In addition to its “current law” scenario, the Congressional Budget Office’s Long-Term Budget Outlook document also considers an “alternative fiscal scenario” in which certain accounting gimmicks suck as pretending that congress won’t continue passing AMT patches and rejiggering Medicare reimbursement rates are dispensed with. The results for the medium-term look like this:
Note that the much-debated stimulus and bailouts and such don’t really have anything to do with the problem here. And also note that while the increasing unsustainability of the fiscal picture is primarily driven by cost growth in Medicare and Medicaid that’s not the whole story. In addition to all that, Barack Obama’s current budget would fix the level of revenue at a smaller share of GDP than where it was during the late 1990s. And it would do this during a period of time when population aging are making Social Security and Medicare more expensive over-and-above health care cost growth. Meanwhile, even at its “bend the curviest,” the administration doesn’t claim it will be able to get cost growth down to zero. And progressives have — or at least my understanding is that we have — an agenda that also involves spending more money on things like schools and transportation and fighting poverty and so forth.
Some of the gap can and should be made up with by reducing the share of GDP currently dedicated to defense. And tax increases should be avoided over the short-term as we cope with a severe recession. But pretty soon taxes will need to be higher than what this chart lays out.