If laws governing federal taxes and spending remain the same, then revenues will increase only slightly more quickly than the overall economy, and spending will increase more rapidly, according to an updated budget and economic outlook (PDF) issued Aug. 27 by the Congressional Budget Office (CBO) and covering 2014 to 2024. Such trends would lead to growing deficits and federal debt, the CBO says.
The new report is an update to a CBO report released in February (PDF).
The CBO said it anticipates that economic growth will be slow this year before picking up, although at a moderate pace over the next few years. Spending is expected to increase by about two percent this year, to $3.5 trillion. “Outlays for mandatory programs, which are governed by statutory criteria and not normally controlled by the annual appropriation process, are projected to rise by about four percent,” according to the report. “That increase reflects growth in some of the largest programs—including a 15 percent increase in spending for Medicaid and a roughly five percent increase in spending for Social Security. In contrast, CBO estimates, net spending for Medicare will increase by only two percent in 2014.”
Also according to the CBO, between 2014 and 2024, annual outlays will increase, on net, by $2.3 trillion, representing an average annual increase of 5.2 percent. An aging population, expanded federal subsidies for health insurance, increasing healthcare costs per beneficiary and growing interest expenses related to federal debt will boost spending for the three fastest-growing components of the budget and will account for 85 percent of the total projected increase in outlays over the next 10 years, the CBO says. Specifically:
- Annual net outlays for Medicare, Medicaid, the Children's Health Insurance Program and subsidies for health insurance purchased through exchanges will increase by more than 85 percent.
- Yearly spending related to Social Security will increase by nearly 80 percent.
- “Outlays for net interest in 2024 are projected to be more than triple those in 2014—the result of both projected growth in federal debt and a rise in interest rates,” the report states.