by Mitch Kokai
Senior Political Analyst, John Locke Foundation
No matter who’s in the majority on Capitol Hill, the Congressional Budget Office always delivers the same Christmas card to all Washington insiders and outsiders. It’s titled, “Options for Reducing the Deficit.” It ought to have a picture of a big lump of coal on the cover, for presidents and most of their congressional playmates have been naughty boys and girls.
They are hyperenthusiastic consumers and unwilling savers. The federal budget deficit reported for the fiscal year that ended on Sept. 30, 2016, was $587 billion, or 3.2% of gross domestic product. It was the first increase in the deficit-to-GDP ratio since fiscal 2009.
The national debt was reported to be 77% of GDP, up by three percentage points since 2015 and the highest ratio since 1950. And that was merely what the government calls debt held by the public. The debt held by the public’s trust funds, such as the Social Security trust fund, adds another $5 trillion, for true total debt of more than $19 trillion.
This is a worsening problem, though some economists deny it. Even if the deficit cooperates and dips in this fiscal year and the next one, that’s the end of the beginning. If nobody does anything for 10 years, the fiscal 2026 deficit will hit $1.2 trillion, and debt held by the public will reach $23 trillion, 86% of GDP. If nobody does anything for 30 years, debt held by the public will reach about 150% of GDP—if lenders are willing.
The retirement of the baby-boom generation will be more costly than World War II. It may be more comfortable for a lot of people who didn’t save on their own, but the boomers’ children and their children’s children will pay for that comfort in taxes or in high interest rates and high prices.
How can we get away with this? The CBO isn’t sure.