Economic impacts of waiting to resolve the long-term budget imbalance.

Format:

Book

Government document

Author/Creator:

Page, Benjamin R.

Contributor:

Santoro, Marika

United States. Congressional Budget Office

Series:

Economic and budget issue brief

Language:

English

Subjects (All):

Budget--United States--Forecasting.

Budget.

Budget deficits--United States.

Budget deficits.

Government spending policy--United States.

Government spending policy.

Budget--Forecasting.

United States.

Physical Description:

1 online resource (12 pages) : illustrations.

Place of Publication:

[Washington, D.C.] : Congressional Budget Office, [2010]

Summary:

Under current policies, the aging of the U.S. population and increases in health care costs will almost certainly push up federal spending significantly in coming decades relative to the size of the economy. Without changes in policy, spending on the government's major mandatory health care programs--Medicare, Medicaid, the Children's Health Insurance Program, and health insurance subsidies to be provided through insurance exchanges--as well as on Social Security will increase from the present level of roughly 10 percent of the nation's output, or gross domestic product (GDP), to about 16 percent over the next 25 years. If revenues remain at their past levels relative to GDP, that rise in spending will lead to rapidly growing budget deficits and mounting federal debt. In June 2010, the Congressional Budget Office (CBO) issued long-term budget projections under two scenarios that reflected different assumptions about future policies for revenues and spending. The extended-baseline scenario was based on the assumption that, by and large, current law would continue without change. Under that assumption, revenues would climb to a higher share of GDP than has typically been seen in recent decades. Even so, federal debt held by the public would rise from 62 percent of GDP at the end of fiscal year 2010 to about 80 percent of GDP by 2035. Only once before in U.S. history--during and shortly after World War II--has federal debt exceeded 50 percent of GDP. CBO also prepared budget projections under an alternative fiscal scenario, which incorporated several changes to current law that are widely expected to occur or that would modify some provisions of law that might be difficult to sustain for a long period. Under that scenario, debt would soar above its historical peak (about 110 percent of GDP) by 2025 and continue climbing thereafter. To prevent debt from rising to unsupportable levels, policymakers would eventually have to restrain the growth of spending, raise revenues significantly above their historical share of GDP, or pursue some combination of those two approaches. Addressing the long-term budget imbalance would, at a minimum, require stabilizing the ratio of debt to output. In deciding when and how to do that, an important consideration is, what are the costs of delay?

Notes:

Title from title screen (viewed on Dec. 14, 2010).

"December 2010."

Includes bibliographical references.

OCLC:

692322023