New Report: Over Next Decade, Budget Deficits Will Hit Trillion-Dollar Mark
Romina Boccia / Michael Sargent /
You’ve probably heard the claim that deficits have been cut in half and are at the smallest level since 2009, implying that the nation has corrected its fiscal course.
But that’s not nearly whole story. The Congressional Budget Office’s latest “Updated Budget Projections: 2015 to 2025,” which details spending, revenues and deficits, shows that while those deficits are projected to remain flat through 2018, they are projected to rise steeply afterwards. The 2015 deficit is projected at $486 billion, or 2.7 percent of gross domestic product—hardly a cause for celebration.
And the long-term picture is even worse. The report shows that spending is on the rise, propelling deficits to return to the trillion-dollar mark by the end of the decade in 2025. Spending meanwhile will nominally grow from $3.5 trillion last year to exceed $6 trillion by 2025. In terms of a percentage of the economy, spending will rise to 22.1 percent of GDP from its 2014 level of 20.3 percent of GDP.
While many opponents of fiscal restraint would have you believe that the country’s spending and deficit problem are at ease, deficits shrunk only as discretionary spending temporarily leveled off (largely as a result of statutory budget caps) and tax revenues surged due to a litany of tax increases and a stronger economy. The CBO report shows that excessive spending and high deficits are lurking just beyond the veneer of temporary progress.
Spending will nominally grow from $3.5 trillion last year to exceed $6 trillion by 2025.
Rather than tout short-lived improvement and ignore long-term fiscal dangers, lawmakers should put the nation’s budget on a path to balance. Congress can take three steps to promote fiscal solvency by reducing spending and debt:
- Reform the major three entitlements: Spending on Medicare, Medicaid and Social Security are set to explode as the nation’s population ages and Obamacare is phased in. Together with net interest, entitlements are projected to account for 85 percent of spending growth. Entitlement reform should focus on providing benefits to those who truly rely need them in a cost-effective way.
- Eliminate wasteful and improper spending: Congress should establish a mechanism such as an independent waste commission that can effectively identify and root out wasteful and duplicative spending, as well as end programs that fall outside the purview of the federal government.
- Control spending with firm caps: Even though Congress weakened the discretionary spending caps enacted in 2011, the Budget Control Act caps still helped return discretionary spending to pre-recession levels. While considering legislation when the debt limit returns this month—a sign that reforms are needed—Congress should implement spending caps that will curb long-term spending growth as a requisite for any increases to the debt limit.
The CBO’s outlook makes it clear that the nation still faces a grave threat from its spending and debt problem. Congress should take these steps to curb government spending in the future and save the next generations from being mired in excessive debt.