The day of financial reckoning is near, says U.S. Rep. Dave Brat.
"In just 17 years, spending for Social Security, federal health care and interest on the debt will exceed ALL tax revenue!" Brat, R-7th, wrote in a May 29 Facebook post.
That would mean no money for defense or domestic programs unless Uncle Sam wanted to put these items on his already overburdened credit card.
"Continuing down this path of rampant federal spending and debt expansion is not an option," Brat wrote. "It will push us ever closer to fiscal crisis. Getting our spending under control and working to balance our budget must begin now."
We wondered whether the 17-year warning -- also being sounded by the Republican leadership on the House Budget Committee, on which Brat serves -- is accurate.
Brian Gottstein, a spokesman for Brat, said the claim is based on figures published by the nonpartisan Congressional Budget Office in its "2014 Long-Term Budget Outlook," issued last July. It contains two scenarios that could happen if Congress doesn’t take strong action to reduce deficits.
The first one assumes that all the major U.S. budget laws in July 2014 will remain in effect. That means Congress will continue sequestration which sets limits on defense and domestic spending, allows a buffet of popular tax cuts to expire as scheduled and doesn’t adjust tax brackets to soften inflationary increases in workers’ earnings.
Under these assumptions, the CBO says spending on Social Security, Medicaid, Medicare and debt interest will top tax revenues in 2044.
As bleak as that might seem, there’s an alternative scenario that’s even gloomier. This is the one Brat embraces. It essentially assumes that Congress will lack the courage to continue unpopular budget policies and, as a result, spending will go up and many taxes will do down.
The alternative scenario supposes that Congress will abandon sequestration and continue to extend tax cuts that are scheduled to expire -- most notably tax breaks on research and development, first-year capital investments costs and income gained through foreign corporations in nations with high tax rates.
Under these assumptions, the CBO says spending on Social Security, federal health care and debt interest would exceed taxes in 2031. That’s 16 years from now.
Is it fair for Brat to focus on the worst scenario? Two analysts told us yes, noting Congress already has a history of relenting on deficit-reducing policies. For example, Congress voted in 2013 to permanently extend the bulk of income tax cuts that were approved during the presidency of George W. Bush. The cuts were originally slated to expire in 2010.
"The alternative fiscal scenario understands how some of the tough choices Congress needs to make conflict with promises members have made to their constituents," said Eugene Steuerle, an economist at the Urban Institute. "Most people who would have to pick between the two scenarios would say Congress would most likely use the alternative one."
Marc Goldwein, senior vice president of the Committee for a Responsible Federal Budget, called Brat’s statement "credible."
A major point in the CBO report is that the day of reckoning is avoidable if Congress can break its standoff between Republicans, including Brat, who oppose tax increases, and Democrats who oppose cuts to entitlement programs.
The report says, "To put the federal budget on a sustainable path for the long term, lawmakers would have to make significant changes to tax and spending policies: reducing spending for large benefit programs below the projected levels, letting revenues rise more than they would under current law, or adopting some combination of those approaches."
Brat says that under the current U.S. path, "In just 17 years, spending for Social Security, federal health care and interest on the federal debt will exceed all tax revenue."
A CBO report concludes that, in a worst-case scenario in which Congress resumes its old habits of cutting taxes and raising spending, this could happen in 2031 -- 16 years from now. Under a somewhat rosier scenario, in which current budget policies are kept in effect, the U.S. would hit bottom in 2044. Brat’s focus on the bleaker outlook is defensible because Congress this century has not shown great fiscal discipline.
We’re dealing with scenarios, however, and Brat’s statement would have been more accurate if he acknowledged from the outset that the U.S. "could" run out of tax money for many major programs instead of saying it "will."
No doubt, however, the U.S. is on a risky fiscal path. We rate Brat’s statement Mostly True.