America’s Unsustainable Long-Term Debt Trajectory

In
the past year or so, the White House has become increasingly
aggressive in touting President Obama’s achievements in reducing
the deficit. The deficit has been “cut by more than half since
2009,” a 2013
blog post by the White House Office of Management and Budget
declared, pointing to the shrinking of the deficit as a percentage
of the economy. The budget office trotted out the same line last
week. “Under the President’s leadership, the deficit has been cut
by more than half as a share of the economy, representing the most
rapid sustained deficit reduction since World War II, and it
continues to fall,” an OMB official
said. The president himself has downplayed the deficit problem,

saying last year, “We don’t have an urgent deficit crisis. The
only crisis we have is one that’s manufactured in Washington, and
it’s
ideological.”           

It is unquestionably true that, judged relative to overall size
of the economy, the deficit—the annual gap between federal spending
and revenue—is down significantly since 2009.

But that’s not the only factor to consider. Yes, annual deficits
are down since 2009, but in no small part because the deficit that
year—which was not exclusively Obama’s doing—came in at a
record-breaking $1.4 trillion. Deficits in subsequent years came in
over $1 trillion as well. Deficits have dropped significantly under
Obama only because they were unusually elevated during his first
years in office.

Meanwhile, even out reduced annual deficits are still adding to
the sky-high federal debt. They’re just adding somewhat less each
year to the total federal tab.

What that means is that, even if the budget picture isn’t as
gloomy at this very moment, the longer-term debt problem remains.
As the Congressional Budget Office notes in a report today on the
long-term budget outlook:

If current laws remained generally unchanged in the future,
federal debt held by the public would decline slightly relative to
GDP over the next few years, CBO projects. After that, however,
growing budget deficits would push debt back to and above its
current high level. Twenty-five years from now, in 2039, federal
debt held by the public would exceed 100 percent of GDP, CBO
projects. Moreover, debt would be on an upward path relative to the
size of the economy, a trend that could not be sustained
indefinitely.

Via the CBO, here’s what that looks like:

And here are the major spending components driving the long-term
rise in debt:

The health care component is the most talked about. That’s part
of what President Obama was getting at when he argued that there’s
no “urgent deficit crisis.” Instead, he said, the nation has “a
long-term problem has to do with our health care programs.” But
what gets less attention is that the growing role of interest.
We’re set to pay more and more on our debt—just to keep carrying
ever-larger amounts of debt. Whether or not that’s an urgent
crisis, it’s one that our current budget path doesn’t
address.