The Congressional Budget Office (CBO) released its Long-Term 2011 Budget Outlook Report, Wednesday, with dire projections for the nation’s fiscal future if the current path is not changed. The CBO called its budget outlook “daunting.”
Under current law, federal spending will continue to soar and an aging populations will increasingly draw funds from programs like Medicare and Social Security. According to the new report, in order to prevent the debt from becoming unsustainable, there needs to be either revenue increases, spending cuts, or some mix of the two. (CBO, Pelosi unclear on Obamacare’s Medicaid “glitch” costs)
One of the more dire figures in Wednesday’s report is the CBO’s projection that by the end of 2011, federal debt will reach approximately 70 percent of gross domestic product – the highest level it has been since the end of World War II.
The report also says that under current law, the aging population combined with rising health care costs will cause spending on health programs like Medicare, and Social Security, to rise to 15 percent of GDP in 25 years. Right now, that spending is 10 percent of GDP. To put that number in perspective, over the last 40 years, all government spending, except for interest payments on the debt, has averaged 18.5 percent of GDP.
CBO also analyzed budget outlooks under an “alternative fiscal scenario,” which, according to some budget analysts, is the more realistic picture of the country’s fiscal policies.
Under this scenario, federal debt grows much faster and is projected to exceed 100 percent of GDP by 2021. Subsequently, the report says that the disparity between revenue and spending levels along with higher interest payments on the debt, will cause debt levels to skyrocket to over 109 percent of GDP by 2023 and even 190 percent by 2035.
The CBO also analyzed the health care law and found that it will result in a $180 billion annual tax increase.
Also according to the report, federal spending will reach 50 percent of GDP by 2060, interest payments on the debt will reach 4.4 percent of the GDP by 2021, and the unemployment rate will rest at a dismal 8.4 percent in 2012.