From CBS, 12/22/03:
http://www.marketwatch.com/news/yhoo/story.asp?guid=%7B290285A0-6066-437B-B116-A5D43D5C7AD7%7D&siteid=myyahoo&dist=myyahoo

CBO: Debt levels are long-term worry

By William L. Watts, CBS.MarketWatch.com


WASHINGTON (CBS.MW) --

Rising health-care costs will force the government to raise taxes or
make deep cuts in Social Security, Medicare and Medicaid entitlement
spending -- or both, in coming years, congressional budget watchers
warned Monday.

A report issued by the Congressional Budget Office charted a range of
scenarios for spending, revenues and the budget over the next five
decades.

"Unless taxation reaches levels that are unprecedented in the United
States, current spending policies will probably be financially
unsustainable over the next 50 years," the report by the nonpartisan
Congressional Budget Office predicted.

The report offered a range of spending, revenue and budget scenarios.

But the scenarios that showed the budget in or near balance assumed
substantially slower increases in healthcare costs or higher taxes or
some combination of both.

In keeping with CBO's research role for members of Congress, the
report makes no specific policy recommendations.

The bottom line, said CBO Director Douglas Holtz-Eakin, in a
presentation on the outlook at the New America Foundation on Monday,
was that policymakers will inevitably have to make some hard choices
on spending and taxes in coming years.

"Fiscal autopilot is not an option," he said.

Holtz-Eakin emphasized that the outlook was not a set of forecasts,
but was instead meant to serve as something akin to a policy compass.

"It says you're walking this way," Holtz-Eakin said.

The report, however, contained warnings about the perils of growing
debt.

"An ever-growing burden of federal debt held by the public would have
a corrosive and potentially contractionary effect on the economy," the
CBO warned.

Rapidly rising health costs and the upcoming retirement of the
baby-boom generation are the key factors behind the gloomy outlook.

Spending on Social Security, Medicare and Medicaid are set to claim a
"sharply increasing share" of the nation's economic output in coming
decades.

The report found that fiscal policy could be financially sustainable
if the rise in health-care costs "slowed significantly" from
historical rates but that tax revenues would still probably need to
rise to higher levels than seen in the past.

As the U.S. tax system is currently configured, revenues will increase
as a share of gross domestic product, and the higher rates will have
"detrimental consequences for work, saving and economic growth," the
report said.

However, if taxation is held to historical levels, the growth of
entitlement spending will have to be sharply curtailed.

Cuts elsewhere -- defense, education, transportation and other
discretionary programs -- wouldn't be enough to ensure "fiscal
sustainability," the report warned.

Meanwhile, there's no prospect of growing the economy out of the
predicament, the CBO warned.

"Economic growth alone is unlikely to bring the nation's long-term
fiscal position into balance. Moreover, issuing ever-larger amounts of
debt or dramatically raising tax rates could significantly reduce
growth," the CBO report said.

____________________________________________________

Ominous, eh?

Rising health-care costs will force the government to raise taxes or
make deep cuts in Social Security, Medicare and Medicaid entitlement
spending -- or both, in coming years, congressional budget watchers
warned Monday.

Rising health-care costs will force the government to raise taxes or
make deep cuts in Social Security, Medicare and Medicaid entitlement
spending -- or both, in coming years, congressional budget watchers
warned Monday.