The Congressional Budget Office released its annual long-term budget outlook document this morning, and as you might imagine the outlook is grim.
Indeed, the agency finds our debt prospects almost literally unimaginably bad: Rather than project specific figures for the national debt as a percentage of GDP for many decades to come, as it usually does in this report, the CBO offers figures for the next three decades and then—from 2043 through the end of its required forecasting range of 2087—it just has a footnote for each year that reads: “CBO does not report debt of more than 250 percent of GDP or projections based on debt above that level, such as interest outlays.” That’s because the models the agency uses show the economy essentially shutting down at those levels of debt, and make it impossible to project the usual figures.
Of course, three decades (let alone seven!) is a long way to project, and specific figures that far out shouldn’t be taken to offer real information. What matters is the trend, and the trend is terrible. It is terrible above all because of health-care spending, and specifically Medicare, Medicaid, and Obamacare. Over the next decade, CBO expects federal health spending to rise from 5.4% of GDP to 7.5%, while all non-health spending combined (excluding interest) actually declines as a share of the economy. By 2032, health spending will be 9.4% of GDP, and rising from there, while all non-health spending grows roughly with the economy. If you break up health and non-health spending (the CBO doesn’t actually do this itself, but you can easily do it using the data they released along with their report today; here is their Excel file if you’re into such things) you will see why entitlement reform, and especially Medicare reform, is absolutely irreplaceably essential. The idea that we can chase this explosion of spending with tax increases is preposterous. Medicare spending growth must be restrained, and it can be restrained in a way that drives innovation and efficiency and continues to provide guaranteed comprehensive coverage to seniors. Paul Ryan has shown us how, and the CBO today shows us why. One of the candidates in November’s presidential election has demonstrated that he understands this; the other would prefer to ignore it and to buy this failed system a few more years of denial through economically damaging tax increases.