Yesterday, the Congressional Budget Office released its most recent long-term budget outlook, and while there is nothing that should be shocking or surprising, there’s plenty to find disturbing. Following is a graph of the two main projections the CBO makes:
The alternative fiscal scenario is really where we’re headed; the CBO’s baseline numbers assume the expiration of all the Bush tax cuts, the enactment of the debt-deal sequester’s spending controls, drastic cuts to Medicare reimbursement rates, etc.
By 2022, the alternative fiscal scenario predicts that Social Security, Medicare, Medicaid (including SCHIP, the Obamacare expansion, etc.), and interest payments would equal 16.6 percent of GDP, or almost the entire revenues available — that means not only no NPR and PBS, but no defense department, too. By 2037, federal revenues wouldn’t even begin to cover those mandatory spending programs: They’d suck up 20.1 percent of GDP, above expected revenues of 18.5 percent. Interest payments would equal a staggering 9.5 percent of GDP at that point.
Further, as Paul Ryan was pointing out over a year ago, since the U.S. economy would never sustain the debt burden that our current budgetary path produces, it’s essentially impossible to project economic growth after a certain point. Here’s what the debt trajectory looks like:
If you look at the most pessimistic projection (of debt and government spending slowing the economy more dramatically than expected), this doomsday scenario can be seen in 2035: