The CBO put the ugly picture of the trajectory of federal debt on the cover of this year’s report, and for good reason. At the end of this fiscal year, debt held by the public (the most relevant measure of federal debt) will be 74 percent of gross domestic product.
That is, as the CBO notes, “more than twice what it was at the end of 2007 and higher than in any year since 1950.” And it’s getting worse, not better; beginning in 2018, deficits start to grow again. As a result, “by 2025, in CBO’s baseline projections, federal debt rises to nearly 79 percent of GDP.”
This is a good time to pause, and give credit. First, for the deficit reduction already painfully accomplished — $4 trillion in spending cuts and tax increases. Some of the cutting (the blunt instrument of sequestration) is dumb, and the promised trims may be unsustainable. Still, that’s not chump change.
Second, for the slower growth of health care costs, the biggest driver of long-term deficits. In 2013, according to Medicare actuaries, spending grew 0.5 percent less than the previous year, the result of lower costs in both private insurance and Medicare. The CBO concluded that “the slowdown in health care cost growth has been sufficiently broad and persistent” to reduce significantly its spending projections for federal health care programs.
Nonetheless, the future is not pretty. Obama, circa 2011, helped explain why. “We have to get back on a path that will allow us to pay down our debt,” he said. “Even after our economy recovers, our government will still be on track to spend more money than it takes in throughout this decade and beyond. That means we’ll have to keep borrowing more from countries like China. That means more of your tax dollars each year will go toward paying off the interest on all the loans that we keep taking out.”
This year, thanks to historically low rates, interest payments on the debt are projected to total $227 billion. By 2025, according to the CBO, that price tag will more than triple, to $827 billion.
The administration, Congress and the country should be talking about the hard choices necessary to deal with this problem. Instead, we see calculated indifference and political grandstanding, including by a president who ought to know better.