Within days of issuing its report on the impact the fiscal cliff would have on the economy, the Congressional Budget Office (CBO) released another report full of suggestions on how to close the deficit. They may as well not have bothered, as the gap is too big and their suggestions are too small.
The CBO tried to put things into perspective:
Federal debt held by the public currently exceeds 70 percent of the nation’s annual output (gross domestic product, or GDP), a percentage not seen since 1950. Under the current-law assumptions embodied in CBO’s baseline projections, the budget deficit would shrink markedly — from nearly $1.1 trillion in fiscal year 2012 to about $200 billion in 2022....
Simply put, if nothing changes, come the first of the year the deficit will begin to come down, but not by very much, and certainly not enough to bring the budget into balance by 2022. But, warns the CBO, "those projections depend heavily on the significant increases in taxes and decreases in spending that are scheduled to take effect at the beginning of January."
Aside from the gridlock now being witnessed in Washington as the conflicting interests of the taxpayers versus the beneficiaries of the welfare state are working themselves out, there is simple mathematics. Says the CBO:
The aging of the baby-boom generation portends a significant and sustained increase in coming years in the share of the population that will receive benefits from Social Security and Medicare and long-term care services financed through Medicaid. Moreover, per capita spending on health care is likely to continue to grow faster than per capita spending on other goods and services for many years.
Click here to read the entire article.