades as a United States Ambassador and senior Presidential and Congressional advisor on science, technology and telecommunications.