ObamaCare and the Debt Crisis
February 18, 2014
America's entitlement spending problem creates a serious risk of an economic crisis, says James Capretta, a senior fellow at the Ethics and Public Policy Center.
The latest Congressional Budget Office (CBO) report on ObamaCare projected that 2.5 million workers will leave the American labor force over the next decade, and while the White House has tried to put a positive spin on the story, voters are unlikely to agree that less work is a good thing.
But focus on the CBO's reference to the lack of work incentives in ObamaCare has distracted from an even larger problem identified in the report: entitlement spending and the deficit.
- The CBO expects federal entitlement spending to rise at 5.9 percent annually over the next 10 years, increasing spending from $2.1 trillion in 2014 to $3.7 trillion in 2024.
- Because of this entitlement spending, budget deficits are projected to rise above 4 percent of gross domestic product (GDP).
- From 2015 to 2024, CBO projects a $7.9 trillion deficit. This would mean that debt held by the public would be at 80 percent of GDP in 2024, "perilously close to levels from which it is hard to recover," Capretta says.
- These projections have only continued to get bleaker. This most recent CBO estimate of the deficit is $1 trillion more than the agency had previously estimated.
The CBO also issued a report with long-term projections last fall. Those projections included assumptions that the cuts to Medicare in ObamaCare will not be overridden, as well as other assumptions that are unlikely actually to occur. If those spending scenarios are replaced with more realistic ones, the CBO expects that public debt will reach 190 percent of GDP by 2038.
The United States could see a debt crisis much earlier than 2030. With another economic crisis, the CBO's deficit projections could easily rise. Our government needs to act now to deal with this problem rather than waiting for a crisis to hit, but the Obama administration, unfortunately, does not seem interested in a serious discussion of entitlements.
Source: James C. Capretta, "ObamaCare and the Coming Debt Crisis," Economic Policies for the 21st Century, February 10, 2014.
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