National Debt, Deficit Projected to Skyrocket Over Next Decade
February 17, 2015
Alexa Moutevelis Coombs
Alexa Moutevelis Coombs (alexa@alexashrugged.com) writes from Washington, DC. (read full bio)
A new report published by the Congressional Budget Office predicts continued growth of the nation’s debt and deficit over the next decade.
The Congressional Budget Office (CBO) report, the “Budget and Economic Outlook: 2015 to 2025,” projects a brief slowdown in the national debt’s growth over the next 3 years, followed by a continuation of previous deficit trends.
By 2025, CBO projects the federal government’s deficit will exceed $1.088 trillion, or roughly $9,444 per American household.
Spending More and More
Unchecked entitlement spending growth and demographic shifts continue to contribute to the problem, but increased subsidization of health care is a primary cause, according to Heritage Foundation budget expert Romina Boccia.
“The projected deficit explosion can be directly attributed to the increase in spending because of the aging of the population, rising health care costs and a significant expansion in eligibility for federal subsidies for health insurance Obamacare,” she said. “The major health care programs—Medicare, Medicaid, Children’s Health Insurance Program and Obamacare—are driving 32 percent of the increase in spending over the next decade, followed closely by the Social Security program at 28 percent, and interest on the debt at 24 percent.”
‘A Spending Problem, not a Deficit Problem’
Raising taxes to compensate for the ballooning debt would only make problems worse, says Boccia.
“Raising taxes harms economic growth, job creation, entrepreneurship and innovation. Tax increases take resources from the American people and places them in the hands of bureaucrats. The country has a spending problem, not a deficit problem.”
Without major entitlement reform, she says, the problem will continue to balloon—until it explodes.
“Without reforms, spending on interest on the debt, health care programs and Social Security will reach unsustainable levels. As a result, these spending levels will cause exploding deficits, even as tax revenues exceed their average historical level.”
Questionable Models
Anthony Randazzo, Director of Economic Research at the Reason Foundation, also identified health care spending as the cause of the nation’s looming debt and deficit problems.
“CBO is projecting the ‘average exchange subsidy per subsidized enrollee’ will nearly double over the next decade.”
Garbage Numbers In, Garbage Numbers Out
However, Randazzo says economic forecasts are only as good as the assumptions made when constructing the models used.
“On the whole, the report’s estimates of federal debt are driven by its revenue projections, which in turn are projected by its economic and labor market growth models. Those models leave plenty to be debated.
“For instance, their model has the drop in oil prices as a negative for the U.S. economy, where I would estimate that it winds up being a net positive,” he said. “On the other hand they have unemployment falling while labor market participation is similarly declining over the next decade, which I would interpret as creating an increase in underemployment, and thus adding downward pressure to economic growth.”
http://news.heartland.org/newspaper-article/2015/02/17/national-debt-deficit-skyrocket-say-projections
