US Budget Groups Say CBO Report Underscores Need For Debt Plan

Author: Market News International | Category: News

–Committee For Responsible Federal Budget Warns of ‘Dangerous’ Debt
–Concord Coalition: Must Bridge Spending and Revenue Gap Over Time

By John Shaw

WASHINGTON (MNI) – Two respected fiscal watchdog groups, the
Democratic chair of the Senate Budget Committee and the Republican chair
of the House Budget Committee all agreed Tuesday the Congressional
Budget Office’s long-term budget outlook can only be read as a stark
warning that the fiscal status is untenable and even dangerous.

The CBO report notes the U.S. public debt will jump to more than
70% of GDP by the end of this year from 40% in 2008.

The CBO outlines two future fiscal scenarios: one which assumes
that current laws remain intact such as the expiration of the Bush era
tax cuts and across-the board-spending cuts; and a second that assumes
that some adjustments are made that more closely reflect the fiscal
policy approved in recent years.

In the first scenario, which would lead to sharply higher revenues
and lower spending than the historic norm, public debt would fall to
about 53% of GDP by 2037.

In the second scenario, which would result in much lower revenues
and higher spending than the first scenario, public debt would approach
200% of GDP by 2037.

The Committee for a Responsible Federal Budget said the CBO’s
projections “demonstrate, unequivocally, that the United States cannot
continue on its current course without accumulating unsustainable and
economically dangerous levels of debt.”

The budget group said the first fiscal scenario puts the nation on
roughly the right fiscal trajectory, but it does so with policy
assumptions that are politically unrealistic. And this path assumes deep
and immediate deficit reduction from large tax increases and deep
spending cuts.

“A comprehensive debt reduction plan must replace the abrupt and
untargeted savings under current law with a more gradual and smart path
to declining debt levels,” the group said.

In a separate report, the Concord Coalition, another budget
watchdog group, said the CBO report shows the U.S. fiscal debate is
missing the central challenge facing the nation. The current debate too
narrowly focuses on the wisdom of extending the Bush era tax cuts or
overhauling the sequestration process.

“Today’s CBO report is an important reminder that the aging U.S.
population and rising health care costs will dramatically increase
pressure on the federal budget from the largest entitlement programs
over the next 25 years, and that the projected gap between spending and
revenue under current policies is simply unsustainable,” the Concord
Coalition said.

Both Senate and House Budget Committee Chairs Kent Conrad and Paul
Ryan said the CBO report shows the urgent need to change American fiscal

Conrad said in a statement that the U.S. needs a “bipartisan and
balanced long-term deficit reduction plan.”

“Democrats and Republicans must come together to solve this
problem,” Conrad said.

Ryan said the CBO report is “the latest in a series of warnings”
that American fiscal policy is badly off track. He said his budget would
move the country’s fiscal policy in the right direction

Doug Elmendorf, the director of the CBO, will testify on the report
Wednesday before the House Budget Committee which Ryan chairs.

** MNI Washington Bureau: (202) 371-2121 **

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