The latest long-term budget outlook from the Congressional Budget Office reads like a particularly dark noir: Things start out pretty bad. And then they get worse.
“Over the past few years,” the report’s first sentence explains, “the federal government has been recording budget deficits that are the largest as a share of the economy since 1945.”
Before the year is out, debt held by the public — the federal government’s outstanding debts to outside parties — will equal 70 percent of the total economy. That’s not a pretty picture. And it’s not likely to get better. It is a foregone conclusion that large entitlements, Medicare and Medicaid in particular, are destined to cost far more as a percentage of the economy due to the aging of the Baby Boomer generation, the rise in health costs, and long-term care expenses born by Medicaid. If today’s laws are kept on the books, “spending on the major federal health care programs alone would grow from more than 5 percent of GDP today to almost 10 percent in 2037 and would continue to increase thereafter.”
In a quarter century, entitlements, which currently account for about 10 percent of GDP, would alone chew up a full 16 percent of the economy. That would represent a massive historical shift: For the last four decades, the entire federal government, including entitlements, has consumed an average of 18.5 percent of the country’s economic output. Relative to the size of today’s economy, that would be like spending an extra $850 billion annually on entitlements. In a growing future economy, it will be far more. READ MORE.