Federal Debt Will Rise to Almost 300% of GDP in 2050, Center on Budget and Policy Priorities Report Says
Congress must limit health care spending and weigh the benefits of tax cuts because current budgetary policies will bring the federal debt from 46% of the gross domestic product in 2009 to 279% in 2050, according to a report released Tuesday by the Center for Budget and Policy Priorities, CongressDaily reports. CBPP Executive Director Robert Greenstein said, "The specter of budget deficits exceeding $1 trillion and the fact that members of Congress are going to be asked to vote on a very large economic recovery package is going to heighten the tension to the long-term fiscal situation and may indeed lead to discussions ... about how leaders of both parties might find a way to start to move on these issues after the economy recovers." The report states that a short-term economic stimulus package, which could include funding for state Medicaid programs, and the $700 billion bailout of Wall Street firms approved in October will add to the short-term deficit but will have minor impact on the long-term deficit (CongressDaily, 12/16).
According to the report, most of the unfunded long-term spending obligations are attributable to rapidly rising health care costs and their effect on the Medicare and Medicaid budgets. CBPP estimates that the deficit could be controlled through across-the-board tax increases of 24% or across-the-board budget cuts of 20%, or some combination of the two. Potential solutions to stem the rising cost of Medicare to the federal government include reducing benefits, introducing cost-sharing measures or raising taxes, but "[n]o one wants to play with that political football," Cato Institute budget analyst Tad DeHaven said. Another potential challenge for the incoming Obama administration and lawmakers would be reining in temporary spending measures once the economy has recovered, the Washington Independent reports (Lillis, Washington Independent, 12/17).
The report is available online.
