WASHINGTON — It’s a picture he’s drawn many time before. But Congressional Budget Office (CBO) Director Doug Elmendorf painted it again Wednesday: The federal debt is growing at an unsustainable rate — but the paradoxical best short-term response is to cut taxes or boost spending.
That was the thrust of Elmendorf’s message to lawmakers at the second meeting of the budget conference committee. The 29-member bipartisan panel, co-chaired by Sen. Patty Murray, D-Wash., and Rep. Paul Ryan, R-Wis., is attempting to hash out a compromise budget for the remainder of the 2014 fiscal year and beyond to avoid another government shutdown in January.
The nation’s long-term fiscal outlook, Elmendorf said, is dismal. The $12.2 trillion federal debt held by the public equals 73 percent of the country’s total economic output. In 25 years, the public debt will equal 100 percent of the gross domestic product, pushed up by higher interest rates and spending on Social Security, Medicare and subsidies under the Affordable Care Act, among others.
In addition, the federal government holds $4.9 trillion in intergovernment debt, money borrowed from the Social Security Trust Fund and other sources.
Prompted by Sen. Lindsey Graham, R-S.C., Elmendorf said there are about three workers today for every Medicare beneficiary. But thanks to a wave of retiring Baby Boomers, the ratio will fall to 2 to 1 in two decades.
Given that, Graham asked, “how can we avoid entitlement reforms?” such as reducing inflation-adjusted increases for Social Security benefits or raising Medicare premiums for higher-income retirees.
At the same time, Elmendorf warned lawmakers that spending cuts, including the automatic budget reductions known as sequestration, has acted as “head wind” against a fragile economy. The cuts curtailed short-term demand for goods and services. The CBO projects 800,000 jobs will be lost to sequestration by end of 2014.
That has taken a huge toll on Americans, some harder than others. Elmendorf said the unemployment rate overall is 7.3 percent. But 12.5 percent of workers aged 20 to 24 are jobless; for blacks, the unemployment rate is above 13 percent.