Controlling America's huge and growing national debt will only get harder if lawmakers continue to put off the effort.
In a report released Thursday, the Congressional Budget Office (CBO) tried to attach calculations to the tough policy decisions ahead. Regardless of when lawmakers decide to address the $30 trillion national debt, simply stabilizing it (that is, implementing policies to keep it from growing relative to the national economy) will require "tax revenues or benefit payments to shift significantly from their path." currently projected.
New CBO report shows that the longer Congress waits to deal with the debt, the bigger the problem becomes.
In short, taxes will have to increase and government services, including benefits from programs like Social Security and Medicare, the Medicare program for the elderly, will probably have to be cut.
Note: - recommended you read Don't Wait! The National Debt Is Only Getting Worse
It's not really a new set of recipes. Debt watchers have been warning for years that benefit cuts and tax increases will likely be needed to stand a realistic chance of managing America's long-term debt. (And remember, we're talking about what it takes to stabilize debt, not reduce or eliminate it.)
The CBO report charts three forward-looking courses based on assumptions about when Congress could start implementing the changes needed to deal with this tsunami of problems: by 2026, 2031, or 2036.
If policymakers waited until the end of the decade to raise taxes and cut spending, debt would be around 120% of GDP in the long run at best. Waiting longer means higher debt levels forever and more serious consequences.
“As federal borrowing increases, the amount of funds available for private investment will decrease (a phenomenon known as crowding out) and interest costs will increase,” the CBO warns. "The perpetual increase in debt would also increase the likelihood of a fiscal crisis and pose other risks to the US economy."
Higher debt translates into lower long-term economic growth because the cost of interest payments on debt eats up dollars that could otherwise be used for productive purposes. As the CBO points out, persistently high debt levels can also put upward pressure on interest rates and make it harder to fight inflation.
(Remember that debt is the accumulation of all federal budget deficits. Reducing the deficit from $3 trillion to $1 trillion does not reduce the size of the current national debt, but rather adds another $1 trillion.)
There is little hope that the Republicans will do much to stabilize the debt. Despite the comic promise to pay off the debt in eight years, former President Donald Trump was a spendthrift whose debt grew more, per year, during his four years in office than President Barack Obama did during his eight years. Imagine introducing a bill to Congress today to raise taxes and cut benefits. Which political party would have a target on their back faster?
But for anyone who cares, the future is spelled out pretty clearly in the new CBO report. Turns out the waiting may not be the hardest part, but it sure won't help.