In its latest long-term forecast, the nonpartisan Congressional Budget Office predicted that the national debt, which has surged to nearly 60 percent of annual economic output in the wake of the recession, would continue rising in the coming decades despite cost-containment measures in the health overhaul Obama signed this spring."Growth in spending on health-care programs remains the central fiscal challenge," CBO Director Douglas W. Elmendorf said in a presentation to Obama's bipartisan deficit commission. "In CBO's judgment, the health-care legislation enacted earlier this year made a dent in the problem, but did not substantially diminish that challenge."
... the CBO said the national debt would soar to 87 percent of gross domestic product by 2020, exceed its historical peak of 109 percent by 2025 and hit 185 percent by 2035 -- "uncharted territory," Elmendorf said, that could include higher interest rates, more foreign borrowing, less private investment and lower income growth, if not a full-blown fiscal crisis. [Emphasis mine]Elmendorf said the gloomy long-term picture is not an argument for rejecting additional spending now to bolster the economic recovery. Indeed, he said, "enacting cuts in spending or increases in taxes now would probably slow the recovery."
However, Elmendorf said developing a credible and certain deficit-reduction plan to take effect after the economy has recovered could provide a significant boost to public confidence by reducing "uncertainty" about what is bound to be a painful future path.
From CBO Tells Obama Deficit Panel That Forecast Remains Bleak by Lori Montgomery, July 1, 2010, at washingtonpost.com, and The Long-Term Budget Outlook by Congressional Budget Office, June, 2010, at cbo.gov.
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