Budget Report Shows Need for Entitlement Reform

The annual budget report from the nonpartisan Congressional Budget Office (CBO) gets more grim every year. This year's Budget and Economic Outlook confirms that the 2012 deficit is expected to equal $1.079 trillion, marking the fourth consecutive year with a deficit above $1 trillion.

And the news gets worse from there. If the rate of economic growth does not accelerate, we can expect the unemployment rate to remain above 8 percent both this year and into 2013. Even by 2015, the jobless rate will still be as high as 7 percent. Under some scenarios, unemployment could jump back up to 9.1 percent next year and remain well above 8 percent for years to come.

The projected debt levels are just as alarming as the unemployment estimates. If current budget practices continue, CBO projects that debt held by the public will exceed $15.3 trillion by 2022 -- a level equal to 94 percent of GDP.

The only remotely positive news to come out of the report involves discretionary spending. With the support of taxpayers fed up with wasteful Washington spending, conservatives in Congress were able to push through significant spending cuts. The impact of these cuts is reflected in the budget outlook, which projects that discretionary spending will decline to 5.6 percent of GDP -- the lowest level in 50 years -- by 2022.

However, mandatory spending on Medicare, Medicaid and Social Security is the real driver of the debt. In contrast to shrinking discretionary spending, the mandatory spending category -- so named because it occurs automatically each year even without a vote in Congress -- is expected to continue to increase to 14.3 percent of GDP by 2022. As CBO states, "the aging of the population and rising costs for health care will push spending for Social Security, Medicare, Medicaid, and other federal health programs considerably higher" and "the resulting deficits will increase federal debt to unsupportable levels."

In testimony before the House Budget Committee days after the report's release, Federal Reserve Chairman Ben Bernanke confirmed that -- even if President Obama got his wish for tax increases -- the long-term debt cannot be solved through spending cuts and revenue increases alone. In response to my question on the issue, Bernanke admitted that Congress "could cut discretionary spending pretty close to zero and not solve the problem in the long term."

The only way to avoid a catastrophic debt crisis is through a comprehensive plan that includes entitlement reform, tax reform, and spending cuts. The House passed such a plan last year only to see it die in the Senate not long after President Obama refused to endorse the reform recommendations of his own debt commission or to offer a serious plan of his own. The CBO report makes it clear that we're running out of time. It's time to stop playing political games and enact meaningful budget reform.