How To Fix US Debt Without Hurting Fragile Economy
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The most serious threat to the federal government's finances is America's aging population. As baby boomers have begun to shuffle into retirement, they are tapping Medicare health care benefits and collecting Social Security.
The CBO sees federal deficits falling through 2015 as the economy improves and the automatic budget cuts reduce spending. But then the deficits start rising again inexorably because of higher health care spending and rising interest payments on the federal debt. The debt will near $20 billion by 2030 if nothing is done, according to the CBO.
Many Democrats have resisted efforts to slow the growth of Medicare and Social Security. Economists say Democrats will have to accept the reality that the government can't keep spending at its current pace indefinitely.America spent more than $8,200 per person on health care in 2010. That's the most of any country and more than 50 percent higher than No. 2 Norway's $5,388 per person. The automatic spending cuts largely leave health care and Social Security spending alone. Instead, they zero in on the rest of the federal budget â¿¿ so-called discretionary programs â¿¿ including defense spending. But the 2011 budget agreement already took an ax to discretionary programs. The White House says they are already scheduled to fall to 5.7 percent of U.S. GDP by 2017 â¿¿ the lowest level in budget records dating back to 1962. Discretionary spending accounted for nearly 37 percent of the $3.8 trillion the federal government spent last year; so-called mandatory programs, including Social Security and Medicare, accounted for 61 percent. "By far the preferable policy," Macroeconomic Advisers says, "is a credible long-term plan to shrink the deficit more slowly through some combination of revenue increases within broad tax reform, more carefully considered cuts in discretionary spending, and fundamental reform of entitlement programs."
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