Spending on Social Security and Medicare over the next 30 years could contribute to mounting federal budget deficits and the highest level of debt relative to gross domestic product ever seen in the United States, according to a report released Tuesday by the Congressional Budget Office.
Federal debt, currently 75% of GDP, will increase to 86% of GDP in 2026 and to 141% of GDP in 2046 if current laws governing taxes and spending do not change, predicts the CBO in “The 2016 Long-Term Budget Outlook.” That level would top the historic peak of 106% that occurred just after World War II.
“The prospect of such large debt poses substantial risks for the nation and presents policymakers with significant challenges,” according to the CBO. The problem stems from government spending that grows more quickly than revenues, especially for Social Security, the major healthcare programs (mainly Medicare) and interest on the government’s debt, the agency said.
“As members of the baby-boom generation age, and as life expectancy continues to increase, the percentage of the population age 65 or older is anticipated to grow sharply, boosting the number of beneficiaries of those programs,” the report states. “By 2046, projected spending for those programs for people 65 or older accounts for about half of all federal noninterest spending.”
Healthcare costs per beneficiary drive the remainder of the projected growth in spending for Social Security and major healthcare programs, according to the report. The CBO projects that these costs will increase more quickly than GDP per person (after the effects of aging and other demographic changes are removed). Healthcare costs will increase, albeit more slowly than in the past, in part because of the effects of new medical technologies and increasing personal income, according to the agency.
Noting that the increase now projected by the CBO is almost twice as much as what it had estimated in its budget outlook last year, the nonprofit Bipartisan Policy Center said that the revised fiscal outlook is largely due to the permanent extension of expiring business tax provisions, which Congress passed at the end of 2015.
“Today’s CBO report is a reminder that policymakers need to stop adding trillions of dollars to the federal credit card and work on bipartisan solutions that put our country on a more responsible budgetary path,” said Shai Akabas, the center’s director of fiscal policy. “Regardless of who is elected in November, the next president and Congress must prioritize returning our country to solid fiscal footing.”
From the “The 2016 Long-Term Budget Outlook” by the CBO: