February 23, 2014
An ominous new report from the Congressional Budget Office paints a bleak picture for America's future, projecting that entitlement spending will send the federal deficit soaring beyond previous estimates.
Federal entitlement spending is projected to rise at an average annual rate of 5.9 percent over the coming decade, increasing spending from $2.1 trillion this year to $3.7 trillion in 2024.
The CBO also projects that the federal budget deficit will rise to more than 4 percent of GDP in the latter part of the coming decade. From 2015 to 2024, the cumulative deficit will reach $7.9 trillion, $1 trillion higher than previously projected.
That would push debt held by the public to nearly 80 percent of GDP in 2024, "far above the post-war norm for the United States and perilously close to levels from which it is hard to recover," James C. Capretta noted in an article published by the Manhattan Institute's Economic Policies for the 21st Century.
But the actual economic situation could be far worse. The CBO projections assume an average annual growth rate in discretionary spending of only 1.8 percent. This would likely take defense spending as a percentage of GDP down to levels "not seen in the post-war era — at a time when global conflicts and potential threats are clearly on the rise," observed Capretta, a senior fellow at the Ethics & Public Policy Center and a visiting fellow at the American Enterprise Institute.
Looking further into the future, deficits are projected to rise even more sharply in years beyond the coming decade due to an aging population and healthcare inflation. The CBO expects debt held by the public to reach 190 percent of GDP by 2038. And that's assuming the nation will not experience another serious economic downturn.
What's more, the CBO projections don't include data on total state debt, which the Insider Report last week disclosed has already topped $5 trillion.
"At the beginning of the Obama presidency, the administration convened a fiscal responsibility summit during which there was a lot of talk about the need to finally address the ticking time bomb of runaway entitlement spending," Capretta wrote. "Suffice it to say that, in year 6 of the Obama presidency, people are not holding their breath that a breakthrough on entitlements is imminent."
He concluded: "It would be far better to take action now and head off the crisis before it ever happens than to wait for the crisis to hit and then attempt to scale back benefit commitments."