New Government Study warns of Long-Term Debt Problems

A new government study says that federal health care and retirement programs threaten to overwhelm the federal budget and harm the economy in coming decades unless Washington finds the political will to restrain their inexorable growth. The long-term pressures promise to quickly reverse recent improvements in the deficit. 

Tuesday's Congressional Budget Office report says that government spending on health care and Social Security would double relative to the size of the economy in 25 years and that spending on other programs like defense, transportation and education would decline to its smallest level by the same measure since the Great Depression.

The share of federal spending devoted to health care would rise from 4.6 percent of gross domestic product today to 8 percent in 2038; spending on Social Security would rise as well, as the number of people receiving benefits rises to more than 100 million in 25 years, compared with 57 million people taking benefits now. 

The rise in costs for the popular benefits programs has been apparent for many years and budget hawks says it's best to tackle their unsustainable growth immediately rather than be forced to make more draconian cuts later. But Washington -- whether government is divided or controlled by one party -- has been unable to agree on ways to curb the growth of these programs.

Democrats prefer a mix of tax increases and relatively small cuts in Medicare, Social Security and other spending. Republicans have proposed more dramatic long-term cuts to Medicare but are dead set against further taxes, especially after President Barack Obama won rate increases on upper-bracket earners in January.

Read the rest of the story HERE.

If interested, I have below Douglas Elmendorf, director of the Congressional Budget Office, presenting the CBO's annual long-term budget outlook at a news conference in Washington:

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