The Congressional Budget Office’s just-released long-term budget outlook finds that deficits rise over the next three decades — from 2.9% of GDP in 2017 to 9.8% in 2047 — because spending growth is projected to outpace growth in revenues, particularly as it relates to Social Security and Medicare.
Spending as a share of GDP increases for Social Security, the major health care programs (primarily Medicare), and interest on the government’s debt, the outlook notes, with much of the spending growth for Social Security and Medicare coming from the baby-boom generation aging and life expectancies increasing.
The percentage of the population age 65 or older will grow sharply over the next 30 years, boosting the number of beneficiaries of those programs.
In addition, growth in spending on Medicare and the other major health care programs “is driven by rising health care costs per person, which are projected to increase more quickly than GDP per capita (after the effects of aging and other demographic changes are removed),” the outlook states.
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CBO projects that those health care costs “will rise — although more slowly than they have in the past — in part because of the effects of new medical technologies and rising personal income.”
By 2047, under current law, federal spending for people age 65 or older who receive benefits from Social Security, Medicare and Medicaid would account for “about half of all federal noninterest spending, compared with about two-fifths today,” the CBO said.
Moreover, “because interest rates are expected to rise from their current low levels and federal debt is projected to grow, interest payments on the government’s debt would rise sharply.”