OMB Director: Baby boomer retirement means US living with more debt
The federal budget for fiscal year 2016, whose drafting Office of Management and Budget Director Shaun Donovan supervised, projects federal debt next year will total $18.6 trillion. Speaking at a Monitor breakfast, Donovan said, 'We are dealing with ... the pig in the python.'
While the nation provides health-care and retirement benefits to the giant baby boom generation, the US government may have to learn to live with higher levels of debt than would otherwise be ideal, says Office of Management and Budget Director Shaun Donovan.
The federal budget for fiscal year 2016, whose drafting Mr. Donovan supervised, projects federal debt next year will total $18.6 trillion, an amount equal to 75 percent of the size of the US economy. That level of federal debt is the highest level since 1950 and up sharply from 39.3 percent of GDP as recently as 2008.
Speaking at a Monitor-hosted breakfast for reporters, Mr. Donovan said, “We are dealing with ... the pig in the python.” That is a reference to the 76 million members of the baby boom generation, those born between 1946 and 1964.
The OMB director added, “This demographic shift through the middle 2030s is a huge fiscal challenge to get through and so what is sort of acceptable in the next 20 years is different from what might be acceptable long term.”
The Washington Post editorial board, among others, has criticized President Obama for ignoring “the ongoing battle with the federal debt.” The Peterson Foundation’s report on the new budget noted that interest costs will soar to $785 billion in 2025, more than triple their level in 2014, and total $5.6 trillion over 10 years. “The policy proposals in this budget are not sufficient to stabilize the debt over the long term,” the foundation said.
Donovan pushed back against criticism of the Obama administration’s handling of the debt.
“If we do nothing our current path ... is that debt as a share of GDP would go up to almost 81 percent by 2025,” he said. “What our budget achieves in a 10 year window is to not only stabilize it but begin to bring it down so it ends just over 73 percent of GDP in the last year of the window. That alone, that change is a substantial change from the status quo, which would have it growing.”
The budget director also responded to criticism that the budget failed to call for an increase in the gasoline tax to fund construction of roads, bridges, and rails, an action that would appear easier during a time of low gasoline prices. Instead, the administration is proposing a $478 billion, six-year surface transportation plan funded in part by a one-time 14 percent tax on the $2 trillion in profits US firms are holding overseas.
“One of the reasons we worked so hard to put that proposal [together] is it just does not seem like there is an ability politically to get any consensus around the gas tax. So the president has not proposed it, he is not advocating that we increase the gas tax at this point,” Donovan said.
He argued that the administration’s six year transportation plan “creates more space to look at a range of alternatives” for funding transportation infrastructure in the long term. So when it comes to the gas tax, “we are not taking any options off the table.”