CBO Analysis of A Roadmap for America's Future
Tuesday, February 09, 2010
According to the Congressional Budget Office (CBO), absent reforms to gain control of federal spending, deficits, and debt, the U.S. economy will stagnate and then literally crash. Unless reformed to slow their spending growth, Medicare, Medicaid and Social Security will go bankrupt and be unable to meet their obligations to seniors and low-income families. CBO highlights the fact that the real risk to Medicare, Medicaid and Social Security is doing nothing.
CBO analyzed A Roadmap for America’s Future (H.R. 4529) and produced a detailed 50-page review of the plan and its impact on the long-term budget and economic outlook. According to CBO, A Roadmap for America’s Future provides reforms that make possible a growing and prosperous U.S. economy. It ensures the Medicare program does not go bankrupt and makes Social Security permanently solvent. It does so without changing benefits for those who are currently 55 and older. It balances the budget and pays off the debt. In short, CBO concludes that the Roadmap would put the budget and economy on sustainable path compared to current policies that will bankrupt America.
CBO analyzed the Roadmap relative to its “Alternative Fiscal Scenario,” which represents a current policy scenario that CBO has developed to evaluate long-term budget trends.
Below are highlights from the CBO analysis of the Roadmap:
Effects of the Roadmap on the Economy
CBO analyzed the economic impact of the Roadmap relative to a projection of the impact under current policies. By getting spending, deficits, and debt under control, CBO shows a strong growing economy per capita in the United States. Without reforms to get debt under control, CBO concludes that under current policies the economy begins to falter in a little over a decade, flattens, begins to crash, and then seeks to function in 2058. A similar graph to the adjacent one can be found on page 15 of CBO’s analysis. CBO’s specific observations on the impact of the Roadmap on the economy follow:
• “The lower budget deficits under your proposal would result in much less federal debt than under the alternative fiscal scenario and thereby a much more favorable macroeconomic outlook.” – pg 14
• “The economy would be considerably stronger under the proposal (as analyzed by CBO) than it would be under the alternative fiscal scenario. Real gross national product per person would be about 70 percent higher in 2058 under the proposal than under the alternative fiscal scenario.”– pgs 15-16
• “Using CBO’s ‘textbook growth’ model, it is not possible to simulate the effects of the alternative fiscal scenario after 2058 because deficits become so large and unsustainable that the model cannot calculate their effects.” – pg 14
• “Under the Roadmap, the ratio of government debt held by the public to economic output (the ratio of debt to GDP) would be lower than that under the alternative fiscal scenario in every year….In contrast, under the alternative fiscal scenario, debt is projected to skyrocket over the next several decades.” – pg 7
Effects of the Roadmap on Social Security
• “Current beneficiaries and workers who are age 55 or older in 2010 would experience no change in benefits” – pg 2
• “The flow of payroll tax contributions into the Social Security trust funds would be sufficient to pay benefits as specified in the proposal…. By contrast, under the alternative fiscal scenario… the trust funds would be exhausted in 2042.” – pg 2
Impact on Social Security Under Current Law
• “Under the scenario with payable benefits, outlays would include only those benefits that the Social Security Administration (SSA) would have the legal authority to pay under current law. Once the Social Security trust funds were exhausted, SSA would reduce all benefits – those paid to both existing and new beneficiaries – by whatever percentage was necessary to make the program’s total annual outlays equal its total available revenues. – pg 29
Effects of the Roadmap on Health Insurance and Medicare
• “Over the next 10 years, removing the existing tax exclusion and replacing it with the fixed tax credit for the purchase of health insurance, as specified in the Roadmap, would decrease the number of uninsured people relative to the number under current law. That decrease would occur because the move to a fixed refundable tax credit would have the effect of increasing the subsidy for health insurance to lower-income people, who are also most likely to be uninsured.” – pg 13
• “Must less uncertainty about future federal spending on Medicare would exist under the Roadmap than exists today.” – pg 11
• “Under the proposal, national health expenditures would almost certainly be lower than they would under the alternative fiscal scenario. Federal spending for health care would be substantially lower.” – pg 13
• “People who are age 65 or older in 2020 and other existing enrollees at that time would continue to be covered by the current program” – pg 2
• “By contrast, under CBO’s alternative fiscal scenario, annual federal spending on Medicare would be 6 percent of GDP in 2030, 9 percent in 2050, and 15 percent in 2083.” – pg 11