CBO Report: Long-Term Deficit Picture Gloomy

The Congressional Budget Office reported Tuesday that the nation's long term deficit picture is gloomy, despite a slowed rate in the rise of healthcare costs. The biggest factors: Tax cuts locked into place by the fiscal cliff deal and the long-standing problems of an aging population.

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ROBERT SIEGEL, HOST:

From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.

AUDIE CORNISH, HOST:

And I'm Audie Cornish. The nonpartisan Congressional Budget Office just added fuel to the fire already raging in Washington over what to do about the deficit. A new CBO study paints a grim picture of the nation's long-term debt and deficit.

NPR's Tamara Keith reports that despite three years of fighting over it, Congress hasn't done much to improve things.

TAMARA KEITH, BYLINE: This is a long-term budget outlook, looking decades ahead rather than the usual 10 years. Things start out looking decent, with shrinking deficits. The report projects that in 2018, the national debt will bottom out at 68 percent of the size of the overall U.S. economy. Then it will gradually grow again as annual deficits widen.

Doug Elmendorf, who heads the Congressional Budget Office, says this is largely the result of demographics - an aging population.

DOUG ELMENDORF: Federal spending would be pushed up by rising interest payments on the federal debt, and by growing costs from Social Security and the federal health care programs.

KEITH: In 2038, he projects the debt would reach 100 percent of GDP. That would be higher than in any year since the end of World War II.

ELMENDORF: With such large deficits, federal debt would be growing relative to GDP - a path that could not be followed indefinitely.

KEITH: Deficit hawks responded to the report saying it was a call to action. But one left-leaning economist pointed out on his blog, in all caps: WE SIMPLY DO NOT HAVE A DEFICIT PROBLEM FOR AT LEAST THE NEXT THREE PRESIDENTIAL TERMS. In fact, the deficit isn't projected to return to the current level for more than a decade. Elmendorf says Congress will have to decide how to deal with this future problem of the cost of programs like Social Security and Medicare outpacing revenue from taxes.

ELMENDORF: We, as a society, have a fundamental choice of whether to cut back on those programs, or to raise taxes to pay for them. And so far, we've chosen to do very little of either. And as long as that's the case, I think CBO's projections will keep looking like this.

KEITH: Congress may take another stab at that choice this fall, as it debates spending for the year ahead and raising the debt limit.

Tamara Keith, NPR News, The Capitol.

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