Tuesday, March 27, 2012

Need To Cut Future Social Security And Health Program Expenses Plus Raise Taxes Even After ObamaCare, According To CBO

From CBO Director Douglas Elmendorf's March 26, 2012, presentation to the National Association for Business Economics, "Choices For Federal Spending And Taxes" on the choices the US faces about future federal spending and taxes:
...putting federal debt on a sustainable path still requires changes in Social Security, the major federal health care programs, and taxes that amount to about $750 billion in 2022.

To meet that target for 2022, one can think of two broad choices:
  • If lawmakers extend the expiring tax provisions (other than the payroll tax reduction) and index the alternative minimum tax for inflation, as described in the alternative fiscal scenario, they would need to cut spending on Social Security and the major federal health care programs by about one-fourth. Because most of such spending goes to people over age 65, a cut of that magnitude would represent a major change to the sorts of benefits provided for Americans when they become older.

  • Alternatively, if lawmakers do not change spending on Social Security and the major federal health care programs, they would need to raise tax revenue by about one-sixth. Such an increase would raise federal revenues significantly above their average share of GDP in the past several decades.
Of course, lawmakers could also adopt some combination of those choices, cutting spending on those programs by somewhat less than one-fourth and raising tax revenue by somewhat less than one-sixth.
CBO Presentation Slides:

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