U.S. fiscal policy is on an unsustainable path of a huge budget gap that cannot be rectified by minor tinkering, a senior budget policy analyst said on Monday.
While the U.S. economy has benefited from government stimulus measures, further assistance from additional stimulus would also expand the yawning budget gap, Douglas Elmendorf, director of the Congressional Budget Office, said.
The budget-saving approach used in the past several decades, paying for increases in retirement and health care programs through cuts in defense spending, is not feasible in the future, Elmendorf told the National Association of Business Economists.
Defense cuts alone would be insufficient to rein in the shortfall, he said, adding that significant tax increases or spending cuts are likely to be necessary.
Elmendorf described the outlook for the budget under current policies as "bleak."
The CBO on Friday said President Barack Obama's budget plans would rack up $9.8 trillion more U.S. debt by 2020, or $1.2 trillion more than the White House has forecast.
Elmendorf also warned about rising levels of debt.
"It is truly worrisome that our ratio of debt to (gross domestic product) is entering territory that is so unfamiliar to us and to other countries," he said.
U.S. debt will be larger over the next decade than it has been in more than half a century, Elmendorf said.
"The key choices are not whether to change course, but how quickly and in what way," he said.
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