Social Security and health care spending drive growth in federal spending ‼️

2014

Don’t shoot the messenger. The following is directly from the Congressional Budget Office. And you thought you paid for your Social Security😇

Pay special attention to the comments on interest. As interest rates rise all our freewheeling deficit spending will come home to roost. 😥 The numbers don’t quite paint as rosy a picture as do our politicians.

Higher Spending for a Few Major Programs and for Interest on the Public Debt Drives Projected Growth Over the Next Decade

In CBO’s baseline projections—which incorporate the assumption that current laws generally remain the same—total annual outlays rise by $2.5 trillion from 2014 to 2024, reaching $6.0 trillion, or 22.4 percent of GDP, by the end of that period. The 1.8 percentage-point increase over the share projected for 2014 reflects growth in spending for Social Security, major health care programs, and net interest, and a decline (relative to GDP) in other mandatory outlays and discretionary spending (see the figure below).

In fact, net federal spending for Social Security and the major health care programs is projected to rise by $1.5 trillion, from $1.7 trillion to $3.2 trillion from 2014 to 2024—accounting for 60 percent of the total projected increase in federal spending over that period. By 2024, spending for those programs will represent more than half of the federal budget and will equal 11.7 percent of GDP.

Specifically, under current law, federal spending in the following areas is projected to grow as a share of GDP over the coming decade:

Social Security—Outlays for the largest federal program are projected to rise from 4.9 percent of GDP in 2014 to 5.6 percent in 2024, as the retirement of the baby boomers helps boost the number of people collecting Social Security benefits by one-third.

Major health care programs—Outlays for Medicare, Medicaid, the Children’s Health Insurance Program, and subsidies offered through health insurance exchanges are projected to increase more rapidly than outlays for Social Security, from 4.8 percent of GDP in 2014 to 6.1 percent in 2024, net of premium income and other offsetting receipts related to Medicare. (Offsetting receipts are certain collections by the government that are recorded as offsets to spending, rather than as revenues.) That increase is driven by the growing number of retirees, the expansion of federal subsidies for health insurance, and rising health care spending per beneficiary.

Net interest—The government’s net interest costs are projected to increase rapidly, by an average of roughly 14 percent per year, almost quadrupling in dollar terms between 2014 and 2024, as interest rates return to more typical levels and federal debt continues to mount. As a share of GDP, they are projected to rise from 1.3 percent in 2014 to 3.3 percent in 2024.