In 2013, federal spending approached $3.5 trillion and the deficit dropped to “only” $642 billion. Some are using this small improvement in the nation’s fiscal situation to avoid further budget tightening. But as the figures and graphics in this report show, this is the wrong conclusion to draw. Following four years of trillion-dollar deficits, the national debt will still reach nearly $17 trillion and exceed 100 percent of gross domestic product (GDP) at the end of the year. Publicly held debt (the debt borrowed in credit markets, excluding Social Security’s trust fund, for example), is alarmingly high at three-quarters of GDP. Without further spending cuts, it is on track to rise to a level last seen after World War II. Deficits fell in 2013 because President Obama and Congress raised taxes on all Americans, the economy saw slight improvement which helped to bring in more revenue, and spending cuts from sequestration and spending caps under the Budget Control Act of 2011 took effect. The nation should not take this short-term and modest deficit improvement as a signal to grow complacent about reining in exploding spending. Though deficits will decline for a few more years, existing spending cuts and tax increases will not prevent them from rising soon, and within a decade exceeding $1 trillion once again. Driving this is federal spending which, despite sequestration cuts, will grow 69 percent by 2023. The nation’s long-term spending trajectory remains on a fiscal collision course. Total spending has exploded by 40 percent since 2002, even after inflation. Some programs have grown far in excess of that. Defense, however, has been slashed. Social Security, Medicare, Medicaid, and Obamacare are so large and growing that they are on track to overwhelm the federal budget. While the Budget Control Act of 2011 and sequestration are modestly restraining the discretionary budget, mandatory spending—including entitlements—continues growing nearly unabated. Without any changes, mandatory spending, including net interest, will consume three-fourths of the budget in just one decade. Obamacare will add $1.8 trillion to federal health care spending by 2023. By 2015, health care spending will overtake Social Security as the largest budget item, including Obamacare’s coverage expansion provisions: a massive expansion of Medicaid and subsidies for the new health insurance exchanges
Posted on: Wed, 28 Aug 2013 03:18:34 +0000