The Congressional Budget Office released its latest long-term budget outlook today, and this chart sums up their key findings:
After the astonishing jump caused by the financial crisis, TARP bailout, and stimulus bill, budget deficits have declined sharply and the rate of federal borrowing as a percent of the economy has begun to decline. The tea party deserves enormous credit and the 2010 election was a clear inflection point; the demands to get spending under control made a huge difference. From CBO:
“The economy’s gradual recovery from the 2007–2009 recession, the waning budgetary effects of policies enacted in response to the weak economy, and other changes to tax and spending policies have caused the deficit to shrink this year to its smallest size since 2008: roughly 4 percent of GDP, compared with a peak of almost 10 percent in 2009. If current laws governing taxes and spending were generally unchanged—an assumption that underlies CBO’s 10-year baseline budget projections—the deficit would continue to drop over the next few years, falling to 2 percent of GDP by 2015. As a result, by 2018, federal debt held by the public would decline to 68 percent of GDP.”
But here’s the rub. The hard-fought spending discipline embodied in the Budget Control Act caps and sequestration are necessary but woefully insufficient for long-term fiscal stability. If we don’t reform the mandatory spendng side, and quickly, the upward march of federal debt will resume at the end of this decade and continue indefinitely. In CBO’s words:
“However, budget deficits would gradually rise again under current law, CBO projects, mainly because of increasing interest costs and growing spending for Social Security and the government’s major health care programs (Medicare, Medicaid, the Children’s Health Insurance Program, and subsidies to be provided through health insurance exchanges).”
As we head into the showdowns over the continuing resolution and the debt ceiling, we need to feel good about we’ve accomplished in recent years and defend against any backsliding. But we also need to insist on reforms on the mandatory side as well. One great place to start would be to repeal the individual health insurance mandate.