Doug Elmendorf

Report: Long-term budget issues present fiscal threat to U.S.

National Debt

TL;DR version: This is a pretty long post dealing with a subject that generally fascinates only those interested in fiscal policy. The short of what you need to know is that the CBO expects the economy to perform better in the short-term, with higher revenues and lower budget deficits. But the rising costs of entitlements and the cost of servicing the national debt will drive up spending substantially over the long-term with the public’s share of the national debt becoming equal to the size of the economy (or GDP). As if the baseline scenario isn’t concerning enough, the alternative fiscal scenario is even more of a disaster. All charts below come directly from the CBO’s report.

Forget Syria or the still ongoing war on terrorism. The real security threat is the national debt. That’s what Admiral Mike Mullen warned in 2010. Those words still ring true today, especially after reading the latest long-term budget projections released yesterday by the Congressional Budget Office (CBO).

The annual report presents the federal budget outlook for the next 10 years (2013-2023) as well as provides a look into long-term projections relative to both current law and alternative scenarios, the latter of which most economists believe present a more realistic view of the United States’ fiscal health.

CBO Director Doug Elmendorf told reporters yesterday that the “federal budget is on a course that cannot be sustained indefinitely.”

Podcast: Healthcare, CBO, Census, Immigration Reform, Pre-Crime Policing, War,Guests: Doug Mataconis, Brooklyn Roberts

This week, Brett was joined by UL contributor, Doug Mataconis, and Brooklyn Roberts, Executive Director of the Alabama Eagle Forum.  Unfortunately, due to circumstances beyond his control, Jason was unable to participate, so we had a blast without him.

This week’s topics include:

CBO director warns of “unpleasant” choices on federal spending

The growth of federal entitlements programs is the biggest fiscal issue facing the United States, says CBO Director Doug Elmendorf, and it’s one that is going to require Washington to make some “unpleasant” choices, preferably sooner rather than later:

“So we have a choice as a society to either scale back those programs relative to what is promised under current law; or to raise tax revenue above its historical average to pay for the expansion of those programs; or to cut back on all other spending even more sharply than we already are,” Elmendorf said.

“And we haven’t actually decided as a society…what we’re going to do. But some combination of those three choices will be needed.”

Elmendorf said there are various ways to proceed: “But they tend to be unpleasant in one way or another, and we have not, as a society, decided how much of that sort of unpleasantness to inflict on whom.”

Though there’s a lot of attention paid to short-term deficits, this is symptomatic of a much, much larger problem. It’s not a new crisis, and it’s one that most people in Washington realize exists. The CBO has been pointing out these concerns for some time, most recently its September long-term budget report.

This analysis anticipated that spending as a percentage of GDP would rise to 26.2%, based on current law, and federal revenues will come in around 19.5%. The budget deficit as a percentage would be 6.4% and the public’s share of the national debt will hit 100%.

CBO shows further labor force participation decline

During a breakfast with reporters on Wednesday, CBO Director Doug Elmendorf presented reporters with his agency’s labor force projections — the percentage of Americans available for work — over the next 10 years.

Much attention has been paid to Elmendorf’s defense of the nonpartisan Congressional Budget Office’s (CBO) analysis of the $10.10 minimum wage proposal amid criticism from the White House and congressional Democrats, but his presentation on labor force participation is the real story from his talk with reporters.

The side Elmendorf presented shows that the CBO expects labor force participation to continue to slide to lows not seen in decades. The most recent numbers from the Bureau of Labor Statistics (BLS) showed the labor force participation rate at 63%, up very slightly from the previous month’s 62.8%, which was the lowest rate since 1978.

 Historical and Projected Rate of Participation in the Labor Force

Yes, Secretary Sebelius, Obamacare will reduce employment

While most Democrats seem to be hailing the news that Obamacare will reduce the incentive to work, Health and Human Service Secretary Kathleen Sebelius seems to be in complete denial.

At a stop in Orlando on Monday, Sebelius told reports that there is no evidence that Obamacare will reduce employment.

“There is absolutely no evidence, and every economist will tell you this, that there is any job-loss related to the Affordable Care Act,” Sebelius said. “Part-time physicians are actually down since 2010, not up. The number of full-time workers continues to increase. I know that’s a popular myth that continues to be repeated, but it just is not accurate.”

Well, there is evidence.

The Congressional Budget Office recently determined that Obamacare would reduce employment by 2 million full-time workers by 2017, up from an earlier projection of 800,000, rising to 2.5 million by 2024. The reason for the decline in workers is because the subsidies, which are tied to income, would encourage people to work less.

Today in Liberty: House raises debt ceiling, Bachmann channels Ron Paul

“I will to my dying day oppose, with all the powers and faculties God has given me, all such instruments of slavery on the one hand, and villainy on the other, as this writ of assistance is.” — James Otis

Rand Paul v. Barack Obama: Sen. Rand Paul (R-KY) will file a class-action lawsuit against President Barack Obama and intelligence officials over the NSA’s domestic surveillance programs this morning at the U.S. District Court in Washington, D.C. Paul will be joined by Matt Kibbe, President of FreedomWorks, and Ken Cuccinelli, lead counsel in the case. Stay tuned. We’ll have a full write up on this a little later.

Rand Paul

— House passes “clean” debt ceiling hike: House leaders gave up on the trying to get policy riders attached to a debt ceiling bill, The House of Representatives passed a “clean” debt ceiling early yesterday evening by a vote 221 to 201. The measure extends the nation’s borrowing limit to March 16, 2015. The Senate is expected to take up the measure as soon as tomorrow.

Medicaid expansion also encouraging people not to work

There has been much focus on the Congressional Budget Office (CBO) report released last week, the findings of which showed that Obamacare will result in 2.5 million fewer people working full-time jobs by 2024.

Republicans have seized on the report as proof that Obamacare discourages Americans from working so that they can retain health insurance subsidies through the law and, by extension hurt economic growth. Those points were confirmed by CBO Director Doug Elemendorf in congressional testimony the day following release of the report.

But, as Jason Hart of FreedomWorks notes, the nonpartisan budget agency also went into detail on Medicaid expansion, another part of the law that will discourage Americans from working:

“CBO estimates that expanded Medicaid eligibility under [Obamacare] will, on balance, reduce incentives to work,” the nonpartisan budget office opined, citing a National Bureau of Economic Research (NBER) working paper Media Trackers called attention to last summer.

CBO listed “expansion of eligibility for Medicaid” as the second most important Obamacare provision affecting the nation’s labor supply.

“In particular, studies of past expansions or contractions in Medicaid eligibility for childless adults have pointed to a larger effect on labor supply than CBO had estimated previously,” CBO wrote.

CBO director: Obamacare will increase deficits, creates disincentive to work

CBO Director Doug Elemendorf appeared before the congressional committee yesterday to testify on his agency’s budget outlook report. As one might image, given its explosive findings, the most the discussions centered around Obamacare.

House Budget Committee Chairman Paul Ryan (R-WI) kicked off the hearing by noting that the CBO report shows that “autopilot spending” are driving budget deficits, but he quickly turned to the findings related to Obamacare.

“This report says the debt gets worse, and we have slower economic growth compared to the last forecast,” said Ryan in his opening remarks. “But what is particularly troubling is CBO’s projection of labor force participation. CBO says that about half of this decline is attributable to the aging of the population — most notably the retirement of the ‘baby boom’ generation.”

But CBO also says that government policies, especially the President’s healthcare law, are discouraging work. Washington is making this problem worse,” he said. “This does not have to be our fate. We need to reverse this decline.”

Elemendorf parsed through various parts of the report, going through points related to the federal budget and the economy, both in the short- and long-term. But he also touched on parts of the report dealing with Obamacare.

“The baseline projections show what we think would happen to federal spending, revenues, and deficits over the next 10 years if current laws were generally unchanged,” Elemendorf told the House Budget Committee. “Under that assumption, the deficit is projected to decrease again in 2015 to [$478 billion].”

Federal Reserve report: Obamacare’s negative impact on employment

In mid-January, the Federal Reserve released its monthly Beige Book, which offers a wide-ranging look at commentary on economic conditions in each of the central bank’s 12 regions. While it’s mostly mundane, the Heritage Foundation found some key details buried in the report that relate to Obamacare and its affect on employment:

The Beige Book finds businesses repeatedly stating that Obamacare and rising health care costs have held back the labor market:

Tom McClintock questions CBO director on results of Obama’s economic policies

Few members of the House have been more consistant in trying to keep the Obama Administration accountable for its economic policies than Rep. Tom McClintock (R-CA). Recently, Rep. McClintock had the opportunity to question Doug Elmendorf, director of the Congressional Budget Office (CBO), about how President Obama’s economic policies are hurting the nation during a House Budget Committee hearing on the recent economic report released by his agency.

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