Heading Toward National Insolvency

[Geee]

American Spectator:

Americans don't need to go to the movies to see a horror picture show. The Congressional Budget Office's latest report on the federal budget should scare everyone. Not that Washington seems to have noticed.

For the fourth year in a row the federal government is running a deficit in excess of $1 trillion. Yet President Barack Obama is lecturing European governments on how to solve the Eurozone crisis. He should be telling them what not to do: stop running up wild and irresponsible debts.

That's what the CBO opined in its recent budget report "The 2012 Long-Term Budget Outlook." The document is a bit dry, but the looming catastrophe it describes could not be more frightening.

Explained CBO: "In the past few years, the federal government has been recording the largest budget deficits since 1945, both in dollar terms and as a share of the economy. Consequently, the amount of federal debt held by the public has surged."

Uncle Sam's 40-year average debt to GDP ratio is 38 percent. At the end of 2008 Washington was up to 40 percent. By the end of 2012 that number will be 73 percent, "the highest percentage since shortly after World War II," said CBO. The recession is responsible for part of this rise but, explained CBO, "the growing debt also reflects an imbalance between spending and revenues that predated the recession."

These numbers disguise worse news, however. CBO does not count intra-government borrowing as part of the national debt. So when the Treasury Department "borrows" money from Social Security, CBO doesn't count it, even though cash will have to be procured -- through more borrowing -- to pay promised benefits to retirees. The full national debt already is 100 percent of GDP, compared to about 84 percent for Europe.

But use CBO's analysis. The long-term still looks truly ugly. There's the so-called "baseline scenario," under which everything goes "right" in the agency's view. Then debt as a percentage of GDP would fall to 61 percent in 2022 and 53 percent in 2037. That would still be about 30 percent above the 40-year average.

Unfortunately, everything doesn't often go right in Washington. Of course, what is "right" for the CBO is not necessarily "right" for the American people. Under this analysis the CBO figures that taxes would go up dramatically -- as a result of "Taxmageddon," with the expiration of the Bush tax cuts -- which would push the country toward a renewed recession. Even with the tax reductions Americans would be paying a larger share of the GDP to the government than the average over the last four decades. The "baseline scenario" would have Americans turning over a much larger share.