The Congressional Budget Office will soon present testimony before the U.S. House Committee on the Budget. This hearing should be far more than a routine update on federal finances. It should be heard as a clear warning about the long-term fiscal direction of the United States.
Too often in Washington, hearings become perfunctory exercises in which troubling numbers are acknowledged politely and then quietly set aside. This upcoming testimony offers an opportunity for something different if members of Congress are willing to listen carefully and speak honestly about what the numbers show.
The director of the CBO, Dr. Phillip Swagel, will be presenting projections that reinforce a difficult but unavoidable truth. The U.S.’s financial condition is bad and worsening, and the trajectory is becoming increasingly difficult to reverse with each passing year. The annual financial statements produced by our own government clearly state the current outlook is unsustainable.
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The strength of the American economy should not be confused with the fiscal health of the federal government, which has steadily weakened. We can learn by looking at the City of Chicago, which has plundered the city for years ignoring fiscal health. They just had to cancel a bond sale after investors realized their financial duress and could portend bankruptcy. That can and will happen to the United States if we continue to ignore reality.
For decades, Washington has accumulated deficits regardless of which political party has controlled Congress or occupied the White House. Today, the national debt is approaching $39 trillion, a figure larger than the entire annual output of the U.S. economy. Our interest-bearing, debt-to-GDP ratio now stands near 125%, a level that would have been considered extraordinary only a generation ago. These figures alone should command serious attention from policymakers who claim to care about long-term economic stability.
Even worse, this fails to include the enormous unfunded long-term obligations tied to Social Security and Medicare. When unfunded commitments associated with these programs are included, the liabilities confronting the U.S. exceed $130 trillion.
The projections offered by the Congressional Budget Office show multi-trillion dollar deficits continuing for the foreseeable future because the structural imbalance between federal spending and federal revenue has become deeply embedded in the budget. And those projections are optimistic as they do not include any new programs, any impact of recessions, wars, or other unforeseen events, some of which are sure to occur. Without meaningful policy changes, borrowing will continue to rise while interest payments on existing debt consume a larger share of federal resources.
Within roughly six years, the Social Security trust fund is projected to be exhausted. When that moment arrives, current law requires benefit cuts estimated at 28%. It is probable that politicians will not let that happen and could take preventive action by raising taxes, cutting benefits, or borrowing to cover the deficit, as the CBO projections assume.
This is precisely why Swagel’s testimony matters. The purpose of the nonpartisan Congressional Budget Office is not to advocate political agendas but to present clear and objective analysis based on the available data. That analysis often makes lawmakers uncomfortable because it strips away political rhetoric and highlights the long-term consequences of current policy decisions.
Members of Congress should welcome that clarity rather than dismiss it or attempt to minimize its significance. Honest fiscal analysis is a valuable tool for responsible governance, but only if leaders are willing to act upon it.
If Congress continues ignoring repeated fiscal warnings, the consequences will be dire. We will face the problem Chicago now faces, and if we are unable to sell our debt someday, our financial world will collapse. The America we knew and grew up in will be no more.
No country, regardless of its economic power, can ignore fiscal realities forever. No republic in history has lasted forever, and fiscal problems have always been a major cause of failure. We can be different, but only if we address the issue.
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Members of Congress attending the coming hearing will hear these facts. They should resist the temptation to treat the testimony as just another hearing in Washington’s crowded legislative calendar. Instead, they should recognize it as a moment for candid reflection about the nation’s fiscal future and seriously pursue actions to fix this fiscal disaster in the making.
Swagel can present the numbers and explain the projections, but the responsibility to respond ultimately belongs to Congress. Lawmakers must decide whether they will choose political expediency and continue to ignore the problem or begin addressing the problem while there is still time to act.
Les Rubin is the founder and president of Main Street Economics.