A Growing Federal Debt Puts the Nation at Risk
The 2016 Long-Term Budget Outlook, released this month by the bipartisan Congressional Budget Office (CBO), paints a bleak picture of nation’s fiscal future. It concludes that under the current laws governing taxing and spending, the United States will experience steadily and rapidly increasing federal budget deficits and debt, posing “substantial risks for the nation.”
The federal debt now totals almost $14 trillion. The Great Recession led to federal debt increasing from 39 percent of Gross Domestic Product (GDP) in 2008 to 75 percent today. Without significant fiscal reform, CBO projects that debt will reach 86 percent of GDP in ten years and reach 141 percent by 2046. The nation’s previous high debt level was 106 percent of GDP right after World War II.
In dollars, America’s debt is forecast to reach an astonishing $87.9 trillion in 30 years. This is more than $200,000 for each of the 400 million men, women, and children expected to live in the United States in 2046.
Simply, the deficit and debt will rise because government spending will increase faster than government revenue. The main drivers of spending and the resultant debt growth are Social Security, federal health care spending (primarily Medicare), and interest on the debt.
As the baby boom generation ages and life expectancy increases, the percent of the population over age 65 will grow sharply, adding significant costs to Social Security and Medicare. The CBO estimates that by 2046, approximately half of all federal non-interest spending will go to benefits for those 65 or older. Although healthcare costs per beneficiary are growing slower than in the past, they are still expected to outpace growth in GDP, adding to the cost of federal health programs.
Currently, spending on Social Security, Medicaid and other health programs, and the interest on our debt takes up just over half of the federal budget. CBO estimates that in thirty years, these items will take up 73 percent of the federal budget and 104 percent of federal revenues. In other words, the federal government will incur a budget deficit just paying for these programs.