Here’s a shocking chart from the Congressional Budget Office’s latest long term budget outlook showing that unless Congress acts decisively, our debt situation will be totally fine:
See that line where the debt:GDP ratio is stable? That’s what happens under current law. If congress changes nothing, or the president vetoes everything, then this is what happens. No apocalypse. But nobody believes that’s going to happen. Nobody believes the Bush tax cuts will fully expire. Nobody expects the AMT phase-in to happen. Nobody expects physicians’ Medicare reimbursement rates to be held in check. And though I think he’s mistaken about this, Doug Elmendorf is skeptical that some cost-saving elements of the Affordable Care Act will ever be implemented. That’s the “alternative fiscal scenario” in which the debt level skyrockets.
But note that congress doesn’t need to do these things that it’s projected to do under the alternative fiscal scenario. Congress can stick to current law, and we’ll be fine. Alternatively, as Brad DeLong suggests, congress can commit to pay-as-you-go budgeting whereby if they choose to implement the large tax cuts and doctor salary increases they’re predicted to implement they offset these measures with other tax increases or spending cuts. If congress does that, we’ll be fine. This would give a successive series of congresses the opportunity to take a whack at modest ideas to increase the growth rate of health care spending.