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Opinion: Columnists

Philip Klein: Yes, there's still a debt problem

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Opinion,Philip Klein,Columnists,Politics Digest,Fiscal Policy,Debt Ceiling

Humans, by nature, are typically focused on the short term. This has always been one of the major obstacles to implementing necessary reforms to get America's debt on a sustainable path.

Between 2009 and 2012, perpetual trillion-dollar-plus deficits helped bring attention to the nation's growing debt problem. But this always ran the risk of conflating two separate issues.

One issue was the immediate problem of near-term deficits, which ballooned due to lower revenues resulting from the weak economy combined with higher spending from short-term economic stimulus and stability measures.

The other, bigger problem was the nation's growing long-term debt, driven by the aging of the population and rising health care costs.

Last month, the Congressional Budget Office reduced its short-term budget projections, determining that the federal government would run a $642 billion deficit in 2013, which is about $200 billion less than previously forecast. Over the 2014 to 2023 time frame, the CBO now projects cumulative deficits of $6.3 trillion, or $618 billion less than projected in February.

The Washington Post's Ezra Klein declared that "the debt disaster that has obsessed the political class for the last three years is pretty much solved, at least for the next 10 years or so." The problem is that even though near-term deficits are down from their historically high levels, the long-term problem still remains. Over the next decade, according to the CBO, "[F]ederal debt held by the public is projected to remain above 70 percent of GDP -- far higher than the 39 percent average seen over the past four decades."

Deficits also begin to grow again at the end of the projection period, reaching almost $900 billion in 2023, at which point debt will be 74 percent of GDP, more than double the 36 percent it stood at in 2007, just before the economic downturn.

"Such high and rising debt later in the coming decade would have serious negative consequences," the CBO warned, adding that "a large debt increases the risk of a fiscal crisis, during which investors would lose so much confidence in the government's ability to manage its budget that the government would be unable to borrow at affordable rates."

Last Friday, the trustees overseeing Social Security and Medicare issued their annual report, which found the programs were carrying a long-term deficit of $66 trillion.

In 2013, for the fourth straight year, Social Security's trustees expect the program to pay out more in benefits than the government collects in Social Security taxes and anticipate the program running deficits in perpetuity. This is despite the expiration of the payroll tax holiday that reduced the program's revenues in 2011 and 2012.

By 2033, without changes, the trustees anticipate the program will have to automatically cut benefits by 23 percent. Back when President Bush was pushing Social Security reform in 2005, the program wasn't supposed to start running annual deficits until 2018 (instead of 2010), and the automatic benefit cuts weren't projected to begin until 2042.

Thus, the trust fund exhaustion date that was 37 years away during the Bush era when liberals denied the existence of a Social Security crisis, is today just 20 years away.

Trustees now anticipate Medicare's various programs running a combined long-term deficit of $42.9 trillion. But Paul Spitalnic, acting chief actuary for the Centers for Medicare and Medicaid Services, in a statement at the end of the report cautioned that even these projections were overly optimistic, because the changes to Medicare envisioned by President Obama's national health care law were likely to prove unsustainable.

This week, the Wall Street Journal reported that the shrinking near-term deficit forecast was making any sort of debt deal less likely this year. But the longer the nation avoids making reforms to reduce its debt trajectory, the more difficult Americans' choices will become down the road.

Philip Klein (pklein@washingtonexaminer.com) is a senior editorial writer for The Washington Examiner. Follow him on Twitter at @philipaklein.

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