Lawmakers wrangling over “fiscal cliff” negotiations may have a bigger problem on their hands over the next decade, as the current rate of federal spending could drive the United States into a fiscal crisis, according to the Congressional Budget Office.
The CBO issued this warning in a little-noticed report on the effects of the fiscal cliff that was released just before David Petraeus resigned as CIA director (my emphasis):
[I]f the fiscal tightening was removed and the policies that are currently in effect were kept in place indefinitely, a continued surge in federal debt during the rest of this decade and beyond would raise the risk of a fiscal crisis (in which the government would lose the ability to borrow money at affordable interest rates) and would eventually reduce the nation’s output and income below what would occur if the fiscal tightening was allowed to take place as currently set by law.
President Obama’s budget — voted down unanimously by the House and Senate earlier this year — would have added almost $10.4 trillion to the federal debt over the next decade, according to a review of the budget by Republicans on the Senate Budget Committee.
“We aren’t $16 trillion in debt because taxes are too low; it’s because Washington spends too much,” said The Public Notice’s Gretchen Hamel in a statement on the CBO report. “Without major reforms to entitlements and significant spending cuts, we are doomed to go off a cliff, it’s just of question of when.”
Even so, Obama continues to demand tax increases as a way to pay down the debt. “If we’re serious about the deficit, then we’ve got to ask the wealthiest Americans — folks like me and Governor Romney — to go back to the tax rates that were paid when Bill Clinton was President,” he said during the last week of the campaign.
Obama has given lip service to the idea of cutting spending. ” I’m ready and willing to make big commitments to make sure that we’re locking in the kind of deficit reductions that stabilize our deficit, start bringing it down, start bringing down our debt,” he said during a press conference Wednesday.
Of course, his budget proposal raises spending.