August 2015 – WASHINGTON – The economy is sluggish but growing and inflation remains low, painting a decidedly mixed picture for the federal government, the Congressional Budget Office reported Tuesday, saying the fiscal situation is improving this year but will snap back by 2018 to swelling deficits and unsustainable debt. The inflation rate is so low that Social Security beneficiaries probably won’t get a cost-of-living raise after this year, the CBO said. But tax revenue is up and spending has stayed pat, which is helping reduce the pool of red ink in the federal budget.
Combined, those numbers mean the government will run a deficit of $426 billion in fiscal year 2015, down about $60 billion from 2014 and marking the smallest deficit of President Obama’s tenure. The good news will continue for a couple of years as the economy belatedly but fully rebounds from the recession of December 2007 to June 2009. By 2018, though, debt will rise as government spending grows and the economy will cool again, the CBO said.
“The growth in debt is not sustainable,” CBO Director Keith Hall said in presenting the estimates. “At some point, it’s going to get to a very high level. Obviously, you can’t predict tipping points, but at some point this becomes a problem.” Democrats saw the short-term outlook as progress and said it’s time to close tax breaks and bring in more revenue for spending on investments such as infrastructure. Republicans kept their focus on the longer-term warnings in the CBO report. They noted that taxes will remain higher than their historic average over the past five decades but deficits will persist because spending will still outpace revenue.
Budget watchdogs pleaded with all sides to go beyond the numbers and talk about solutions to persistent debt. “I don’t know how anyone can declare victory when trillion-dollar deficits are just on the horizon,” said Judd Gregg, a former senator and a co-chairman of the advocacy group Fix the Debt. “While deficits are down this year, the real story is that they are on the rise and that our national debt is at record-high levels and growing.” Watchdogs pleaded with presidential candidates to start talking about the national debt in their campaigns. For the most part, that conversation has been muted. Democrats have called for tax hikes to pay for more spending, and Republicans generally have focused on other issues. –Washington Post