The Congressional Budget Office recently released its long-term budget outlook. The report doesn't offer specifics in terms of a solution to the country's increasing debt burdens, but does point out a number of reasons why the current system won't be able to solve itself.
Among the report's concerns are rising health care costs, which continue to grow faster than the economy. The report examines a range of possible paths for federal spending and revenues through 2050 and combines them into various hypothetical scenarios.
The report's executive summary says that analysis of the scenarios leads to a number of conclusions, chief among them that driven by rising health care costs and an aging population, federal spending for Medicare, Medicaid, and Social Security will claim a sharply increasing share of the nation's economic output over the coming decades. Even if taxation reached unprecedented levels, current spending policies would be financially unsustainable.
Meanwhile, as the tax system is now configured, federal revenues will grow faster than the overall economy. If taxation is restricted to the levels that prevailed in the past, the growth of spending on programs for the elderly will have to be reduced substantially.
The report says limiting the growth of outlays for defense, education, transportation, and other discretionary programs would not be enough to ensure fiscal sustainability. Likewise, economic growth alone is unlikely to bring the nation's long-term fiscal position into balance. Moreover, issuing ever-larger amounts of debt or dramatically raising tax rates could significantly reduce economic growth.
The full report is available at the budget office's Web site, www.cbo.gov.
