Ellington

According to an AP poll, President Bush's economic policies are playing better with the country this week—the stock market is up, consumer confidence is rolling along and Bush's economy approval numbers bumped up to 55% approval and 43% disapproval.

But that news comes at the same time as a new Congressional Budgetary Office (CBO) report regarding the future outlook of the national budget, which it says is "unsustainable" given the requirements of automatic spending increases that will come about when the Boomer generation (76 million people) begins to retire in droves.

"Taken to the extreme, such a path could result in an economic crisis," including the possibilities that foreign investors would pull out, the dollar's value plunge, interest rates and prices soar and stock markets collapse. "The longer that lawmakers delay acting to counter an unsustainable budgetary situation, the larger the spending cuts or tax increases will eventually have to be," the 60-page study warned.

The solution? The CBO ran six different scenarios, and only three had a chance of balancing the budget in the next 50 years -- two allowed the Bush tax cuts to expire and one assumed the "improbable scenario" that Medicare and Medicaid spending would not need to keep pace with rising health care costs and other entitlements would shrink. In all cases, even with tax revenues returning to Clinton-era levels, "fiscal security is not assured."

"Substantial reductions in the projected growth of spending or a sizable increase in taxes as a share of the economy -- or both -- will probably be necessary to provide a significant likelihood of fiscal stability in the coming decades," the report said.

Given that the growth comes in automatic entitlement spending -- Social Security, Medicare and Medicaid spending already promised to a generation that's been at work for 40 years -- cutting those programs seems politically untenable. (Indeed, fiscal conservatives are starting to get pretty antsy about Bush's lack of political will when it comes to reigning in spending.) That brings one to the uncomfortable conclusion that taxes may need to increase substantially on post-Boomer generations over the next few decades to keep the current juggernaut afloat.

Previous Comments

ID

136856

Comment

"That brings one to the uncomfortable conclusion that taxes may need to increase substantially on post-Boomer generations over the next few decades to keep the current juggernaut afloat." It may be an uncomfortable conclusion you've reached, but that in no way means it will happen. As you often write, only time will tell. Tad DeHaven's numbers are just as 'fuzzy' because only after time has told, only after the actual numbers have played out, will we be able to assess whose numbers were fuzzy, and whose numbers were closest to actuals. In other words, we'll just have wait and see. We've got nothing but time.

Author

RanchHuevos

Date

2003-12-22T11:06:32-06:00