OMB Director: Baby boomer retirement means US living with more debt
While the nation provides health-care and retirement benefits to the giant baby boom generation, the US government may have to learn to live with higher levels of debt than would otherwise be ideal, says Office of Management and Budget Director Shaun Donovan.
The federal budget for fiscal year 2016, whose drafting Mr. Donovan supervised, projects federal debt next year will total $18.6 trillion, an amount equal to 75 percent of the size of the US economy.聽 That level of federal debt is the highest level since 1950 and up sharply from 39.3 percent of GDP as recently as 2008.
Speaking at a Monitor-hosted breakfast for reporters, Mr. Donovan said, 鈥淲e are dealing with ... the pig in the python.鈥澛� That is a reference to the 76 million members of the baby boom generation, those born between 1946 and 1964.聽
The OMB director added, 鈥淭his demographic shift through the middle 2030s is a huge fiscal challenge to get through and so what is sort of acceptable in the next 20 years is different from what might be acceptable long term.鈥澛�
The Washington Post editorial board, among others, has President Obama for ignoring 鈥渢he ongoing battle with the federal debt.鈥� The Peterson Foundation鈥檚 on the new budget noted that interest costs will soar to $785 billion in 2025, more than triple their level in 2014, and total $5.6 trillion over 10 years. 鈥淭he policy proposals in this budget are not sufficient to stabilize the debt over the long term,鈥� the foundation said.
Donovan pushed back against criticism of the Obama administration鈥檚 handling of the debt.
鈥淚f we do nothing our current path ... is that debt as a share of GDP would go up to almost 81 percent by 2025,鈥� he said. 鈥淲hat our budget achieves in a 10 year window is to not only stabilize it but begin to bring it down so it ends just over 73 percent of GDP in the last year of the window. That alone, that change is a substantial change from the status quo, which would have it growing.鈥�
The budget director also responded to criticism that the budget failed to call for an increase in the gasoline tax to fund construction of roads, bridges, and rails, an action that would appear easier during a time of low gasoline prices.聽Instead, the administration is proposing a $478 billion, six-year surface transportation plan funded in part by a one-time 14 percent tax on the $2 trillion in profits US firms are holding overseas.聽聽
鈥淥ne of the reasons we worked so hard to put that proposal [together] is it just does not seem like there is an ability politically to get any consensus around the gas tax. So the president has not proposed it, he is not advocating that we increase the gas tax at this point,鈥� Donovan said.
He argued that the administration鈥檚 six year transportation plan 鈥渃reates more space to look at a range of alternatives鈥� for funding transportation infrastructure in the long term. So when it comes to the gas tax, 鈥渨e are not taking any options off the table.鈥�
