Congressional Budget Office Director Douglas Elmendorf and Federal Reserve Chairman Ben Bernanke both have reminded lawmakers of the challenges ahead if policies are not enacted to place our nation on a fiscally sustainable path.
In testimony before the House and Senate Budget Committees last week, Elmendorf detailed new CBO projections that deficits would total $1.1 trillion this year and $3.1 trillion over the next ten years — even under some optimistic assumptions.
He said the aging of the population and rising health care costs would continue to significantly increase mandatory spending for programs such as Social Security, Medicare, and Medicaid. If the spending is combined with revenues that remain close to the historical average, Elmendorf warned, “the resulting deficits will increase federal debt to unsupportable levels.”
The Concord plausible baseline, which applies more realistic assumptions about future policy decisions to the CBO’s data, shows annual deficits remaining in the trillion-dollar range throughout the next decade, totaling almost $12 trillion in new debt.
Concord Coalition Executive Director Robert L. Bixby said recently that CBO’s projections and Concord’s estimates show that Washington needs “a comprehensive plan that spreads the burdens and sacrifices fairly, and includes all major areas of the budget: entitlement programs, domestic discretionary spending, defense and taxes.”
At a second House Budget Committee hearing last week, Bernanke said the “prospect of unsustainable deficits has costs, including an increased possibility of a sudden fiscal crisis.” He added: “To achieve economic and financial stability, U.S. fiscal policy must be placed on a sustainable path that ensures that debt relative to national income is at least stable or, preferably, declining over time.”
Bernanke is scheduled to testify this week before the Senate Budget Committee.
Senate Budget Committee Hearing on Budget and Economic Outlook
House Budget Committee Hearing on Budget and Economic Outlook
House Budget Hearing: State of the Economy
Concord Coalition Says New CBO Report Should Be Required Reading on the Campaign Trail
Concord Coalition’s Plausible Baseline
The Budget and Economic Outlook: Fiscal Years 2012 to 2022 (CBO)