The financial health of the U.S. was thankfully offered one positive check mark last week after the Congressional Budget Office reported that Medicare won’t be as much of a budget-buster as expected.
This was the good news – the difference between the current estimate for Medicare’s 2019 budget, according to the budget office, and the estimate for the 2019 budget four years ago is down a whopping $95 billion. That’s positive because a projected reduction in health care costs will require less fiscal pain on the country’s future. It also contributes to lessening the federal deficit, which still sits at a staggering $506 billion.
The bad news, however, is that the country’s financial outlook overall remains grim.
The budget office expects the accumulated federal debt to reach 74 percent of gross domestic product by the end of this year, which is the highest ratio of debt since the end of World War II.
It’s clear policy makers will have to do something to curb the growing national debt. It’s expected to hit 80 percent by 2024, and even higher after that if the country continues on this current trajectory – even with lower Medicare costs.
One of the best solutions is the Simpsons-Bowles plan, a bipartisan proposal crafted by former U.S. Sens. Alan Simpson, R-Wyoming, and Erskine Bowles, D-N.C., as part of President Barack Obama’s National Commission on Fiscal Responsibility and Reform.
The plan does call for tax increases – $2.6 trillion over 10 years – that would be hard to muscle through Congress. But it also calls for cutting trillions of dollars in spending cuts and makes significant changes to entitlements.
However, Obama hasn’t pushed to get this plan passed and Congress hasn’t supported it, although it’s the most itemized and concrete plan aimed at reducing the nation’s deficit and debt.
The need to have lawmakers concentrate on reducing the national debt isn’t anything new. But the recent fiscal news regarding Medicare should bring the conversation back to the forefront. The situation isn’t as dire as people expected, but the U.S. clearly isn’t out of the woods. The debt is historically high and it continues to climb.
Policy makers in Washington, D.C. thankfully haven’t been completely idle.
The country’s financial outlook actually somewhat brightened as Congress raised taxes on upper-income Americans in 2013. But there’s still so much to be done, and the Simpson-Bowles model would be an excellent way forward.
The U.S. already borrows way too much from foreign countries, particularly China, although borrowing recently hit a seven-year low, according to the Commerce Department, thanks to a slight uptick in economic growth. Trimming back that borrowing needs to be one of the main priorities of Congress and the president, but that’s almost a lock not to happen anytime in the near future.
Had Congress implemented Simpson-Bowles, deficit reduction would have been set to start in 2016. Now, debt increases for the U.S. continue, only alleviated by sunny news such as lowered Medicare costs and wishful thinking that the economy will turn around.
Positive economic headlines are always welcomed, but the conversation must come back around to reducing the long-term debt.
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