The good news from yesterday’s CBO report is that we may actually end up with a sub-trillion-dollar deficit this year. The annual deficit for FY2013 will come in at $845 billion, the first time in five years that it’s been less than the 13-figure mark. However, that depends on keeping the law at the status quo – including the sequester:
CBO forecast that the deficit for fiscal 2013, which ends September 30, will shrink slightly to $845 billion after four straight years above $1 trillion. The reason is an improving economy and higher taxes paid by wealthy Americans.
The CBO analysis, which will feed into Congress’ bitter debate over how to tame deficits, assumes that $85 billion in automatic spending cuts will launch as scheduled on March 1… It forecast a $616 billion deficit in fiscal 2014 and a $430 billion deficit in fiscal 2015, equivalent to 2.4 percent of U.S. gross domestic product at that time, a level that many economists view as sustainable.
And that’s about the extent of the good news, too, and even that’s qualified. Those figures assume that Congress will not pass any more “doc fixes” and cut Medicare/Medicaid reimbursements substantially, as current law requires. If Congress passes more delays in already-scheduled cuts in reimbursements, those deficits will grow significantly.
By the way, that’s the bad news. Deficits will grow substantially anyway:
But deficits will rise steadily from mid-decade, nearing $1 trillion again by 2023, according to the forecast. The 10-year cumulative deficit is forecast at $6.958 trillion.
“Deficits are projected to increase later in the coming decade, however, because of the pressures of an aging population, rising health care costs, an expansion of federal subsidies for health insurance, and growing interest payments on federal debt,” the CBO said in the report.
Again, that’s assuming we don’t pass any more “doc fixes,” which are the only thing keeping providers in the Medicare/Medicaid business at all. Meanwhile, the economy will remain stuck in stagnation, and joblessness will get worse, too:
It said the fiscal tightening from these across-the-board cuts and from higher taxes will slow economic growth to an anemic 1.4 percent by the end of 2013, causing the unemployment rate to edge higher to 8.0 percent by then from about 7.9 percent currently.
Nor was that the only bad news from the CBO yesterday. Remember those federal subsidies that will fuel ObamaCare’s push to make health insurance universal? The ten-year cost for that program jumped by nearly a quarter-trillion dollars:
The Congressional Budget Office on Tuesday quietly raised the 10-year cost of ObamaCare’s insurance subsidies offered via the health law’s exchanges by $233 billion, according to a Congressional Budget Office review of its latest spending forecast.
The CBO’s new baseline estimate shows that ObamaCare subsidies offered through the insurance exchanges – which are supposed to be up and running by next January – will total more than $1 trillion through 2022, up from $814 billion over those same years in its budget forecast made a year ago. That’s an increase of nearly 29%.
The CBO upped the 10-year subsidy cost by $32 billion since just last August.
In part, this jump is because more people will get insurance via the exchanges than it had forecast. Where the CBO had seen 22 million enrolled in an exchange in 2022, it now figures 25 million will be.
That explains only part of the cost hike. The rest is largely the result of the CBO’s sharp increase in what it expects the average subsidy will be.
Take a look at the chart from IBD:
The calculation of average subsidy has risen 38.7% in three years – and we haven’t even implemented the system yet.
Think about that, and now think about what amount of debt we’ll really be adding in ten years.