February 13, 2014
A warning from the director of the Congressional Budget Office was lost in the static Tuesday as House Republicans sold out fiscal conservatives and caved to Democrat demands in extending the Nation’s debt limit without a single provision to control government spending. In testimony before the Senate, CBO director Douglas Elmendorf told lawmakers that the “large and growing Federal debt” could very likely bring about financial hardship in the coming years.
“The large budget deficits recorded in recent years have substantially increased federal debt, and the amount of debt relative to the size of the economy is now very high by historical standards. CBO estimates that federal debt held by the public will equal 74 percent of GDP at the end of this year and 79 percent in 2024 (the end of the current 10-year projection period),” Elmendorf told the Senate in prepared testimony.
He continued, “Such large and growing federal debt could have serious negative consequences, including restraining economic growth in the long term, giving policymakers less flexibility to respond to unexpected challenges, and eventually increasing the risk of a fiscal crisis (in which investors would demand high interest rates to buy the government’s debt).”
The CBO projects solid economic growth for the next few years. But the nonpartisan fiscal watchdog predicts that ongoing high unemployment combined with a growing number of people leaving the workforce could offset economic gains.
“Moreover, the rate of participation in the labor force — which has been pushed down by the unusually large number of people who have decided not to look for work because of a lack of job opportunities — is projected to move only slowly back toward what it would be without the cyclical weakness in the economy,” Elmendorf said.
By 2017, according to the CBO representative, U.S. economic growth is expected to “diminish to a pace that is well below the average seen over the past several decades.”
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