The ever-growing budget surpluses, which earlier this year spurred the leading presidential candidates to boost their tax cut and spending plans, have done little to change a grim long-term financial outlook for the United States, the Congressional Budget Office said Friday.
Even under the most optimistic scenario in which politicians agree to save every penny of the surplus and use it to pay off the national debt the cost of providing promised health and retirement benefits after the baby boom generation leaves the workforce will ultimately overwhelm the federal budget, the CBO concluded.
"If the nation's leaders do not change current policies to eliminate that imbalance, federal deficits are likely to reappear and eventually drive federal debt to unsustainable levels," the CBO said. In particular, the agency said, spending on Medicare, which provides health care for retirees, and Medicaid, the health program for the poor, will triple in four decades when measured as a percentage of the nation's economy.
The report underscores how campaign rhetoric has become increasingly separated from the budget reality that will face the next president. Lawmakers are piling on billions of dollars in extra spending as they rush to complete the session, leaving less available for debt reduction. Many analysts also say projections of nearly $5 trillion in surpluses during the next decade rest on a number of questionable assumptions, and the actual amount could be much less.
Indeed, though both the White House and Congress have been quick to claim credit for balancing the budget, the CBO noted that the sudden turn in the nation's financial picture was due to other factors.
"Most of the improvement stems from unexpected increases in revenue and slower-than-anticipated growth in some spending rather than from changes in policy," the report said.
The CBO considered three scenarios saving all the surplus, saving only the Social Security surplus and saving none of the surplus. The middle-ground solution closely reflects how the candidates present their plans, though each side says the other busts the budget. But the CBO said that even if the government took the controversial step of using the surplus to invest in stocks and bonds after the debt was paid off, rising health care and retirement costs would push the budget back into deficit in 2027.