CBO budget offers hope qualified by big ifs

The Congressional Budget Office's updated budget projections offer hope tempered by big ifs around healthcare issues.

The CBO's latest projections for the federal deficit for 2011 will be about $1.3 trillion, $116 billion lower than the Congressional Budget Office projected in March's budget update. The cumulative deficit for 2012 to 2021 will be about $3.3 trillion lower than projected.

The CBO's current projections assume "that current law remains in place." That would include planned reductions in Medicare payments to physicians. Historically, such cuts have been avoided. The CBO said that if those planned cuts and other changes specified by current law did not happen, "much larger deficits and much greater debt could result."

The CBO's budget report also notes in the decade beyond its current projections, federal spending will be pushed up considerably as a percentage of GDP as a result of the country's aging population and the continued rise in healthcare costs. That higher level of spending combined with revenues close to their average share of GDP would result in deficits that would "cause federal debt to skyrocket."

"The CBO report shows that the debt to GDP ratio will stabilize over the next decade if current law is followed. However, this assumes that tax rates will revert to pre-2001 levels in 2013," said Donald Taylor, Jr., associate professor of Public Policy at Duke University. "The CBO does show some planned healthcare cost constraint due to the ACA, but the hardest steps in healthcare remain, and as long as health reform remains a political football, it will make achieving sustainable savings difficult."

Follow HFN associate editor Stephanie Bouchard on Twitter @SBouchardHFN.