The Congressional Budget Office has just released the 2016 version of its Long-Term Budget Outlook.
It’s filled with all sorts of interesting data if you’re a budget wonk (and a bit of sloppy analysis if you’re an economist).
If you’re a normal person and don’t want to wade through 118 pages, you’ll be happy to know I’ve taken on that task.
And I’ve grabbed the six most important images from the report.
First, and most important, we have a very important admission from CBO that the long-run issue of ever-rising red ink is completely the result of spending growing too fast. I’ve helpfully underlined that portion of Figure 1-2.
And if you want to know the underlying details, here’s Figure 1-4 from the report.
Once again, since I’m a thoughtful person, I’ve highlighted the most important portions. On the left side of Figure 1-4, you’ll see that the health entitlements are the main problem, growing so fast that they outpace even the rapid growth of income taxation. And on the right side, you’ll see confirmation that our fiscal challenge is the growing burden of federal spending, exacerbated by a rising tax burden.
And if you want more detail on health spending, Figure 3-3 confirms what every sensible person suspected, which is that Obamacare did not flatten the cost curve of health spending.
Medicare, Medicaid, Obamacare, and other government health entitlements are projected to consume ever-larger chunks of economic output.
Now let’s turn to the revenue side of the budget.
Figure 5-1 is important because it shows that the tax burden will automatically climb, even without any of the class-warfare tax hikes advocated by Hillary Clinton.
And what this also means is that more than 100 percent of our long-run fiscal challenge is caused by excessive government spending (and the Obama White House also has confessed this is true).
Let’s close with two additional charts.
We’ll start with Figure 8-1, which shows that things are getting worse rather than better. This year’s forecast shows a big jump in long-run red ink.
There are several reasons for this deterioration, including sub-par economic performance, failure to comply with spending caps, and adoption of new fiscal burdens.
The bottom line is that we’re becoming more like Greece at a faster pace.
Last but not least, here’s a chart that underscores why our healthcare system is such a mess.
Figure 3-1 shows that consumers directly finance only 11 percent of their health care, which is rather compelling evidence that we have a massive government-created third-party payer problem in that sector of our economy.
Yes, this is primarily a healthcare issue, especially if you look at the economic consequences, but it’s also a fiscal issue since nearly half of all health spending is by the government.
P.S. If these charts aren’t sufficiently depressing, just imagine what they will look like in four years.
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I see no overall real desire on behalf of the American people to reduce spending.
We had been on a trajectory of exponentially ballooning deficits yet we voted ourselves a brand spanking new third entitlement pillar in Obamacare — to complement the deficit compounding force of Medicare and social security.
That, while current taxation and government GDP percentage consumption have already reduced American prosperity growth to a permanent new structural normal of two percent — half the world average.
Are we becoming more like Greece, or more like France? We could dwell a couple of decades in some sort of French equilibrium — seeing our once enviable prosperity levels been reached and then eventually overtaken by a much faster rising world average — while living in an angry dystopia, voting for Trump.
It will be a fate entirely of our own making.
I’m at a loss as to what the solution may be. Americans seem hopelessly clueless about the effort-reward flattening effects of HopNChange and the compounding decline of low growth rates (don’t these people learn exponents in public schools?)
On the other hand I have many well educated European immigrant friends who — having seen what is happening in Europe and knowing what slow growth compounding means — complain that we don’t have enough government benefits here in America.
I mean, what makes the few wise electorates of the world so? I have no clue. What makes the Swiss realize that voting yourself political favors, whether in the form of over-market minimum wages or guaranteed incomes, only flattens the effort-reward curve and leads to systemic slow growth and decline?
I mean, I do get it but Europeans don’t, Americans don’t , Silicon Valley citizens don’t seem to get it either. How is a provincial country bumpkin in Texas actually wiser than a Silicon Valley sophisticate? Ironic serendipity? Coincidence?
Seems like the only practical solution to at least maintain personal prosperity is to let the world’s electorates (and other regimes) do what they may. By virtue of the law of probabilities some –very few– will get it right. So keep mobile and move to those serendipitously wiser places, preferably even before they become truly fashionable.
America used to be a safe bet. Now, for the first time in its two hundred year history that seems to no longer be the case. The trendline has taken a bad turn — the typical HopNChange and all that has eroded many one nations…
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