The Congressional Budget Office is warning that unless we get debt under control, we may wind up like other countries that have buckled under during a fiscal crisis:
The risk of a debt crisis along the lines of the kind being experienced in Europe will increase as long as the debt increases, the Congressional Budget Office (CBO) said Tuesday.
The CBO said in a new report that while it was impossible to predict whether the United States would encounter a debt crisis like those plaguing some European nations, the longer debts and deficits go unaddressed, the greater the risk of a crisis.
“Unfortunately, there is no way to predict with any confidence whether and when such a crisis might occur in the United States; in particular, there is no identifiable tipping point of debt relative to GDP indicating that a crisis is likely or imminent.” a new CBO report said. “But all else being equal, the higher the debt, the greater the risk of such a crisis.”
It’s not only our debt that represents a problem, but entitlement spending has to be address. Laurence Kotlikoff notes this problem in a column at the Financial Times:
A couple of weeks ago, I noted that the budget deficit for FY 2010 had topped $1 trillion, this would be the second straight year with a trilion dollars in red ink. On Friday, the White House announced that it expects the budget deficit to reach a record $1.47 trillion before it’s all said and done:
New estimates from the White House on Friday predict the budget deficit will reach a record $1.47 trillion this year. The government is borrowing 41 cents of every dollar it spends.
That’s actually a little better than the administration predicted in February.
The new estimates paint a grim unemployment picture as the economy experiences a relatively jobless recovery. The unemployment rate, presently averaging 9.5 percent, would average 9 percent next year under the new estimates.
The deficit for FY 2011, next year, is expected to be around $1.4 trillion. Obama wasn’t kidding when he said we’d have trillion deficits as far as the eye can see.
But wasn’t ObamaCare supposed to help bring down the budget deficit? That was part of the reasoning, right? Well, thoses “savings” are not all they’re cracked up to be:
Just a week after the United States recorded the third largest increase in the national debt for a single day, the CBO is reporting that the budget deficit for FY 2010 has topped $1 trillion:
The deficit was $1.005 trillion at the end of June for fiscal year 2010, which is $81 billion less than it was after nine months of fiscal 2009, according to a Congressional Budget Office (CBO) report released late Wednesday.
Tax revenues, due to improved corporate tax receipts, are slightly up while spending is slightly down compared to last year.
If that trend holds, the 2010 deficit would be slightly lower than last year’s $1.4 trillion budget shortfall, a record in nominal dollars, and lower than CBO’s earlier 2010 deficit projection of $1.5 trillion.
The CBO put out a report in March showing that President Barack Obama’s budgets would add $9.8 trillion to the national debt over the next 10 years. So, you know, get used to this.
A new report from the Congressional Budget Office shows that the national debt is something that Congress may want to start paying attention to:
The national debt will reach 62 percent of gross domestic product (GDP) by the end of this year, the nonpartisan Congressional Budget Office (CBO) said Wednesday.
The budget office said the debt will reach its highest percentage of GDP since the end of World War II. The jump is driven by lower tax revenues and higher federal spending in the recent recession.
And while the national debt would stabilize at 67 percent of GDP over the next decade if current law were maintained, extending tax cuts enacted during the administration of President George W. Bush and keeping growth in appropriations in line with inflation would mean that the debt would reach almost 90 percent of GDP by 2020.
By contrast, GDP has averaged “a little above” 36 percent per year over the past 40 years.
Doug Elmendorf, the head of the CBO, writes
Does ObamaCare encourage employers to end offering health insurance benefits to employees in favor of the fines levied against them for offering no coverage at all? John C. Goodman thinks so:
AT&T, Caterpillar, John Deere and Verizon have all made internal calculations, according the House Energy and Commerce Committee, to determine how much could be saved by a) dropping their employer-provided insurance, b) paying a fine of $2,000 per employee, and c) leaving their employees with the option of buying highly-subsidized insurance in the newly created health-insurance exchange.
AT&T, for example, paid $2.4 billion last year to cover medical costs for its 283,000 active employees. If the company dropped its health plan and paid an annual penalty for each uninsured worker, the fines would total almost $600 million. But that would leave AT&T with a tidy profit of $1.8 billion.
Economists say employee benefits ultimately substitute for cash wages, which means that AT&T employees would get higher take-home pay. But considering that they will be required by federal law to buy their own insurance in an exchange, will they be net winners or losers? That depends on their incomes.
A Congressional Budget Office (CBO) analysis of the House version of ObamaCare, which is close to what actually passed in March, assumed a $15,000 premium for family coverage in 2016. Yet the only subsidy available for employer-provided coverage is the same one as under current law: the ability to pay with pretax dollars. For a $30,000-a-year worker paying no federal income tax, the only tax subsidy is the payroll tax avoided on the employer’s premiums. That subsidy is only worth about $2,811 a year.
[T]o hear the bill’s supporters explain it, ObamaCare constitutes a triumph of fiscal responsibility, lowering the deficit, extending the solvency of Medicare, and reining in the growth of health care costs. Rep. Bart Stupak (D-Mich.), a staunch pro-lifer who assured the bill’s passage by deciding to vote yes at the last minute despite misgivings about abortion funding, declared that the legislation would provide “health security and financial security” to Americans. “This is a good bill for the American people,” he told MSNBC. “We’re not adding to the deficit. Indeed, the CBO [Congressional Budget Office] says the bill will actually reduce the deficit over time.”
This argument was crucial to the bill’s success. In the preceding week, it became increasingly clear that several votes were contingent on the bill’s receiving certain scores from the CBO. And when the scores—a $940 billion price tag for the first 10 years, $138 billion worth of deficit reduction in the first decade, and $1.2 trillion worth of reduction in the following 10 years—came through, many wavering Democrats hopped on board.
The Congressional Budget Office has doubled the estimated increases of some costs resulting from the sweeping health care reform legislation passed this year.
A CBO report sent Tuesday to Rep. Jerry Lewis of California, the ranking Republican on the House Appropriations Committee, said the estimated rise in discretionary spending - which is spending requiring annual congressional authorization - over the first 10 years under the new legislation could exceed $115 billion.
On March 11, exactly two months earlier, the non-partisan CBO reported the estimated increase for discretionary spending could exceed $55 billion.
Douglas Elmendorf, the CBO director, said the latest report “updates and expands” on the previous report. He noted that assessing effects on discretionary spending was speculative because such appropriations require congressional action, and could be larger or smaller than initially anticipated.
The health care legislation was estimated by CBO to cost $940 billion over 10 years and reduce the federal deficit by $143 billion over the same period.
Paul Krugman confirms it:
PAUL KRUGMAN, NEW YORK TIMES: Think about people on the right. They’re simultaneously screaming, they’re going to send all of the old people to death panels and it’s not going to save any money. That’s a contradictory point of view.
TAPPER: Death panels would save money, theoretically.
KRUGMAN: The advisory path has the ability to make more or less binding judgments on saying this particular expensive treatment actually doesn’t do any good medically and so we’re not going to pay for it. That is actually going to save quite a lot of money. We don’t know how much yet. The CBO gives it very little credit. But most of the health care economists I talk to think it’s going to be a really major cost saving. I have to say, I’m wearing an FDR tie in honor of the fact that we have gone from the New Deal to the Big Biden Deal, I guess we’re allowed to say.
TAPPER: Big bleeping deal?
Anyone as uncomfortable as I am with the idea of a government panel deciding if you’ll be able to get that life-saving operation ?
We all knew that the “created or saved jobs” rhetoric was a red herring. The administration’s attempt to spin declining jobs after passing massive Keynesian-style spending to “bring us from the brink.” The Congressional Budget Office has gone along with it, but recently we got some truth from the head of that government agency:
CBO director Doug Elmendorf has finally conceded that they never actual examined this stimulus bills’ affect on the economy. Responding to a questioner following a recent speech, he admitted that the CBO’s jobs count was “essentially repeating the same exercise” as their initial projections. When asked if this means their jobs projections would have ignored any failures of stimulus spending to perform as CBO predicted, Mr. Elmendorf responded “that’s right.” (Exchange begins at 38:20.)
CBO never actually counted the jobs. Nor did their analysis take into account the rising unemployment rate. Or the economic figures. Or how effectively the money was spent. They merely assumed this government spending “must have” saved 1.5 million jobs.
There you have it. Now, if only the media give it some attention.
What was thought to be a few years away is now suddenly a reality. Social Security will run a deficit this year, according to The New York Times:
This year, the system will pay out more in benefits than it receives in payroll taxes, an important threshold it was not expected to cross until at least 2016, according to the Congressional Budget Office.
Stephen C. Goss, chief actuary of the Social Security Administration, said that while the Congressional projection would probably be borne out, the change would have no effect on benefits in 2010 and retirees would keep receiving their checks as usual.
The problem, he said, is that payments have risen more than expected during the downturn, because jobs disappeared and people applied for benefits sooner than they had planned. At the same time, the program’s revenue has fallen sharply, because there are fewer paychecks to tax.
What else do you expect from this Ponzi scheme?
Yesterday I had $10 in my right pocket.
I loaned that money to my left pocket, which I like to call my “Right Pocket Trust Fund”. I put an IOU from my left pocket into my right pocket to document the loan.
I then spent that $10 on lunch.
Today my right pocket wants to start collecting on that loan.
That’s the Social Security Trust Fund. An IOU that requires new taxation, NOT drawing down on savings, to be repaid.