CBO paints bleak fiscal picture (long term fiscal woes)

[UpInArms]

http://www.marketwatch.com/news/print_story.asp?print=1&guid={CF92C1EC-B283-4CF7-B5DE-2B186DD18DF4}&siteid=mktw

WASHINGTON (MarketWatch) - Under most long-range scenarios, the federal government will see bigger deficits and skyrocketing debt unless policymakers take steps to rein in expected growth in Social Security, Medicare and Medicaid spending as baby boomers begin to retire, the Congressional Budget Office warned Thursday.

"As health care costs continue to grow faster than the economy and the baby-boom generation nears eligibility for Social Security and Medicare, the United States faces inevitable decisions about the fundamentals of its spending policies and its means of financing those policies," the CBO said in its biannual Long Term Budget Outlook.

The report's conclusions are little different than its last long-range report, issued in December 2003.

In a speech at the New America Foundation, a Washington think tank, outgoing CBO Director Douglas Holtz-Eakin said the future burdens posed by federal entitlement programs are such that even in a world without hurricane relief, ongoing war spending, budget pork and the extension of recent tax cuts, "our country would face deficits as far as the eye can see and enormous fiscal challenges."

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The worst-case scenario sees federal debt equal to 130% of GDP by 2030, growing steadily after that, the report said, noting that the forecast doesn't take into account the harmful effect long-term deficits would have on economic growth.

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