Outlook released today confirms U.S. will face looming debt crisis without legislative action
Jan. 31, 2012
Washington, D.C. – The following is a statement by Steve Bell, senior director of Economic Policy at the Bipartisan Policy Center (BPC), on the Congressional Budget Office (CBO)’s annual economic update released today:
"The Congressional Budget Office’s Budget and Economic Outlook for Fiscal Years 2012 to 2022 confirms that the United States continues to face a looming debt crisis that will grow worse if federal policymakers fail to take serious and quick action on the fundamental drivers of our deficits. Legislation is needed to reduce the costs of entitlements – such as Social Security, other federal pensions, Medicare, Medicaid, and TRICARE for Life – and to reform our arcane tax code to bring in more revenues. While CBO projects both smaller deficits and slower economic growth under current law, it freely admits that current law is unlikely to prevail. Analyzing recent congressional and presidential actions, CBO has devised a more likely outcome for fiscal policy – its Alternative Fiscal Scenario (AFS). That scenario, which would follow from the continuation of recent Washington behavior, seems more probable than CBO’s traditional “current law” baseline and yields deficits and debt unprecedented in American history.
"Simply put, CBO confirms the failure of federal policymakers to take deficit reduction and debt stabilization seriously. Despite passage of the Budget Control Act of 2011 (BCA), with its $1 trillion in cuts through caps on annually appropriated discretionary spending, deficits will still mount by $11 trillion over the next decade under CBO’s alternative scenario. If this occurs, Americans will bear a debt of nearly 100 percent of the Gross Domestic Product within ten years, and a worsening fiscal picture in the decade after.
"Although conventional wisdom is that Congress and the president will do little of significance until after the November elections, and perhaps not even then, the CBO document today demands much more immediate attention to the growing fiscal folly. Policymakers have received serious, concrete recommendations from a variety of sources, including the comprehensive plan that BPC’s Domenici-Rivlin Debt Reduction Task Force produced and still recommends."
Economic Policy Project