FIGURE 1-1 The long-term budget outlook.

FIGURE 1-1 The long-term budget outlook.

  • Through about 2035, Social Security spending as a share of GDP will grow significantly, reflecting the broad demographic trend of an aging population. It will grow more slowly thereafter.

  • Medicare and Medicaid will consume an increasing share of GDP as per-capita health spending continues to grow at a faster rate than the economy. Federal health spending also will grow because the number of recipients will increase, even without legislation expanding program coverage, driven by the same aging demographic trend that affects Social Security.

  • As noted above, if no action is taken to constrain or offset the growth of Social Security, Medicare, and Medicaid, if the tax rates stay near their current levels, and if other programs are held at their current share of GDP, the federal debt, deficits, and interest costs will explode over the long term. If all this were to occur, the federal debt would be more than seven times the nation’s GDP in 75 years; see Figure 1-2.

These projections, which largely rely on the Congressional Budget Office (CBO) for estimates (although making a few different assumptions, see Box 1-3), are similar to those that others have made using similar techniques. They estimate the budget effects of current policies if they are continued over a long period—what is commonly referred to as a budget baseline; see Box 1-3. CBO’s June 2009 long-term outlook reached the same basic conclusion as its previous updates, that “under current law, the federal budget is on an unsustainable path” (Congressional Budget Office, 2009e:1). The latest long-term projections from the Government Accountability Office (GAO), using somewhat different assumptions, also confirm that “the long-term fiscal outlook is unsustainable” (Government Accountability Office,



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