Fiscal Doom: What You Weren't Told About the Latest Budget News
Political leaders and reporters miss the forest for the trees in CBO's deficit and debt projections.
Only in Washington, the place where you land when you fall through the looking glass, could this be hailed as good news:
Between 2009 and 2012, the federal government recorded the largest budget deficits relative to the size of the economy since 1946, causing its debt to soar. The total amount of federal debt held by the public is now equivalent to about 74 percent of the economy's annual output, or gross domestic product (GDP) — a higher percentage than at any point in U.S. history except a brief period around World War II and almost twice the percentage at the end of 2008.
If current laws remained generally unchanged in the future, federal debt held by the public would decline slightly relative to GDP over the next few years, CBO projects. After that, however, growing budget deficits would push debt back to and above its current high level. Twenty-five years from now, in 2039, federal debt held by the public would exceed 100 percent of GDP, CBO projects. Moreover, debt would be on an upward path relative to the size of the economy, a trend that could not be sustained indefinitely.
Those are the first two paragraphs of the Congressional Budget Office's latest report. Our deficit levels (annual totals of red ink) are stalled at breathtakingly high levels — and are projected to soar again in a few years, piercing the $1 trillion mark. Our debt (money owed to the United States' creditors) is on pace to exceed the GDP (the value of goods and services produced) by the time today's college graduates turn 50.
Scary news, right? Not according to many media outlets and a cynical leadership class in Washington. Some news organizations focused on the sugar-high of good news — the (temporary) dip in deficits. Politico's lede:
The federal budget outlook will continue to improve this year, with the deficit projected to shrink to $514 billion — the lowest level since President Barack Obama took office.
Think of a reporter covering a shooting. The police tell him the victim is dying of blood loss. Is the headline, "Shooting Victim Expected to Die" or "Blood Flow Slows for Shooting Victim"?
Al Kamen of The Washington Post mocked deficit scolds under the headline "Remember the Deficit?" In a clause six paragraphs into his column, he reveals the deficit is "expected to rise sharply in coming years."
Like many on the left, Mike Grunwald of Time magazine cherry-picked the CBO numbers to argue against austerity. He waited until his last paragraph to inform readers that the debt is expected to grow from 74 percent of GDP today to 106 percent in 25 years, and then noted (correctly) that President Bush squandered the Clinton-era surpluses. It's never too late for the news and a partisan shot.
This is the subhead on Grunwald's piece: "Fiscal doom will be delayed thanks to lower health care inflation in recent years. But will Congress take notice?" Thanks to? Doomsday is coming — a little later than feared — so let's give thanks, and spend!
My colleague Billy House knows how to get to the heart of a story. His lede:
The nation is doomed to return to trillion-dollar shortfalls by 2024 if lawmakers don't alter existing tax and spending policies, congressional auditors warned on Monday.
Billy dinged Democrats for seizing "optimistically on a smaller aspect of the report: that the federal government's subsidies for the health care exchange premiums under the Affordable Care Act will be lower than previously projected."
According to the nonpartisan CBO, the nation's spending pressures stem from an aging population, rising health care costs, and an expansion of federal subsidies for health insurance. Moreover, interest rates are expected to climb, adding to the red ink.
CBO urged political leaders to address the problem now, rather than wait to deal with fewer options and worsening consequences. The solution is a budget deal that neither President Obama nor House Speaker John Boehner seems to possess the courage and/or ability to strike.
To put the federal budget on a sustainable path for the long term, lawmakers would have to make significant changes to tax and spending policies: reducing spending for large benefit programs below the projected levels, letting revenues rise more than they would under current law, or adopting some combination of those approaches.
Higher taxes, fewer entitlements. It's going to happen sooner or later, painfully or more painfully, and nobody in charge in Washington seems to care.