The Congressional Budget Office has released new long-term projections that show why Washington must work towards comprehensive fiscal reforms even though the federal deficit has fallen sharply this year.
“We’ve had some good short-term news on the deficit this year, but CBO’s new Long-Term Budget Outlook helps put this news in proper perspective,” says Robert L. Bixby, executive director of The Concord Coalition. “It’s an antidote for complacency and denial. On our current path, the oversized federal debt will continue to grow and annual deficits will soon begin to rise again — even with some optimistic assumptions about future spending restraint.”
Despite that, he notes, “a bipartisan chorus of elected officials in Washington is still shying away from dealing with the core problems: retirement and health care programs growing on autopilot faster than the economy and a deeply flawed tax system that cannot efficiently produce adequate revenues.”
Instead, lawmakers continue to largely focus on only one part of the budget: discretionary spending that they approve each year for defense and domestic programs. Under current law, this part of the budget is projected to fall from 8 percent of GDP in 2012 to 5.3 percent of GDP in 2023. But that target is well below historical levels and Congress is unlikely to reach it, much less remain there over the long term.
Health care spending is another area where spending might be higher than projected under current law. While the growth in health care spending has slowed in recent years, there is great uncertainty as to why and how long this pattern will continue. Other sources of uncertainty: Affordable Care Act implementation and a rapidly rising Medicare population.
Elected officials must quickly reach agreement on a budget for Fiscal 2014 and increase the debt limit. Beyond this short-term work, however, they must start dealing with the longer-term challenges that the CBO report details.