Mar 24, 2016
CBO Confirms: U.S. Fiscal Future is Bleak
Post by Mary Kate Hopkins
Entitlement Crisis is Not a Matter of If – But When.
The Congressional Budget Office (CBO) released its updated 10-year budget projections today, and it once again highlights that our nation’s fiscal future is bleak. Without substantive reforms, America is heading toward disaster.
According to CBO, mandatory (automatic) spending plus interest payments on our debt will make up nearly 78 percent of all government spending by the year 2026 – compared to 33 percent in 1966.
Within the mandatory spending budget, Social Security and Major Health Care Programs (Medicare, Medicaid, the Children’s Hospital Insurance Fund (CHIP) and exchange subsidies) will account for 54 percent of all federal spending by 2026 – compared to 16 percent in 1966.
What this means is that in ten years all other federal spending—everything from the national defense to education to transportation infrastructure to NASA—will account for less than one quarter of federal government spending.
This growth of spending on entitlements has been a key driver of the national debt—which currently clocks in over $19 trillion. According to CBO, the national debt will actually be larger than our entire economy this year.
- Over the next 10 years, annual spending on Major Health Care Programs including Medicare and Medicaid will increase nearly $800 billion, or 77 percent, rising from just over $1 trillion this year to more than $1.8 trillion by 2026.
- Due to pressure from an aging population and retiring workforce, annual spending on Social Security will increase 78 percent from over $900 billion in 2016 to $1.6 trillion by 2026.
- By 2026, spending on these entitlement programs will lead to debt held by public growing to more than five-sixths the size of the U.S. economy.
- By 2026, more than three-out-of-every-four dollars the government spends will go towards mandatory spending programs and interest on the national debt.
Continued irresponsible spending that leads to debt is unsustainable and poses a serious threat to the future of the American economy. High debt is already hurting our economy. As it grows, the debt reduces private savings, diminishes economic opportunity, robs other federal activities and forces us to be dependent on foreign creditors.
In order to avoid the fate of Spain or Greece, we must enact entitlement reforms that go beyond minor adjustments. Lawmakers need to be serious in their approach to a serious problem.
While entitlement reform is never a popular discussion during an election year, serious, meaningful changes are the only way to actually address the mounting and unsustainable debt facing our nation’s future.
Next year Congress will be asked once again to increase the federal limit on borrowing and debt. When Washington acts to increase the debt limit in 2017, it must implement structural changes that will rein in out-of-control mandatory spending.
There are a number of options for reasonable and responsible reform. Congress could means test entitlement benefits where better-off retirees would receive smaller payouts, tie cost-of-living increases to the chained Consumer Price Index, target the causes of waste, fraud and abuse, or gradually increase the retirement age for entitlement benefits.
We have entrusted our elected leaders to be responsible stewards of our hard-earned tax dollars. It’s time for them to show some determination to address the drivers of our debt.