Gene Epstein‘s latest Barron’s cover story looks beyond the immediate debate over Obamacare funding and a potential partial government shutdown. Epstein focuses instead on an even more daunting challenge for America’s public finances.
As President Barack Obama and Congress continue to bicker over passing the federal budget and raising the government’s debt ceiling, a report published by one of the nation’s most credible agencies warns that the U.S. could face economic disaster within 25 years due to excessive government spending.
Obamacare is part of the problem, but so are Medicaid, Medicare, and Social Security. The cost of these programs will mushroom as tens of millions of baby boomers reach retirement age.
The report was published on Sept. 17 by the nonpartisan Congressional Budget Office. Its most optimistic forecast shows the federal debt growing to 100% of annual economic output by 2038, from an “already quite high 73%” today. That would make the U.S. like France, which in terms of fiscal strength is none too good.
But the CBO implicitly concedes that the outcome is likely to be a lot worse than that, and so it included its “alternative fiscal scenario,” which is far more realistic. It projects the federal debt will grow to 190% of the nation’s annual economic output by 2038. That would make us worse than Greece today, which has a 27% unemployment rate and periodic bloody riots over its dreadful economic conditions.
