This is frightening. Douglas Elmendorf, Director of the Congressional Budget Office posted the following on his blog:
The Long-Term Budget Outlook
By Douglas Elmendorf
Congressional Budget Office
July 16, 2009
Today I had the opportunity to testify before the Senate Budget Committee about CBO’s most recent analysis of the long-term budget outlook.
Under current law, the federal budget is on an unsustainable path, because federal debt will continue to grow much faster than the economy over the long run. Although great uncertainty surrounds long-term fiscal projections, rising costs for health care and the aging of the population will cause federal spending to increase rapidly under any plausible scenario for current law. Unless revenues increase just as rapidly, the rise in spending will produce growing budget deficits. Large budget deficits would reduce national saving, leading to more borrowing from abroad and less domestic investment, which in turn would depress economic growth in the United States. Over time, accumulating debt would cause substantial harm to the economy.
Measured relative to GDP, almost all of the projected growth in federal spending other than interest payments on the debt stems from the three largest entitlement programs—Medicare, Medicaid, and Social Security. For decades, spending on Medicare and Medicaid has been growing faster than the economy. CBO projects that if current laws do not change, federal spending on Medicare and Medicaid combined will grow from roughly 5 percent of GDP today to almost 10 percent by 2035. By 2080, the government would be spending almost as much, as a share of the economy, on just its two major health care programs as it has spent on all of its programs and services in recent years.
In CBO’s estimates, the increase in spending for Medicare and Medicaid will account for 80 percent of spending increases for the three entitlement programs between now and 2035 and 90 percent of spending growth between now and 2080. Thus, reducing overall government spending relative to what would occur under current fiscal policy would require fundamental changes in the trajectory of federal health spending. Slowing the growth rate of outlays for Medicare and Medicaid is the central long-term challenge for fiscal policy.
Democrats considered CBO the gold standard for economic analysis when it's reports were critical of Bush Administration policies. Will they now listen to the warning above?
It's something to consider as Democrats propose a massive expansion in health care based on the Medicare/Medicaid model which is already shown to be failing financially.
There are not enough rich people in the nation to fund this level of spending. That only leaves huge tax increases for the rest of us if Obama and the Democrats continue to get their way!