Budget cuts or tax increases now would help avert that scary scenario, leaving the economy far stronger than it otherwise would be, the Congressional Budget Office said in the starkest warning yet by the independent agency that putting off tough decisions will only make things worse.
The report — the first major one under new CBO Director Keith Hall — also takes aim at some traditional liberal arguments, finding that government investment yields only half the return on investment compared with the private sector and that money transfers to the poor act as “implicit taxes,” keeping them out of the labor force and depressing the economy further.
"The long-term outlook for the federal budget has worsened dramatically over the past several years," the CBO said in its dire report, blaming large deficits that piled up under President Obama’s stimulus and more fundamental changes to the economy that have caused Americans to leave the workforce in favor of government support.
"Our national debt is spiraling out of control," said House Budget Committee Chairman Tom Price, Georgia Republican.
The next few years will show solid improvement in the budget as the effects of the stimulus wear off and the economy climbs out of the slump that began under President George W. Bush and has continued for most of Obama’s tenure.
But the aging population, rising health care costs, a less-motivated workforce and ever more generous promises of government assistance will soon reverse the trend and send annual deficits shooting back up, accumulating a bigger debt burden that will act as a permanent drag on the economy.