Congressional Budget Office now admits catastrophic debt 'crisis' inevitable for America

Tuesday, September 24, 2013 by: J. D. Heyes
Tags: Congressional Budget Office, catastrophic debt crisis, American economy

(NaturalNews) From the behavior of both sides of the political aisle in Washington, you'd think that the nation's unsustainable debt is no big deal. Otherwise, lawmakers would be clamoring to get a handle on it. But as it is, only a small, small group of fiscal conservatives is working to not only get a handle on the national debt, which is spiraling ever faster out of control, but to reform the entitlement spending that is driving the debt higher.

Obamacare is just the latest massive entitlement that is quickening the pace of America's bankruptcy, which is why the fiscal hawks are moving to defund it. The same forces who passed that monstrosity, however, are now working overtime to not only keep it the law of the land but to make sure America goes broke funding it.

Is there anything that can impose reason on the unreasonable? Well, the Congressional Budget Office, Congress' non-partisan fiscal watchdog, is trying. But there is only so much the CBO can do.

Like a broken record, the warnings keep coming

In its latest budget projection, which covers the 10-year period between 2013 and 2023, the CBO offers yet another dire warning that lawmakers ignore at there - and our - peril. The agency says that, based on its current projections, America's large and growing debt - can you guess? - is unsustainable.

"[A] large and continually growing federal debt ...would increase the probability of a fiscal crisis for the United States," says the report.

What's more, CBO says that if current laws and policies don't change, the federal debt could reach 100 percent of GDP by 2038 (it is currently about 73 percent).

CBO also projects that healthcare spending by the federal government "will grow considerably in 2014 because of changes made by the Affordable Care Act" (Obamacare).

Of the current federal debt-to-GDP ratio, the "percentage is higher than at any point in U.S. history except a brief period around World War II, and it is twice the percentage at the end of 2007."

If laws remain the same, CBO said that it expects federal debt held by the public to decrease slightly, relative to gross domestic product, over the next several years. But after that, deficits would begin growing once more, in no small part due to the government's major healthcare programs (think Obamacare, Medicare, Medicaid and the Children's Health Insurance Program, or CHIP).

"CBO projects that the federal debt held by the public would reach 100 percent of GDP in 2038, 25 years from now, even without accounting for the harmful effects that growing debt would have on the economy," the report said.

Per CNSNews.com:

The word "crisis" appears numerous times in the report, as the CBO explains the negative consequences of burdensome debt. At some point, the report says, investors would begin to doubt the government's willingness or ability to pay U.S. debt obligations, making it more difficult or more expensive for the government to borrow money. Even before that happens, the high and rising amount of debt "would have significant negative consequences" for both the economy and the federal budget.

And it just gets worse from here

More bad news:

-- As the debt-to-GDP rises, there will a larger risk of a major fiscal crisis as well, because investors could begin demanding much higher interest rates to finance the federal government's borrowing.

-- More debt equals less flexibility in Washington to utilize tax and spending policies as a response to unexpected issues or occurrences, like a new recession or a major war.

-- Most assuredly, interest payments on the government's rising debt would necessarily increase - and substantially so - to become one of the budget's biggest line items, if not the largest.

-- As the government borrows more, private investment will fall off, "because the portion of total savings used to buy government securities would not be available to finance private investment," CNSNews.com reported.

Sources:

http://cnsnews.com

http://www.cbo.gov

http://www.marketwatch.com