CBO's math on budget deficit presents daunting choices for US
The gloomy outlook for the federal budget deficit, outlined by the CBO director Wednesday, comes as politicians and economists are arguing over what the US economy needs most: another jolt of government stimulus or sharp spending cuts.
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The commission's give-and-take with Elmendorf offered some glimpses of the tough choices and volatile politics that lie ahead.Skip to next paragraph
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"As I heard you describe it, what's going to be necessary [is] either a 25 percent increase in taxes or a 20 percent reduction in spending, or some combination thereof," said Sen. Kent Conrad (D) of North Dakota. "Is that correct?"
"That's the order of magnitude, yes," Elmendorf replied.
Such large changes don't need to happen all at once. But if nothing is done, the cost of servicing debt will keep rising as a share of federal spending. With the Greek debt crisis serving as a reminder of what can go wrong, debate has been growing lately about whether the Bush tax cuts should be made permanent for most Americans or partially phased out.
The fiscal commission's Republican co-chair, former Sen. Alan Simpson of Wyoming, didn't weigh in on that specifically. But he stuck his neck out by arguing that fellow Republicans should remember that even Ronald Reagan raised taxes at times.
The biggest budget problem, in the long term, is the rising cost of health care.
The CBO view incorporates a forecast that Mr. Obama's health-care reform law will increase federal health-care spending for most of the next 20 years. Then, about 2030, the law will "slightly reduce federal spending for health care if all of its provisions are fully implemented," Elmendorf said.
That leaves plenty of room for politicians to spar about the law. But, whether it's good or bad, the law doesn't fix the budget challenge regarding health care, budget experts say.
Elmendorf summed up his own view this way: "Keeping deficits and debt from growing to unsustainable levels would require raising revenues as a percentage of GDP significantly above past levels, reducing outlays sharply relative to CBO’s projections, or some combination of those approaches."
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