[Rushtalk] national debt crisis
John A. Quayle
blueoval57 at verizon.net
Sat Jul 19 22:13:18 MDT 2014
Another warning that a national debt crisis is looming
It's no longer popular in Washington these days
to discuss the nation's long-term debt problem,
released on Tuesday by the
Budget Office provided a stark reminder that a
looming crisis is approaching, and the longer the
nation waits to address it, the more difficult it will be to avert.
In the immediate term, with the economy doing
better than it had been, annual deficits have
shrunk substantially from where they were in the
beginning of this decade. But this trend, the CBO
has projected, will be short-lived, and deficits
will soon be on the rise again, pushing the debt to unsustainable levels.
CBO identified the primary drivers of the rising
debt to be the aging of the population and rising
health care spending, a trend that was
care law due to the increase in
spending and subsidies for individuals to
purchase insurance on government-run exchanges.
In addition, CBO anticipates that interest rates
will rise from their currently low levels, further adding to the debt.
In 2007, debt held by the public was 37 percent
of gross domestic product, and it has since
doubled to its current 74 percent. Assuming that
current laws remain the same, the CBO projects
that by the time a girl born today graduates from
college in 2036, the nation's debt will be as
large as an entire year of U.S. economic output, and it will continue to grow.
In an alternative scenario under which Congress
makes certain predictable policy changes, that
point would be crossed even earlier, according to
the CBO, merely 15 years from now.
Though Obama and his liberal supporters have
identified insufficient levels of taxation on
wealthier Americans as the major problem, the CBO
report finds that revenue will increase in the
coming decades, reaching 19.5 percent of the
economy by 2039 -- which is significantly higher
than the 17.5 percent average over the last four decades.
The problem is that federal spending will
accelerate at a much faster rate, reaching nearly
26 percent of the economy by the same year.
CBO warned that the growing debt could crowd out
private investment and drive up interest payments
(which, in turn, would make the debt even higher.)
In addition, the report warned, the debt problem
would restrict policymakers ability to use tax
and spending policies to respond to unexpected
challenges, such as economic downturns or
financial crises. As a result, those challenges
would tend to have larger negative effects on the
economy and on peoples well-being than they
would otherwise. The large amount of debt could
also compromise national security by constraining
defense spending in times of international crisis
or by limiting the countrys ability to prepare for such a crisis.
As things stand, the debt problem has become so
severe that major reforms are needed to bring it
down to a sustainable level. For instance, if
lawmakers set the goal of bringing debt as a
percentage of the economy to 39 percent by 2039
the level its averaged over the past 40 years
it would require either spending cuts, tax
increases, or some combination of both, equaling
2.6 percent of GDP starting in 2015. That would
represent $465 billion in that year alone, and
then the equivalent level of savings would have
to be generated each year for 25 years.
CBO also noted that the sooner changes are made,
the less severe the policy changes would need to
be. For instance, achieving the same debt
reduction mentioned above would require annual
savings of 3.2 percent of GDP if lawmakers waited
until 2020, and 4.3 percent if lawmakers waited
until 2025 (roughly translated, that would be the
equivalent of over $700 billion in 2013 dollars.)
Obama, always reluctantly forced into the debt
reduction conversation, has no interest in
addressing the long-term issue. Republicans,
meanwhile, have grown weary of debt fights and
worry that emphasizing debt reduction is no longer a winning election issue.
Washington can ignore the problem, but that wont
make it go away. It will just make the solution that much harder.
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warning that a national debt crisis is
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