The White House and Congress are preparing to do more battle regarding the budget as the Congressional Budget Office gave out a warning that President Barack Obama and lawmakers have been cutting the wrong type of federal spending as they try to prevent the buildup of the nation’s debt that is projected in the coming decades.
Yearly federal deficits will continue to drop in the short term, according to the report by the Congressional Budget Office. It attributed it to the recent spending cuts in domestic and military programs as well as the rising tax collections as the economy recovers. The report estimated the deficit in 2015 to be 2.1 percent of the economy’s output.
But starting 2016, deficits are estimated to increase again as more baby boomers start drawing from Medicare, Social Security and Medicaid. These are the entitlement programs that the Democrats and Republicans can’t reach a compromise.
The federal debt averaged 38 percent of the gross domestic product for the 40 years before the 2008 financial crisis. It was predicted to increase from the present 73 percent of the GDP to at least 100 percent in 2038.
Budget experts have already warned about the increase as early as the Reagan era as they saw the aging baby boomers would drive entitlement spending of the government. They will reach the level that will be above all the other domestic and military spending. The interest on the debt will also be a growing expense.
The White house and the House have agreed on other cuts that are not part of the projections for the long term. The discretionary spending programs are slashed but entitlement spending remained uncontrolled.
The Congressional Budget Office said that by 2023, the yearly deficit will increase to an estimated 3.5 percent of the GDP that is just above the level that most economists consider sustainable in an improving economy.