The Committee for a Responsible Federal Budget conducts research and provides information to the public on major fiscal issues facing the United States. These include the rising national debt, the budget reconciliation process, health care policy, and the future of trust funds like Social Security, Medicare, Federal Highway, and others.
Its latest missive entitled “Deficit Reduction Is Key to Improving Affordability” lists a number of interesting tidbits.
With long-term interest rates now exceeding projected nomination economic growth, “the U.S. is entering a debt spiral.” The Committee suggests this could cause a fiscal crisis with “exploding unemployment rates, crashing asset values, surging inflation, falling incomes, sharp and unexpected increases in taxes and cuts in government support, or some combination.”
The Committee also contends that many of the efforts seeking to improve affordability are “likely to worsen affordability challenges over time by boosting inflation, interest rates, and the cost of what is being subsidized.”
Other points in the latest missives include:
Inflation has been above the 2% target for five-and-a-half years and is projected to total about 3.5% in 2026 alone.
Prices have risen by 24% since March 2021, compared to 11% had inflation remained at its 2% annual target. That’s an extra $7,000 in per capita costs in 2026 alone, although higher inflation has also pushed up nominal wages.
The growth in the debt-to-GDP ratio over the last quarter century is responsible for an estimated 1.5% of interest rates.
Mortgage interest rates have risen to about 7%, up from less than 3% in early 2021 and an average of 5% over the prior two decades.
Health care spending consumes 18% of GDP – over $17,000 per person – with over one-third of the costs paid for directly by the federal government and nearly all costs subsidized by the federal government in some way.
Failing to save Social Security will lead to a 22% abrupt benefit cut in 2032.
Under current law, we project debt will rise from 100% of GDP today to 122% by 2036, while budget deficits will grow to 6.9% of GDP.
The U.S. would need sustained, broad-based growth of 3.3% per year – 83% higher than CBO’s projected growth rate of 1.8% – to hold debt to 100% of GDP.
The paper includes specific recommendations to reduce the deficit (around $2 trillion this year) in the areas of healthcare, Social Security, education, the tax code, and more.
The board and staff at the Committee are impressive, including names like Mitch Daniels, Leon Panetta. John Kasich, Erskine Bowles, Brian Bernasek, Saxby Chambliss, and Joe Manchin.
Too bad their insights will fall on deaf ears in Washington.
“Incline your ear, and hear the words of the wise” – Proverbs 22:17.
Bill Crawford is an author and syndicated columnist from Jackson.
