Advertisement

The federal debt and the tough choices ahead

Ballooning federal deficits leave Congress in a bind, and the choices get worse the longer it waits.

September 03, 2009

Almost two decades after Ross Perot put his poster-sized charts on national TV, the federal deficit is becoming a political issue again. Republicans and conservative advocacy groups are trumpeting the latest projections from the White House Office of Management and Budget, which predict that Washington will run up $9 trillion in deficits over the coming decade, almost doubling the national debt. The Congressional Budget Office predicted that the debt, which amounted to less than 60% of U.S. economic output in 2000, would be more than 100% of GDP by 2023.

President Obama's critics naturally want to blame the geyser of red ink on the grand ambitions of his administration, including the $787-billion stimulus package and expensive new health insurance subsidies. Longtime budget analysts, however, have seen this problem coming for years, even decades. They cite two primary factors: healthcare costs that have been growing faster than the economy since the birth of Medicare and Medicaid, and the looming conversion of a generation of wage-earning baby boomers into Social Security beneficiaries. The administration and the Democratic majorities in Congress have made matters worse by proposing to boost spending on their top domestic priorities more than they would cut the rest of the budget. But those increases are small in comparison to the growth in existing entitlements.

The unusually steep recession hasn't helped, of course. Current projections call for much slower economic growth than the White House was anticipating before the downturn, and thus significantly lower tax revenue. That's the main reason the anticipated deficits add up to such headline-grabbing numbers. Yet even though the economy will come back to life, the bailouts and stimulus programs will end and tax revenue will rebound, the long-term picture isn't pretty. Unless lawmakers agree to make unpopular changes to Social Security, Medicare and Medicaid, those programs will remain on track to break the federal piggy bank.

Putting those entitlements on a more sustainable path isn't as sexy as providing universal health insurance, saving troubled borrowers from foreclosure or reining in the financial institutions that ran amok during the housing bubble. But that task, like the slumping economy, is something Obama inherited when he won the White House. Congress can make a down payment of sorts by enacting a healthcare reform package with meaningful cost controls -- more meaningful than the ones in the current bills. But the longer it waits to solve the long-term problems in the federal programs for the elderly, the tougher the choices will be.

Advertisement
Los Angeles Times Articles
|
|
|