CBO Projects Lower Living Standards If Current Laws Are Not Modified

By Sarah Mamula - Talk Radio News Service

Congressional Budget Office (CBO) Director Douglas W. Elmendorf announced Wednesday that the CBO’s most recent projections offer a bleak future for the nation’s standard of living and it’s federal debt.

According to a report released by the CBO, federal debt will hit 62% of the United States’ GDP by the end of 2010, a percentage not reached since the aftermath of WWII. If current laws are not modified, the CBO projects that federal spending on healthcare programs will grow from about 5% of GDP today, to nearly 10% by 2035.

“Reaching agreement on longer term reductions in spending or increases in taxes or some combination as quickly as possible would support the economic recovery,” said Elmendorf.

The CBO Director said there are two scenarios that will work to prevent such projections from becoming a harsh reality. The “extended-baseline scenario” would implement a steadily increasing average tax rate. In addition, rising tax rates and provisions in the newly passed healthcare bill, the CBO projects that revenue would grow to 23% of GDP by 2035. 

Under an “alternative fiscal scenario,” major changes in current legislation would have to take place. According to the CBO, under this plan “most of the provisions of the 2001 and 2003 tax cuts would be extended, the reach of the alternative minimum tax would be kept close to its historical extent, and that over the longer run, tax law would evolve further so that revenues would remain at about 19 percent of GDP.” 

Dodging giving recommendations to Congress, Elmendorf said that “ultimately, if the debt grows unchecked… it means declines in people’s standards of living.”