CBO: Medicare, Social Security and Debt Interest Driving Deficits
Should Congress reform Medicare & Social Security?
by Countable | 1.30.19
The Congressional Budget Office’s (CBO) outlook on the budget and economy for the next decade and beyond projects that future growth in the federal deficit will be driven by rising mandatory spending on Medicare and Social Security.
Those deficits will in turn cause the national debt to grow by $12 trillion over the next decade to an estimated $33 trillion. Because of the larger debt and higher interest rates, interest payments on the national debt are expected to rise from $383 billion this year to $928 billion in 2029 (an amount larger than the defense budget).
“Beyond 2029, if current laws remained generally unchanged, deficits would continue to grow over the following 20 years, driving debt to its highest levels in the nation’s history. Those large budget deficits would arise because outlays ― particularly for Social Security, Medicare, and interest on the debt ― would grow steadily under current law, and revenues would not keep pace with those outlays.”
The following chart from the CBO shows federal spending on mandatory and discretionary programs, plus net interest as a percentage of the U.S. economy’s Gross Domestic Product (GDP):
What’s driving these changes?
The aging of America’s population has led to increased enrollment in Medicare and Social Security, along relatively fewer workers per retiree in the labor force to pay taxes that fund the entitlements' trust funds.
These charts from our partners at USAFacts show that benefits paid to Medicare and Social Security beneficiaries have been rising in recent years:
Because of those factors, the CBO projects the following fate for several of the Social Security & Medicare trust funds:
- The Social Security Disability Insurance Trust Fund will start running a deficit in 2020 and is expected to be exhausted in 2027.
- The Social Security Old Age and Survivors Insurance Trust Fund is expected to be exhausted in 2032.
- The Medicare Hospital Insurance Trust Fund will start running a deficit in 2020 and is expected to be exhausted in 2026.
— Eric Revell
(Photo Credit: iStock.com / NoDerog)
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