The Congressional Budget Office issued a new report today on the long term national debt. This is the first such report that includes the new health care costs. The graph to the left shows two projections. The top line (higher debt) show what the CBO estimates will happen under current laws. The bottom line shows what will the CBO estimates will happen with “possible changes” in our spending laws. Here are some of their findings:
Government controlled health care creates rising costs and rising debt.
CBO projects that if current laws do not change, federal spending on major mandatory health care programs will grow from roughly 5 percent of GDP today to about 10 percent in 2035 and will continue to increase there after.
Our debt problems are a lot worse now than they were when Obama took office. This is not simply a problem he inherited.
The federal government has recently been recording the largest budget deficits, relative to the size of the economy, since 1945. As a result, the amount of federal debt held by the public has surged. Debt is expected to equal 62 percent of the economy’s annual output, or gross domestic product (GDP), at the end of this fiscal year, up from 40 percent at the end of 2008.
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Spending needs to be radically reduced. The long term impact on the economy is catastrophic.
The Impact of Growing Deficits and Debt
In fact, CBO's projections understate the severity of the long-term budget problem because they do not incorporate the significant negative effects that accumulating substantial amounts of additional federal debt would have on the economy:
- Large budget deficits would reduce national saving, leading to higher interest rates, more borrowing from abroad, and less domestic investment-which in turn would lower income growth in the United States.
- Growing debt would also reduce lawmakers' ability to respond to economic downturns and other challenges.
- Over time, higher debt would increase the probability of a fiscal crisis in which investors would lose confidencein the government's ability to manage its budget, and the government would be forced to pay much more to borrow money.