Decoding the CBO’s Latest Report

While the media swirls around Sen. Bernie Sanders and Sec. Hillary Clinton’s debate disagreements and Trump’s latest crazy utterances, the press missed perhaps the biggest news of the week – a story that will likely impact the next generation more than the price of a Clinton speech or another Trump harrumph.

The nonpartisan Congressional Budget Office (CBO) released a new report projecting that our nation’s future deficits and debt are spinning out of control.

In response, The Campaign to Fix the Debt, a nonpartisan movement dedicated to addressing our country’s economic and fiscal problems, made three points worth sharing in an edited form:

1. The Era of Declining Deficits is Over

• This year’s budget deficit is forecast to be $544 billion, $105 billion higher than last year. And deficits are projected to trend upwards.
• Trillion-dollar deficits will return by 2022, and the deficit will reach $1.37 trillion by 2026.
• Deficits will nearly double in the next decade from 2.5 percent of the economy in 2015 to 4.9 percent by 2026.

(Source: The Campaign to Fix the Debt)

1. Already Unsustainable Debt Path Is Now Much Worse

• Debt held by the public will grow by more than $10 trillion over the next decade, from $13.1 trillion last year to $23.8 trillion in 2026.
• As a share of the economy, debt will grow from 74 percent today to 86 percent in 2026. That is more than twice the 50-year debt average of 39 percent.
• Nearly half of the projected $2.5 trillion increase in total spending from 2016 to 2026 is for Social Security and Medicare. Interest on the debt, the fastest growing part of the budget, will more than double over the decade, growing from 1.3 percent of the economy in 2015 to 3 percent in 2026.

1. Irresponsibility in Washington Is a Chief Culprit in the Worsened Outlook

• Last year, Congress added over $1 trillion to the projected debt in 2026 by passing unpaid-for tax breaks and Medicare spending increases.
• Failure to follow the “pay-as-you-go” law that requires paying for new policies is responsible for roughly half of the deterioration of the country’s fiscal outlook from last year.
• If policymakers continue to act irresponsibly…the debt projections will be much worse. This could add an additional $1.4 trillion to the debt, making it reach 91 percent of the economy by 2026.

What changed the CBO’s assumptions? In part, Congress pass unfunded benefits and tax decreases. And the CBO was more pessimistic on the economy. They now assume a 4 percent nominal growth rate split equally between a 2 percent growth rate and a 2 percent inflation rate. The good news is that they also assume low interest rates of 4.1 percent. If they are wrong and interest rates rise, the annual deficits will become higher, since interest on the debt is the one part of the federal budget which cannot be cut by Congress.

Ironically, the Democratic candidates for president as well as Donald Trump refuse to even discuss cutting entitlements, which are the largest source of the growing debt. Sadly, my generation has promised ourselves incredible benefits and we will pay for them by borrowing from our children.

While history will note my generation’s breakthroughs in medicine and communications thanks to the evolution of wireless communications and the Internet, they will also brand us as the selfish ones who bankrupted a country and a generation.

Before we can deal with issues of equality, global warming and defeating ISIS with the support of a strong military, we must figure out how to save our children’s economic future.