posted on February 06, 2013 16:11
The Congressional Budget Office's (CBO) new outlook, released Feb. 5, gave lawmakers, congressional staffers, and economists the first preview of the contours of this spring's budget battles.
The CBO's budget and economic predictions will form the basis of both parties' budgetary arguments in the coming months, as the two sides try to highlight different points of data to their own political advantage.
Senate Budget Committee Chairwoman Patty Murray (D-Wash.) responded to the report by arguing that it showed the wisdom of stabilizing the debt over the long term, undoing any immediate cuts such as the sequester.
House Budget Committee Chairman Paul Ryan (R-Wis.) saw an entirely different lesson – a warning about the perils of the country's long-term debt. “By 2023, our national debt will hit $26 trillion. We can’t let that happen. We need to budget responsibly, so we can keep our commitments and expand opportunity,” Ryan argued.
The CBO report says that the deficit is expected to weigh in at $845 billion in 2013, or 5.3 percent of gross domestic product, the smallest deficit since 2008 and well below the recent $1 trillion figures. (This assumes that the sequester cuts occur in 2013.)
The economic recovery is slowly gaining steam, with an increase in real estate and stock prices, but the unemployment rate will remain quite high, at 7.5 percent through 2014. That rate is not expected to fall to 5.5 percent until the end of 2017, which means that the U.S. may face six consecutive years of unemployment above 7.5 percent — “the longest such period in the past 70 years,” CBO says.
Starting in the latter half of the decade, the deficit will begin to climb again due to an aging population, increased eligibility for federal health programs, and growing healthcare costs. This will help to push up the level of debt held by the public to 77 percent — a worrisome level that could translate into higher interest payments for the government and less financial flexibility to respond to any major fiscal crises. By the end of this fiscal year, the debt held by the public is expected to reach 76 percent, a level the federal government has not seen since 1950.