Did you hear? The United States economy is all rosy, the fiscal picture in Washington is superb and, according to former House Speaker Nancy Pelosi, the cupboard is bare and there is nothing left to cut.
President Obama and his supporters usually allude to the fact that the federal budget deficit has fallen by about two-thirds since he entered office in 2009, though his very first budget helped the budget deficit skyrocket. But since then, however, it’s been on the decline.
That is…until this year.
According to a new report from the Congressional Budget Office (CBO), the annual federal deficit is set to increase this year, following six consecutive years of a falling deficit. It’s also set to increase as a share of the economy from 2.5 percent to 2.9 percent.
So why is the deficit going up again? Well, it’s because politicians have reignited their love affair of spending. This year, spending is set to rise approximately six percent, which is triple the rate of inflation.
When looking at a share of gross domestic product (GDP), it will climb to 21.2 percent.
Here is what the Wall Street Journal writes:
“December’s budget deal explains the $32 billion increase in 2016 in discretionary spending (the kind Congress approves each year). Defense spending will “edge up slightly,” CBO says, while domestic discretionary climbs by 4%. That leaves the big money to the usual suspects—entitlements. Outlays for Medicare (net of premiums), Medicaid, the children’s health insurance program and ObamaCare subsidies will increase no less than 11%, or $104 billion, this year.
“Even an estimated federal revenue increase of 4% for the year can’t keep pace with this kind of spending blowout. Receipts will rise to 18.3% of the economy, which is well above the average of 17.4% from 1966 through 2015. So even as revenues return to their historical norm, they can’t compensate for the spending on entitlements that Mr. Obama has refused to reform.”
Of course, entitlements will be major drivers of spending. In fact, entitlements will account for 15 percent of the economy. Yikes!
Year after year, since Obama leaves office, deficits will go up as a share of the GDP. For instance, by the year 2026, the deficit will reach five percent of the economy.
Now for the really bad news. Right now, the federal debt held by the public is at 74 percent of GDP (it was 40 percent when Obama entered the White House). It will increase to 75.6 percent this year. But, according to CBO projections, it will soar to 86 percent in 2026.
The newspaper adds:
“We realize such unhappy realities are not supposed to intrude on a presidential campaign, and the American public long ago dropped spending and deficits as major concerns. Voters care more about the economy and terrorism, and there’s good sense to that. The deficit will never vanish without faster economic growth, and the various tax reform plans that Republicans are offering would spur growth. By all means let’s debate growth.
“On the other hand, any candidate who tells you that the country can keep spending as it is without a day of reckoning probably believes Mr. Obama’s spin about his fiscal record.”
This isn’t the first time that the CBO has written about this. For the last couple of years, it has put out these warnings, which has served as a constant reminder that Washington is still broke (SEE: CBO: Debt to increase $7 trillion, Social Security costs to reach $3.2 trillion by 2023).
Today, the national debt stands at just under $19 trillion with $120 trillion in unfunded liabilities.
Just imagine if Bernie Sanders is elected president. This will be a walk in the park when compared to his spending, debt and deficit plans.
–AM
It is not like we did not see any of this coming. With 10,000 baby boomers retiring every day, 4 million per year, over the next 20 years, but we have not raised the Social Security tax rate since 1990. 30 years of lost revenue into the government = deficits as far and high as you can see. We need to index the SS tax to inflation and stop adding to the national debt at almost 1 trillion dollars per year. I think all the politicians in D.C. funked basic math. We have waited too long to make the fixes not hurt. We will need to raise taxes on everyone, you cannot do it just by taxing the rich, lower future benefits on all programs or in less than 15 years we will be paying more in interest on the debt than on the whole defense department. Time for Congress and the President to wake up and smell the coffee.