The Congressional Budget Office has analyzed President Obama’s budget for fiscal year 2017. Here are some of their findings:
Under the President’s proposals, the federal budget deficit would decline in 2017 and 2018. After that, however, outlays would rise more quickly than revenues, so deficits would grow. As a result, federal debt held by the public would grow as well. By 2026—the end of the period covered by the President’s budget—such debt would be higher than it is now, measured as a percentage of the nation’s economic output, and it would be rising.
The debt’s continuing to grow doesn’t particularly bother me. The prospect of its continuing to grow substantially faster than aggregate product does. Basically, we’ve got to produce more of what we consume. If the federal government is going to spend at this rate, we need substantially faster growth.
“The debt’s continuing to grow doesn’t particularly bother me. The prospect of its continuing to grow substantially faster than aggregate product does. ”
In banker-speak, the debt service covenant has to be congruent with the total leverage covenant.
There is no non-ludicrous assumption of growth that can accommodate the coming bulge in spending. This problem has it’s roots in the Great Society era and the baby boom, and has been coming for 50 years. Without simply printing money benefits will have to be cut, age of eligibility pushed out, and means tested. In terms of simple sources and uses this is awfully close to the public pensions problem.
The confluence of over promising, faulty assumptions and failure to adjust. Another fine mess……