The CBO Warns National Debt Must Be Dealt With Soon

The Congressional Budget Office, better known as the CBO, is warning Congress that the national debt problem must be dealt with or we will face huge consequences.

CBO?

The CBO is considered a non-partisan accountant for Congress. This is essentially the voice of reason in a building where reason is in short supply while hot air is plentiful. The CBO is charged with reading legislation and providing straight answers. The same is true with the finances of the government.

Debt Trending Badly

The news from the CBO is not good. It is reporting that not only is the national debt a looming problem, but it is becoming one much quicker than originally projected. The problem is the projections do not factor in slow downs caused by the drag of dealing with the debt as we move forward.

This is an interesting point as it is very hard to gauge the effect of the debt year by year on the economy per se. It isn’t like everything will be okay now and then suddenly worse in 2020 when the debt equals 100 percent of the GDP. No, there will be a gradual impact on the economy as the debt burden rises year after year. This is, of course, the fly in the ointment of any projections and makes one wonder who soon it will be before we start to feel the pain.

The Coming Pain

So, how painful will it be to deal with this problem? Very painful. Here is an exchange between the head of the CBO [Elmendorf] that explains everything in a nutshell:

"As I heard you describe it, what's going to be necessary [is] either a 25 percent increase in taxes or a 20 percent reduction in spending, or some combination thereof," said Sen. Kent Conrad (D) of North Dakota. "Is that correct?"

"That's the order of magnitude, yes," Elmendorf replied.

Prepare yourself America.

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