Is the debt crisis over?

Perhaps the strangest thing about the current debate over passing a continuing resolution (CR) to prevent a government shutdown is that the disagreement has nothing to do with the budget. Both sides have agreed to leave government spending at their current levels, a so-called ‘clean CR.’ The debate, instead, is all about Obamacare. Now, if the government shuts down, Obamacare can still be implemented. The only way there isn’t money for implementation is if congress passes something undoing part of the original 2010 law.

So, The House of Representatives (Republican controlled) passed legislation combining a continuing resolution with a defunding of Obamacare. That legislation is currently being filibustered by Senator Cruz (also Republican) because if he doesn’t filibuster the legislation now, he won’t be able to filibuster amendments to it, which means it could pass on the strength of Democratic votes alone. (So, while it feels weird that he’s filibustering a bill he supports, it’s just a result of this being the only point in the process where he can filibuster).

The interesting thing, given there’s a potential government shutdown and a debt ceiling fight coming up in the next month is that no one seems to be talking about the debt. The Congressional Budget Office has crunched the numbers, and last week released on update on the long-term debt:

CBO updated debt chart

They show a debt to GDP ratio of 108% in 2038, with their full range of predictions going from 65% (lower than it is now) to 158%. This is high, but definitely not a crisis.

Just to be clear about what drives the debt:

CBO Where is the spending coming from

Revenue (not pictured) is expected to remain roughly flat at about 19% of GDP.  Health Care (and to a lesser extent Social Security) are driving the debt. Those are both driven by demographics and by rising health care costs (which are occurring in both the public and private sector).  Now, there are things we can do to improve health care costs, but it’s also not unreasonable to think that as a nation gets older and wealthier over time it will choose to devote a greater percentage of its resources to health.

Remarkably, the rate of health care costs increase has been slowing down in recent years, and slowing down even more than one would expect simply based on the recession. Now, that doesn’t mean that it’s all due to Obamacare, or even partly due to Obamacare, but it’s not unreasonable to think it might be.

So we’re currently risking a government shutdown not because we can’t agree on a continuing resolution, but because we’re re-fighting the health care battles we had back in 2010.  Projections of health care costs into 2038 are a really bad reason not to fund the government and pay its bills on time in 2013-2014. It’s a bad reason even if the projections were quite a bit worse than they are. The debt crisis seems to be over, and it’s mostly disappeared from congressional rhetoric. The problem is we’re still acting and legislating as if we’re in a crisis.







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