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Choosing the Nation’s Fiscal Future
FIGURE 9-2 Projected federal debt under the committee’s four scenarios.
FIGURE 9-3 Projected federal deficits under the committee’s four scenarios.
growth of federal health spending, although systemic reforms that improve incentives, information, and efficiency might allow these painful and distortionary restrictions to be loosened eventually. Social Security growth would be reduced to a level that would allow payroll taxes to be maintained at current rates while putting the program on a course to solvency; benefit changes would be designed to have least effect on people with lowest earnings. Merely to allow these health and retirement programs to grow with the size of eligible populations and the economy while keeping revenues near the current level, the proportion of the economy’s resources devoted to all other federal responsibilities would have to be sharply reduced.
Federal revenues could remain at approximately 18.5 percent of GDP through 2025, but would have to increase to 19.2 percent by 2035 and fluctuate around that level through 2083. (For comparison, in the study baseline federal revenues are projected to reach 18.3 percent of GDP in 2019, 18.9 percent in 2035, and 21.8 percent in 2083.) On this path, the combined revenues of all U.S. governments—including those of the state and local levels at about the same proportion of federal revenues as now—