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CBO's Sobering Projections

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    Former CBO director Douglas Holtz-Eakin weighs in on the nation's spending problem.

  • Duration 3:35
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-- meantime the US deficit is projected to fall to 845.

Billion dollars of just -- -- 45 million this year.

But the Congressional Budget Office is predicting that of congress fails to make any changes -- current financial situation.

-- nation's debt could hit 77%.

Of our economy's size -- GDP by 20/20 three episodes -- -- is a former director.

Of the Congressional Budget Office he joins us now from Washington DC.

We're talking about the Federal Reserve like getting access to sensitive information -- the Federer as our Douglas but.

Didn't I mean should we be worried about -- Federal Reserve and -- itself particularly related to the amount of debt that we will continue to -- long.

Look the Fed has been the biggest buyer of treasury debt now for several years com.

It will be able to stop it seeks its extraordinary monetary policy is put this -- get our fiscal house in order and what you heard from the CDO yesterday was actually quite sobering on that front what they.

Really -- is that.

If you go forward ten years and the economy -- fully recover -- back to full employment and taxes are nearly at their historical highs relative to the economy.

We'll still have a trillion dollar deficit that means you've made no progress on the structural problems that face the US budget and that's our biggest threat.

But don't you think -- the Democrats will continue to fall back on raising taxes even more than they already have even -- as you pointed out.

What 600 billion dollars in new tax revenue is nothing compared to the seven trillion dollars in additional debt.

-- this is not a solution to our budgetary problems there's no question about it I I think they've.

Use this to great political advantage that's indisputable but.

That is not a solution to Wear and budget -- to go we have a big spending problem.

It's in the big programs for Medicare Medicaid social security and in the new Affordable Care Act and that's were -- -- take place and that the thing to look forward to AM is.

What -- the senate Democrats put in their budget they've promised for -- -- budget this year.

What what look like because they won't be able to raise taxes and solve this problem and will be able to see in the data we think they did.

-- -- I'm very eager to see this they they're caught in a box that taxes won't work.

They don't want -- reform entitlements right the discretionary spending cuts are things they like and so there in a tough place and I'm eager to see how they resolve.

-- that gets back to my really my Federal Reserve question because there's a growing chorus among many people in this country that.

Their debts not that much of a probable cause we've had these low low almost record low long term interest rates.

For so long at this point so ultimately if the Fed decides hey we are worried about inflation which could happen sooner rather than later.

And begins to withdraw some of this money out of the system that is that going to be the day of reckoning.

That's going to be a big -- very bad day if that happens.

You you're hearing Democrats and would get a lot price we just need a little bit more.

But that relies on getting the growth the CBO expects that's by no means a guarantee.

And relax and ensure this -- very low if either of those is wrong we're in deep trouble very fast and that's -- no one wants to contemplate.

Up well look that deficits gonna go down as the economy recovers and it's slowly doing maps and the temptation just -- -- down roads very great and I could see a real effort to make that happen.

Died it was great to say thank you so much thank you always better in person but looked taken by our remind double -- -- cable news -- -- --

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