Fiscal Crisis: One day after President Obama bragged about how fast the deficit is declining, the Congressional Budget Office reported that the government is in far worse fiscal shape than it previously thought.
Liberals have been rejoicing lately about the fast drop in the nation's deficit, which is projected to hit $642 billion this year, down from $1.1 trillion last year.
"Deficit hawks in both parties don't want you to know this, but the federal deficit as a proportion of the total economy is shrinking fast," is how Robert Reich put it.
Obama said Monday that "by the end of this year, we will have cut our deficits by more than half since I took office."
It's not that Obama and Co. have suddenly gotten religion when it comes to fiscal responsibility. They simply see the current deficit decline as an excuse to abandon all spending restraint.
But the CBO's latest long-term budget report shows that any such celebration is woefully premature. As the report explains, there is a "substantial imbalance in the federal budget over the long run."
In fact, the CBO is far more pessimistic about the long-term fiscal picture than it was last year. Where it predicted a gradual decline in publicly held debt over the next 25 years in its 2012 report, it now expects national debt to reach 100% of GDP by 2038, on its way to 250% by 2088. (It was 39% when President Bush left office.)
And after a couple annual declines, deficits start rising again, reaching 6.5% of GDP by 2038, which is higher than any year between World War II and Obama.
The CBO admits that such long-term forecasts are highly uncertain. But if anything, the results will be worse, since the budget office simply assumes, for example, that ObamaCare's costs don't explode and that all its dubious cost-cutting measures actually work.
Both are unlikely.
While the CBO largely blames the decision to extend most of the Bush tax cuts for the worsening long-term budget outlook, its own numbers make clear that out-of-control spending is the real culprit.
According the report, federal revenues are on track to hit 20% of GDP by 2038, which is well above the average of 17.4% over the past four decades.
Federal spending, however, will climb even faster, reaching 26% of GDP by 2038. That's up from the 20% average set over the past four decades. By 2088, federal spending will consume almost 40% of the nation's economy, the CBO predicts.
What's powering this massive spending growth are entitlements, and more specifically federal health care entitlements.
While federal health spending averaged 2.7% of GDP between 1973 and 2012, it will hit 8% by 2038, the CBO says. And a good chunk of that increase is the result of ObamaCare's massive new middle-class health care subsidies.
In other words, while Obama promised that health care reform would help solve the nation's long-term deficit crisis, it is, in fact, greatly exacerbating it.
So much for bending the cost curve down.
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