How bad is the CBO's latest report on the country's budgetary future? The Washington Post calls the office's numbers "dire." U.S. News says they're "off the wall." And in a post about the report on his blog, the CBO's director, Douglas Elmendorf, writes that "under current law, the federal budget is on an unsustainable path."
What's the problem? In a word, debt: The Post's editorial board summarizes the CBO's findings as follows:
Debt is growing faster than gross domestic product. Under the CBO's most realistic scenario, the publicly held debt of the U.S. government will reach 82 percent of GDP by 2019 -- roughly double what it was in 2008. By 2026, spiraling interest payments would push the debt above its all-time peak (set just after World War II) of 113 percent of GDP. It would reach 200 percent of GDP in 2038.
Elmendorf writes that, in order to prevent "substantial harm to the economy," there are only two options available: spending cuts or tax hikes — and whatever we do, we have to do it soon. From his blog entry:
Keeping deficits and debt from reaching levels that could cause substantial harm to the economy would require increasing revenues significantly as a percentage of gross domestic product (GDP), decreasing projected spending sharply, or some combination of the two. Making such changes sooner rather than later would lessen the risks that current fiscal policy poses to the economy. Although the policy choices that will be necessary are difficult, CBO’s long-term budget projections make clear that doing nothing is not an option: Legislation must ultimately be adopted that raises revenue or reduces spending or both. Moreover, delaying action simply exacerbates the challenge...