What has it come to when you start getting anxious over a
new budget document released by a federal agency like the
Government Accountability Office (GAO), which some readers, of a
certain age, will remember as the former
General Accounting Office? Maybe I have been living in
Washington too long. The GAO just released its
fall 2009 update on The Federal Government's Long-Term
Fiscal Outlook.
Basically, "it's a tear-jerker for budget wonks,"
says Taxpayers for Common Sense. It is also a downer for
taxpayers, their children and their grandchildren.
The weak economy and financial markets, "and the
government's response to them," have resulted in "near-term
increases in federal deficits," reaching record levels in
2009.
Unfortunately, the feds face even larger fiscal challenges
"that will persist long after the return of fiscal stability and
economic growth." The die, as it were, is cast.
GAO's simulations or models show "escalating levels of debt
that illustrate that the long-term fiscal outlook remains
unstable." In little over 10 years, debt held by the public as a
percent of GDP is projected to exceed the historical high reached
in the aftermath of World War II "and grow at a steady rate
thereafter." Again, it will come as no surprise that this fiscal
situation is driven by health care cost growth and demographic
trends.
"Absent reform, Social Security, Medicare, and Medicaid
will account for a growing share of the economy in coming years,"
says GAO. "The longer action to deal with the nation's long-term
fiscal outlook is delayed, the larger the changes will need to be
increasing the likelihood that they will be disruptive and
destabilizing."
As the Irish like to say, it will all come to tears. But we
do not have to wait long for that. Evidently, the cost and
demographic trends, which we often assume are somewhere out there
on the horizon, are already taking their toll. The oldest members
of the baby-boom generation are now eligible for Social Security
and will be getting Medicare benefits in less than two years. The
Medicare Hospital Trust Fund began running out of cash in 2008,
meaning expenses exceeded dedicated revenues. Social Security
surpluses, which have been financing other government programs,
are now projected to turn into cash deficits by 2016. Annual
budget deficits are likely to increase continuously under GAO's
two different sets of assumptions or simulation models that it
uses for these forecasts, and "both simulations show that the
federal government is on an unsustainable fiscal path." For any
green eyeshade types who might be reading this, GAO makes it
clear that the results of its various simulations "are not
materially different." You can check out the document for the
technical explanations.
Is anyone in Congress listening? And are we to believe that
the Baucus health care plan is really a cost-saver over time?
Adding new health care mandates on top of this mountain of debt
is simply "the absolute height of fiscal irresponsibility" as my
hero, Congressman Paul Ryan (R-WI) recently
told Peggy Noonan.
Anyway, GAO soldiers on, noting that "the sense of urgency
has increased" since it now sees "persistent annual budget
deficits in excess of 7 percent of GDP -- levels not seen since
the aftermath of World War II."
According to the GAO, "…absent changes in federal
entitlement programs, spending on Social Security, Medicare,
Medicaid, and interest on the federal debt will account for an
ever-growing share of the economy." There will be little room for
"all other spending," which basically is what we all think of as
"government": defense, homeland security, highways, farm price
supports and assistance to needy families. Under one simulation
model, GAO claims that roughly 92 cents of every dollar of
federal revenue will be spend on major entitlements and net
interest costs by 2019 due to the increased federal debt.
"However, the longer action to deal with the nation's
long-term fiscal outlook is delayed, the greater is the risk that
eventual changes will be disruptive and destabilizing," says GAO.
So "waiting even ten years would require a revenue increase of
about 58 percent, a noninterest spending cut of about 39 percent,
or some combination of the two." Pick your poison.
Of course, none of this is unexpected. This train wreck has
been predicted for some time. What is amazing is the collective
case of cognitive dissonance that has gripped Washington.
Congress and the Administration have long forgotten the principle
of "do no wrong." They are deep into making matters worse. The
entire town seems immune to the exhortations of GAO and other
urgent voices such as David Walker, the former Comptroller
General of the United States.
It is as if the colonists, hearing the cries of Paul
Revere, gave out a yawn, rolled over, and went back to
sleep.
topics:
Federal Budget, Entitlements, Deficits
