October 13, 2013

Questions and answers on U.S. deficit

Taming deficits has been difficult during a recession and weak recovery.

By Jim Kuhnhenn
The Associated Press

(Continued from page 1)

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A pedestrian walks past the U.S. Treasury Building in Washington on Thursday, as the federal government shutdown continued.

The Associated Press

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A: Yes, long term. CBO has said that as interest rates begin to rise, the interest on the national debt will grow. The Baby Boomers have been reaching retirement age and as a growing number of that generation ages, the demands on Social Security and Medicare will grow dramatically. That, together with rising health care costs and federal subsidies for health insurance under Obama’s health care law, will push government expenditures up.

Social Security, Medicare and Medicaid together are the biggest component of the federal budget. The cuts in domestic and defense spending help, but do not represent the growth in the budget. By 2023, government and private forecasters project that deficits will begin to rise annually. By 2038, CBO says the deficit will push the national debt to about 100 percent of the economy – a percentage unseen since just after World War II. 

Q: So how can that be, that deficits have been going down, but will climb steadily later. 

A: Think of your own budget. Imagine you want to tighten your spending. You eliminate the movies you and your spouse go to every week and cut out that premium channel subscription. You give up buying craft beers and those Friday night restaurant outings. But you have a son and a daughter who will be going to college in three years. That balloon payment on your mortgage will kick in around then. You’ll have to borrow again and spend more, and you won’t have any belt tightening left to do. The federal government is no different as the Baby Boom generation hits Social Security and Medicare age, and as interest rates on the debt rise.


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