Updated projections from the Congressional Budget Office (CBO) serve as a reminder that the aging of the U.S. population is reshaping government spending — and that fiscal reforms are needed to prevent harmful economic consequences.
“Despite a slowing of health care inflation and lower annual deficits since their heights during the recession, the CBO’s projections demonstrate that our basic structural problem remains — growth in just a few programs due to the retirement of the baby boom generation, combined with increasing debt service, have and will continue to push our federal debt to levels not seen since World War II,” said Robert L. Bixby, executive director of The Concord Coalition.
Unless we act soon, he added, this will lead to slower economic growth and lower standards of living.
The recently released CBO report includes new 10-year baseline projections for federal spending and revenue as well as updated economic projections. In mid-July, CBO released its long-term budget projections. Viewed together, these reports show that without reform, federal spending in just a few areas — Medicare, Medicaid and exchange subsidies, Social Security, and net interest — will continue to grow as a share of GDP in the coming years while spending on everything else will shrink.
Concord’s updated “Plausible Baseline” shows that under more realistic assumptions about future policy, annual deficits over the next 10 years could total $2.3 trillion more than in CBO’s official baseline.
Last week a CBO blog post underscored the possibility that government interest payments could more than triple over the next decade. The key reasons: the growing federal debt and expected increases in today’s extremely low interest rates.
The Concord Coalition’s Plausible Baseline
CBO’s Update on Budget and Economic Outlook 2014-2024
CBO’s 2014 Long-Term Budget Outlook
CBO’s Projection of Federal Interest Rate Payments
Remarks on Updated Budget and Economic Projections (CBO)