WASHINGTON — The national debt, roughly $22 trillion and climbing, is “on an unsustainable course,” Congressional Budget Office Director Keith Hall told the House Budget Committee Tuesday.
“To put it on a sustainable one, lawmakers will have to make significant changes to tax and spending policies,” he added.
There will eventually be “troubling consequences” if the debt continues to grow at the rate anticipated by the nonpartisan budget office, Hall said.
Asked about the effect of raising corporate tax rates, as some Democrats have proposed, Hall said the move could slow economic growth and hamper wage increases.
Following Congressional Budget Office policy, he declined to make specific policy recommendations.
The national debt is expanding even though the economy is robust, Hall noted during Tuesday’s testimony. The real gross domestic product, which measures the value of the nation’s total goods and services after the effects of inflation are removed, rose by 3.1 percent in 2018, the most since 2005.
In September, unemployment fell to its lowest levels since the 1960s — 3.7 percent — and finished December at 3.9 percent.
Despite an expanding economy, deficit spending climbed to $779 billion during fiscal 2018, which ended Sept. 30. It’s expected to climb to $897 billion for fiscal 2019.
The 3. 1 percent GDP growth, sparked in part by a 10-year, $1.9 trillion Republican tax cut package, will eventually cool, according to this month’s Congressional Budget Office analysis. The office projects annual GDP growth of 1.8 percent over the next decade.
Even with annual growth of 2.4 percent, deficits would continue into the foreseeable future, he added.
The Congressional Budget Office also views last year’s tariffs as an impediment to economic growth, estimating that they will reduce the nation’s real GDP, on average, by roughly 0.1 percent, through 2029.
As the nation ages, budgetary pressures are expected to increase, Hall told lawmakers. The number of Americans aged 65 and over is expected to climb by roughly one-third over the next decade. As more and more baby boomers retire, spending on Social Security and Medicare will accelerate.
If the deficit projections are correct, trouble looms ahead, Hall said:
m Interest rates will rise, making it more costly for the government to borrow money. By 2025, the debt payments will surpass military spending, he said.
m All that federal borrowing, combined with higher interest rates, will result in falling productivity and lower total wages, he said.
m The higher debt will make it harder for lawmakers “to respond to unexpected [economic] challenges,” he said. The flexibility to raise spending or cut taxes, for example, would be limited.
m The chances of the U.S. encountering a “fiscal crisis” will increase, he added.
During Tuesday’s hearing, Democrats attacked the Republican tax cuts, arguing that they had been a giveaway to corporations and those in the highest income brackets.
Republicans, on the other hand, credited the tax cuts with boosting the U.S. economy. They argued that Democrats would exacerbate budget difficulties by increasing spending and raising taxes.
The Tax Cuts and Jobs Act, signed into law by President Donald Trump on Dec. 22, 2017, cut corporate income taxes from 35 percent to 21 percent.
House Budget Committee Chairman John Yarmuth, D-Ky., is discussing raising that rate, perhaps to as high as 28 percent.
On Tuesday, Yarmuth blamed Republicans and the $1.9 trillion tax cut package for the budgetary problems.
“We’re facing this bleak fiscal reality because this president and the so-called fiscal conservatives in his party chose to squander our nation’s wealth and solvency, to exacerbate record income inequality, to take resources from those in need so they could bolster the already wealthy with reckless tax cuts for millionaires and multinational corporations,” he said.
But U.S. Rep. Steve Womack, R-Ark., portrayed government spending as the culprit.
“Is that the plan? To drastically increase taxes to pay for out-of-control spending?” the former Rogers mayor asked. “Let me be clear: We cannot tax our way out of this problem.”
Womack, the ranking Republican on the committee and its former chairman, backed the 2017 tax cut legislation that Congressional Budget Office says contributed to the rising deficits.
He argued Tuesday that tax increases and discretionary spending cuts won’t be enough to fix the system.
“We need to face mandatory spending head-on,” he said.
In fiscal 2018, Social Security, at $977 billion, and Medicare, at $585 billion, were the two largest categories, according to an October Congressional Budget Office analysis.
The Social Security trust fund is set to run out by 2034: Medicare by 2026, he said.
“Our largest entitlement programs are facing insolvency. If we do nothing, they go under. … If we maintain the status quo, they fail,” Womack said. “If we don’t address these drivers of debt, our march towards fiscal insolvency will not stop.”
Lawmakers “have a moral obligation to future generations to get our fiscal house in order,” Womack added.