Over the long term, the country's debt is projected to grow to unsustainable levels. This outlook has not changed for the last two decades, according to a recent Washington Post op-ed authored by former Senators Bob Kerrey (D-NE) and John Danforth (R-MO), co-chairs of the 1994 Bipartisan Commission on Entitlement and Tax Reform. Entitlement trends contributing to dramatic growth in debt over the long term were considered unsustainable then, and they still are.
Kerrey and Danforth note that there has been some good news, notably the slowdown in health care spending and (temporarily) low interest rates reducing the amount the government pays in interest. However, the core drivers of our long-term problems – population aging and rising health-care costs – remain. The problems have become harder to address:
Meanwhile, the passage of time, the failure to take more ambitious actions and the enactment of new obligations have combined to limit our choices and placed the government in a more difficult position to address the challenges than it was in 20 years ago.
The debt burden has grown sharply. Debt held by the public has gone from 48 percent of gross domestic product in 1994 to 74 percent in 2014. This limits our fiscal flexibility and constrains the policy choices of future generations.
Demographics are working against us. The baby boom generation, which was coming into its peak earning years when we were on the commission, has begun to retire, slowing potential economic growth, lowering potential revenue and increasing spending on retirement and health-care benefits.
Because of the delay in addressing entitlements, it will be more difficult to turn the titanic trends in these budget programs. Social Security has run cash deficits since 2010, and every year of delay increases the shortfall which must eventually be addressed. The senators note that health care programs have expanded, income tax rates have been cut, and the amount lost annually to "tax expenditures" has increased. At the same time, discretionary spending will be at its lowest level in 50 years (as a percentage of the economy), making it increasingly difficult to find savings in that area.