Current federal spending track called 'unsustainable'

Congressional Budget Office says massive increases in projected health care costs hurt long-range outlook.

The Congressional Budget Office presented a long-range budget forecast Thursday warning that due to massive increases in projected health care costs, "under any plausible scenario, the federal budget is on an unsustainable path." It said without substantial spending cuts or revenue increases the soaring federal debt "could seriously harm the economy."

CBO Director Peter Orszag told the House Budget Committee that "there are only two alternatives: increases in revenues well beyond anything the United States has ever seen, or cuts in spending, or some combination of the two." Although the aging population will cause Social Security outlays to increase nearly 50 percent in 75 years, the major cause of the surge in spending is a nearly fivefold jump in the projected cost of Medicare and Medicaid, the forecast showed.

"The heart of the problems is that health care costs will literally consume the U.S. economy," House Budget Chairman John Spratt, D-S.C., said. "Those are figures that cannot be ignored."

House Budget ranking member Paul Ryan, R-Wis., called rising health care costs the single greatest threat to the nation's economic health. Ryan noted that the federal government spends one of every five dollars of the gross domestic product. If the nation continues on its path, the government would spend one of every two dollars, he said.

"If we get to that level, it will cripple the U.S. economy and any hope we have of competing in the world economy," Ryan said. Spratt observed that Orszag saw ways to slow the growth in health care cost without reducing the quality of care.

"It is critical that we take advantage of that opportunity," the chairman said.

Senate Budget Chairman Kent Conrad, D-N.D., in a statement, blamed much of the projected fiscal crises on what he called President Bush's "short-sighted policy of unpaid-for tax cuts and increased spending" that added $3 trillion to the national debt. Conrad said Bush now is "trying to fool the American public into believing he is serious about fiscal responsibility" by threatening to veto domestic spending bills.

Members of the House panel took different views of the crisis CBO predicted, with Democrats focusing more on how to save the entitlement programs and Republicans expressing concerns about the tax increases that might be needed to reduce the crushing federal debt. Spratt and Ryan focused on Orszag's statement that a comparison of the wide variance in the cost of health care across the nation showed the possibility of reducing the cost.

CBO's data showed that health care in some parts of the nation cost half as much as in other areas, with no difference in quality. Orszag said the government could save substantial amounts if it would change the current "strong financial incentives for more health care" to favor "better care."