CBO Warns Unchecked Entitlement Spending Is ‘Unsustainable’


#1

From the Fiscal Times (other reports linked below):

Here’s more bad news for President Obama: The non-partisan Congressional Budget Office warned Tuesday in its annual budget outlook that unchecked spending on Medicare, Social Security and other entitlement programs is “unsustainable” and will eventually drive the federally held debt to historic levels – and threaten the economy.

While the administration last week celebrated an improving economy and steadily declining budget deficit, the new CBO report says the long-term debt could reach the equivalent of 100 percent of the overall economy within 25 years. Publicly held debt, by contrast, currently equals about 74 percent of the Gross Domestic Product.

At the same time, most other government programs and services – so-called discretionary spending that is essential to the smooth operation of government – would be severely squeezed.

After several more years of declining deficits and overall debt, budget deficits will begin to rise again. “Debt would be on an upward path relative to the size of the economy, a trend that could not be sustained indefinitely,” says the CBO’s 2014 Long-Term Budget Outlook.

Also see related articles from Marketwatch and Bloomberg.

You can read the actual report, 2014 Long-Term Budget Outlook. at the link.

I personally think the way that this will be dealt with is through continued massive printing of dollars, devaluing the debt that is held.

(What does that mean for you? It means that the dollars you hold will become increasingly worthless…if you don’t like $4 a gallon gas, wait till it costs $12. If you don’t like paying $5 for a gallon of milk, wait till it costs $15 a gallon…and so on)

Oh, and by the way, I also don’t think there is anything that can, on a practical way, be done about it:

  • We aren’t going to eliminate mandatory spending – can you imagine the outcry if they tried to get rid of the tax credits associated with Obamacare, if they tried to get rid of Medicare, if they tried to do away with food stamps? Politically, it is impossible.

  • We can’t tax our way out of it. First, if we were to do so, the economy would grind to a halt. Secondly, if you look at how things really work, “the 1%” will end up either making sure that there are enough loopholes written into the tax code so that they will be able to shelter “their stuff” from the tax man…and, barring that, they’ll move it overseas.

Bottom line: a train wreck is coming and there’s not too much that any of us can do about it.


#2

Regardless of the evidence and the warnings, there ar going to be people who continue to bleat on and and on about “the rich”, “greed”, "corporate America’, “oil companies”, and “fair share” (did I forget any)? Because of their economic ignorance, we’re all going to end up going off the cliff.


#3

Stock up on things that will have value after the collapse - it’s going to get ugly.


#4

It’s quite common now to watch news on tv and hear the latest reports of how the economy continues to improve. Then I go out to various areas and notice more empty store fronts with for lease signs then I ever saw in my life. Maybe we could save a little money if government agencies and small town police forces weren’t arming themselves to the teeth. Or do they think they know something the rest of us aren’t aware of yet.


#5

Of course they have to do that. It’s called preparations for civil unrest as the economy collapses. After all, the government just be prepared to deal with terrorists. You know, like veterans, pro life people, and ordinary citizens.


#6

Spend away! It’s only money!


#7

I don’t think that would work. Isn’t the debt mostly in short term borrowing based on market rate interest? If they just flood the money supply, the rate THEY pay on the debt will go up as fast as inflation does, no?

Basically, we’re a nation of morons. We perpetually vote back into office people who spend money in ways that would appall most drunken sailors. Every American should daily visit the national debt clock and watch those numbers spiral upwards out of any hope of control. And get mad. Really mad.


#8

Well, one of the main reasons, in my opinion, that President Obama was re-elected was that a majority of voters now realize that if they vote for the right person, the government will pay them in the form of entitlements. We are clearly now a country that has the motto “Ask not what you can do for your country, ask what your country will do for you.”

We will not, as a country, survive this.

Peace

Tim


#9

On the other hand the biggest group of takers in society have been senior citizens and the republicans have never had the guts to stand up to that group. Given that the seniors are destroying our nation with their entitlement mentality it is hard to blame younger people for getting their share before society collapses.


#10

People are either ignorant and opinionated, or selfish and opinionated. There are some that honestly don’t get what a financial collapse is. And when it hits, or austerity begins, they are livid! Others are not ignorant, but simply don’t care. By the time a problem occurs, it will be someone’s else’s to deal with and they will have gotten their cut. This is precisely the President’s attitude. Destroy the economy, degrade the country’s status in the world, but why care? He will be gone in 2.5 years getting paid to write books about how to simultaneously fail as a President and fool the gullible into electing you to do just that.

Look around this website. We hear heart-wrending cries for care for immigrants, the poor and needy, and while good and necessary, you rarely hear those same people applauding the reigning in of spending in the form of repealing the Unaffordable Care Act, limiting unemployment, privatizing social security (not a debt reducer per se but merely good sense), cutting wasteful environmental efforts in order to fix short term immediate problems.

No offense, but Americans who can’t feed their families or find a place to live in Detroit aren’t going to care much about new solar factories in the Yucatan peninsula, or the hellish conditions in Honduras.

But as with Bush’s warnings to Congress in 2005, these warnings will go unheeded until it is too late, and then we will hear a cavalcade of cries, likely attacking the “rich” who generally survive most crises as a general rule by the very nature of being “rich.”


#11

Yes, as I look around at real people and the real economy, it seems that we are already in a deep depression, masked by entitlement spending, which, as the CBO notes, is unsustainable. Those who survived the 1930’s depression are long gone, as is the corporate memory of it. Of those of us now alive, the whole thing will be a bad surprise; most will have no idea how to survive in hard times.


#12

Not many who remember the 1930s are still living. But it’s true that if we didn’t have massive welfare programs now, the lines to soup kitchens today would be longer than they were back then.

My grandfather was, however, an adult during the 1930s. He told me that back then, yes, 15-25% or so were unemployed at any one time. But that meant 85% to 75% were employed and lived pretty well. Our situation presently is different only in that the welfare programs are there to soften the blow and mask the reality.

But we also don’t have the resources for it. Obama wants to raise every tax he ever heard of, but one is concerned that will simply deepen the recession. I guess he and others who are like minded don’t care, or perhaps actively want it.


#13

Having listened to Janet Yellen’s testimony yesterday, I tend to believe the debt has become much longer term, thanks primarily to QE. Where before all the Fed had to do is to let the short-term bonds expire, now the exit strategy has become much more complicated. You are right though, even at low interest rates (3-4% over long term) the borrowing can get quite expensive.


#14

In other news today Obama administration announced money does grow on trees but wealth IS A COMPLICATED THING.


#15

Actually, there is some data that suggests that moochers under 65 are as likely to vote for Republicans as they are democrats.

However, the 77.5 percent of voters under age 65 who believe they are net beneficiaries of federal spending are as likely to vote for Romney as for Obama and as likely to be Republicans as Democrats.

marginalrevolution.com/marginalrevolution/2014/07/for-whom-are-the-moochers-actually-voting.html


#16

Yes, that’s true. Both Social Security and Medicare have expanded greatly from their origins. On the other hand, I know of a number of twenty and thirty somethings who are living on their parent’s social security! They’d better hope the elders live a long time, because once they’re gone, they will have to find jobs!


#17

That of course is not a government problem, that is just plain bad parenting. People like that should have never had kids in the first place.


#18

Of course it is unsustainable. It always has been. We’re now reaching the tipping point, where we will begin to suffer serious problems and economic hardship.

And sadly enough, tax receipts are at an all time high, and we’re still borrowing truckloads of money to pay for our profligate ways.


#19

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