WASHINGTON – I’m just back from vacation in Europe, where, to judge from the political headlines coming out of the United States, this country had no greater care than which of its leaders would next be soaked in cold water.
George W. Bush was doused by his wife, Laura, and then nominated Bill Clinton to take the ice-bucket challenge for charity. Mitt Romney got a bucket poured on him by his former running mate, Paul Ryan, who joined other possible 2016 presidential aspirants Scott Walker and Chris Christie in performing the ritual. Alan Greenspan, the former Federal Reserve chairman, dumped a bucket on his wife, NBC’s Andrea Mitchell, who then tapped Hillary Clinton for the treatment.
In my unplugged state, the occasional ice-bucket updates provided a sense of well-being: If this is going on, things must not be too bad in Ferguson, Mo., or with the Islamic State, or with Ebola. And so I pursued my own ice-bucket challenge, which involved a bottle of wine and a view of the sea.
But on my first day back in Washington, the Congressional Budget Office threw cold water on my tranquility. Its semiannual report on the federal government’s fiscal health, released Wednesday, was downright bone-chilling.
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The top-line conclusions were grim enough, if not catastrophic: The federal budget deficit would shrink this year, but less than had been expected. The economy would continue its expansion this year – but at less than half the rate forecast earlier.
Read further, though, and you see that the long-term fiscal disaster, predicted for some time, has crept into the short term. We’re several years into the expansion, and a full recovery from the 2008 collapse should come in the next few years, the CBO predicts – but just in time for that long-dreaded era when interest payments on the debt and the costs of Medicare and Social Security begin to crowd out everything else the government does. While we watch Lady Gaga and Justin Timberlake take their ice baths, the wolf is at the door.
Federal debt will reach 74 percent of gross domestic product this year, more than twice what it was at the end of 2007 and higher than in any year since 1950, the nonpartisan CBO found. In a decade, it will hit 77 percent; in 25 years, 100 percent – “a level seen only once before in U.S. history, just after World War II.”
What’s more, 85 percent of the federal government’s spending increases between now and 2024 will be consumed by just three items: Social Security (which will claim 28 percent of the increase), Medicare and other health care programs (32 percent) and interest on the debt (25 percent). Spending on everything else – military and domestic programs alike – would fall to the lowest proportion of the economy since at least 1940, when such statistics were first collected.
The warnings, if not new, are stark, and the report offers an occasion to reflect on the folly of the budget battles of the last four years. Conservatives threatening government shutdowns and defaults forced discretionary spending levels down to levels not seen since early last century – hampering the economic recovery – and yet the debt continues to rise.
That’s because of the cowardice of leaders on both sides, who have avoided serious changes to the tax code and to Medicare and the other “mandatory” spending programs that are the real problems. President Obama, in his news conference Thursday afternoon, made no mention of this as he cited recent evidence of growth. “Over the past four-and-a-half years, our businesses have now created nearly 10 million new jobs,” he said, “so there are reasons to feel good about the direction we’re headed.”
He’s correct – if you only care about the next three years. The CBO forecast that deficits would continue to shrink over the next few years, as the economy, after a long delay, finally begins to reach its potential. But after 2018, deficits are forecast to rise again as baby boomers retire and require new spending on entitlement programs. Medicare’s trustees reported last month that the program would become insolvent in 2030 (slightly better than earlier forecasts, in part because of modest improvements made by Obamacare) and Social Security would run into trouble a few years later.
This, then, should be the real ice-bucket challenge. Washington has just a few years until deficits swell again and any changes to these programs become much more painful. Then it won’t be a bracing splash of ice water, but a deep and deadly freeze.