DOUG ELMENDORF EXPLAINS IT ALL.

1056345190_esClarissa.gifI don't think CBO Director Doug Elmendorf is quite the blog enthusiast that Peter Orszag was. But week by week, his blog is rediscovering its rhythm. In particular, Elmendorf has a useful post today summarizing a lecture he gave to Greg Mankiw's famed Intro to Econ class. It's as clean a breakdown of the contributors to the coming fiscal crackup as you're like to see. This bit, in particular, deserves a wide audience:

The aspect of the budget that is anomalous by the standards of the past several decades—under both the baseline and the President’s budget—is outlays for Social Security, Medicare, and Medicaid. Specifically, under CBO’s estimate of the President’s budget for 2019:

• Revenues would be close to their pre-recession share of GDP and historical average share of GDP.

•Spending on all programs except Social Security, Medicare, and Medicaid would be below their pre-recession share of GDP and historical average share of GDP.

• While at the same time, spending on Social Security, Medicare, and Medicaid would be a record share of GDP. The result is large and growing budget deficits.

Looking beyond the next 10 years, federal outlays under current law for Medicare and Medicaid, in particular, will substantially outpace GDP growth. CBO is now in the process of updating its long-term budget projections and will release these projections when they are completed. However, the key message of these long-term projections is not in doubt: U.S. fiscal policy is on an unsustainable course.

In other words, if you fast forward beyond the one-time expenditures incurred by the recession (the stimulus, say), Obama's budget is a pretty staid document. Revenues are near the "historical average." Spending on all programs save for Social Security, Medicare, and Medicaid are below "the historical average." But "federal outlays under current law for Medicare and Medicaid, in particular, will substantially outpace GDP growth," so much so that Congress's chief budget wonk can confidently say that "the key message...is not in doubt: U.S. fiscal policy is on an unsustainable course."

Oh, and in true CBO Director fashion, Elmendorf brings the charts.

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