The Congressional Budget Office, or CBO, is a non-partisan federal agency within the legislative branch whose job it is to evaluate proposed legislation and to provide reports to the Congress regarding fiscal policy and federal budget projections.
For the purpose of informing public policy, the CBO could just as easily be a chimpanzee locked in a room with a keypad pecking out random numbers in return for banana pellets.
This is to say that to understand CBO projections you need keep only one thing in mind. Whatever the CBO says, things will actually turn out much differently and most likely much worse.
Last week, I told you that the debate regarding the recently passed health care bill should not center on the particulars of its provisions, bad as they are. I told you that I believe that the debate on the new health care law ends on the indisputable fact that we can’t afford it.
Let me further explain.
The thirtieth of this month will mark the 221st anniversary of the swearing in of George Washington as our first president. From that time, until the end of George W. Bush’s term, the United States accumulated a total of $5.8 trillion in debt. That debt represents approximately 40 percent of the gross domestic product (GDP) of the United States economy. Put simply, for every dollar’s worth of goods or services produced in the United States last year, the federal government owes approximately 40 cents. This level of debt as a percentage of GDP is the highest it has been since the end of World War II in 1945. This alarming statistic is largely a reflection on the Bush administration and the Congress that was controlled for most of his administration by his own party.
President Obama can legitimately claim to have inherited a serious economic mess when he took office. But since taking office, he and the Congressional leadership have taken an already unsustainable budget outlook and made it much, much worse.
According to the Congressional Budget Office, if current trends continue, and if the Congress enacts no additional measures resulting in higher structural expenditures, and if there is even a remote chance that CBO forecasters are any better than our banana pellet-eating chimpanzee, by 2020, national debt will stand at $15.0 trillion or nearly 90 percent of GDP. Put simply, that means the United States will be a third world country.
(And remember, whatever CBO forecasts, things always turn out worse.)
Therefore, expanding entitlements when the entitlements that we already have, such as Social Security, Medicare and Medicaid, are already unfunded at dangerous levels, is simply not going to work.
Raising taxes on “the rich” as Democrats are fond of proposing, won’t fix this problem. Raising taxes on everyone to pre-2001 levels, in other words to the levels that prevailed prior to either of the two Bush tax cuts, won’t fix the problem either. No practical level of taxation will solve the problem.
Nor will a magical rejuvenation of the job market and a return to 1990s-era economic growth. While a growing economy can and will work wonders, if it ever happens again in earnest, there is no way the U.S. economy can grow fast enough to generate tax revenues sufficient to fund the current level of spending.
Serious action at the ballot box this November resulting in a change of control in both houses will help, but even that won’t solve the problem.
The only solution lies in our expectations, which are going to change one way or the other. (Obama did promise change, did he not?)
We have devolved as a society to the place that we expect more from the government than we have the economic capacity to pay for. That means we have reached a tipping point and either we continue on our current path to financial Armageddon (and that right soon) or we accept that the federal government’s role is limited to defending the peace, supporting the currency and acting as impartial referee.
Everything else is up to us.
Which is what the Founders intended.
I know which way I’m leaning. What about you?