CBO Report shows exploding federal debt by maintaining Bush tax cuts

CBO Report shows exploding federal debt by maintaining Bush tax cuts

Factoring for current healthcare spending growth, CBO shows U.S. topping Greece in debt as a percent of GDP.

The Congressional Budget Office has released a new report forecasting future U.S. debt if current federal and private sector conditions don’t change. Principally, the report looks at healthcare and the upcoming expiration of the Bush tax cuts. On one hand Democrats have pushed hard for a repeal of the Bush Tax Cuts seeing them as a backdoor to “raising” taxes on the wealthiest earners in the country, whom the tax cuts principally benefit. Republicans defend this by saying that the economic recovery will be weakened by such substantial and sudden changes to the tax code.

The CBO that by allowing the Bush Tax Cuts to expire in December, the U.S. government will dramatically lower its deficit, from 73 percent to 53 percent in 25 years. If the expiration doesn’t take place, and is compounded by further spiraling healthcare costs, U.S. debt could hit 200 percent in the same timeframe. To put that number in perspective, Greece’s debt load is in the neighborhood of 160 percent and has sparked one of the worst financial crises in Europe in the last 100 years. To understand healthcare’s rising cost in this staggering debt explosion; if there is no fundamental policy changes to healthcare, costs to the government could rise to 10 percent of GDP within the same time period. These are some dire predictions, and both sides are likely to point to them as further evidence of their own political agenda.

Republicans are likely to look at the report as an illustration of the country’s out-of-control spending, regardless of the fact that many of the party’s leaders have adamantly opposed eliminating tax cuts because they are, in effect, “raising taxes.” However, the Bush tax cuts to comprise a significant portion of GDP (around two percent) and such a drastic measure, due to its relative size, could be considered an austerity move. Of course, Democrats have been beating the anti-austerity drum…except in this case. Democrats, on the other hand, look at this as further evidence that both the expiration of the Bush Tax Cuts and the implementation of the Affordable Care Act (vilified by the GOP as “Obamacare”) are national imperatives. The truth, however, is that some combination of both is required to protect our economic health and to stave off the worst-case-scenarios of rising federal debt.

Bill Clinton, who spoke on CNBC yesterday, advocated for a temporary extention of all of the Bush tax cuts. This statement was gleefully repeated by Republican pundits and politicians, mostly due to the fact that it is a contradiction to President Obama’s proposal that the Bush Tax Cuts expire for individuals making $250,000 or more. However, Clinton went on to support the Buffet Rule, raising taxes on the wealthiest earners in the country, starting with those that make $1 million or more. In a way, Clinton is supporting raising taxes on wealthy earners to shore of sagging federal revenues and to equalize the tax code somewhat, but not by beating down the backdoor with a sledgehammer and dropping the Bush tax cuts.