In his first hearing as a member of the Senate Budget Committee, Senator Bob Corker questioned Congressional Budget Office (CBO) Director Doug Elmendorf about the impact debt and deficits have on the standard of living of the American people.
“Debt and deficits hurt the standard of living of Americans by slowing economic growth,” said Senator Corker. “We have quite a challenge… I hope that over the course of the next two months [the Senate Budget Committee] will come together and actually deal with these issues in a way that is meaningful so that our lack of action does not continue to hurt the American people.”
On Monday, CBO released a report, “The Budget and Economic Outlook: 2015 to 2025,” which indicates annual budget deficits will continue to grow at an unsustainable rate. The nonpartisan agency warns that longer-term outlook projections indicate “such large and growing federal debt would have serious negative consequences, including increasing federal spending for interest payments; restraining economic growth in the long term; giving policymakers less flexibility to respond to unexpected challenges; and eventually heightening the risk of a fiscal crisis.”
The CBO report cites increased mandatory spending on entitlement programs, including the expansion of subsidies under the president’s health care law, and interest payments as key factors in the projected increase in the federal debt. The report indicates:
· An increase in debt held by the public from $13.4 trillion in 2015 to $21.6 trillion in 2025 – an increase of $8.2 trillion;
· Today’s debt held by the public relative to a gross domestic product (GDP) ratio of 74% is historically high – higher than any year since 1951 and more than double what it was in 2007;
· A $2.5 trillion increase in total annual outlays between 2015 and 2025, of which 84% comes from a combination of major health programs (32%), Social Security (28%) and net interest on the federal debt (24%); and
· Net interest spending as a percentage of GDP will exceed defense and non-defense discretionary spending respectively in 2023.