Over at the Washington Post, Lori Montgomery writes that in the run up to his State of the Union address, President Obama and White House officials have been pushing the idea that the job of debt reduction is nearly done. But this is undercut by last week’s Congressional Budget Office report.
As Obama put it this weekend, “Over the last few years, Democrats and Republicans have come together and cut our deficit [over the next decade] by more than $2.5 trillion through a balanced mix of spending cuts and higher tax rates for the wealthiest Americans. That’s more than halfway towards the $4 trillion in deficit reduction that economists and elected officials from both parties say we need to stabilize our debt.”
But the CBO report this weekend assumes that all of the deficit reduction Obama described is implemented along with about $1.2 trillion in savings from automatic spending cuts. In other words, the report assumes deficit reduction along the lines that Obama says is the goal.
Yet public debt (U.S. debt held by investors), is projected to rise from $12.2 trillion in 2013 to $19.9 trillion by 2023. Gross debt (which includes money the federal government owes other government funds, such the Social Security system) is projected to grow from $17 trillion in 2013 to $26 trillion by 2023. On a more comparable basis, the public debt is projected to be 77 percent of GDP by 2023, or more than double the 36.3 percent that it was in 2007, before the onset of the economic crisis. Of course, this is just over the next decade. The budget picture gets even worse from there.
As the CBO explains:
Under current law, the aging of the population, the rising costs of health care, and the scheduled expansion in federal subsidies for health insurance will substantially boost federal spending on Social Security and the government’s major health care programs, relative to GDP, for the next 10 years and for decades thereafter. Unless the laws governing those pro- grams are changed—or the increased spending is accompanied by corresponding reductions in other spending, sufficiently higher tax revenues, or a combination of the two—debt will rise sharply relative to GDP after 2023.
Despite this, it looks as though Obama may be giving up any pretense of wanting to address this problem.