CBO's 2011 Long-term Budget Outlook

This Congressional Budget Office (CBO) report presents the agency’s projections of federal spending and revenues over the coming decades. Under current law, an aging population and rapidly rising health care costs will sharply increase federal spending for health care programs and Social Security. If revenues remained at their historical average share of gross domestic product (GDP), such spending growth would cause federal debt to grow to unsustainable levels. If policymakers are to put the federal government on a sustainable budgetary path, they will need to increase revenues substantially as a percentage of GDP, decrease spending significantly from projected levels, or adopt some combination of those two approaches. In keeping with CBO’s mandate to provide objective, impartial analysis, this report makes no recommendations.

This report was prepared under the supervision of Joyce Manchester, and many analysts at CBO provided assistance and helpful comments. Noah Meyerson wrote Chapter 1. Benjamin Page wrote Chapter 2. Lyle Nelson and Julie Topoleski authored Chapter 3. Noah Meyerson wrote Chapter 4, and he and Sam Papenfuss wrote Chapter 5. Joshua Shakin wrote Chapter 6. Noah Meyerson wrote Appendix A, and Charles Pineles-Mark compiled Appendix B. James Baumgardner, Tom Bradley, Wendy Edelberg, Peter Fontaine, Holly Harvey, Jean Hearne, Kim Kowalewski, Deborah Lucas, William Randolph, and Frank Sammartino provided useful guidance. Charles Pineles-Mark, Jonathan Schwabish, Michael Simpson, and Julie Topoleski developed the long-term budget simulations, and Jonathan Huntley prepared the macroeconomic simulations. David Weiner coordinated the revenue simulations, which were prepared by Paul Burnham, Grant Driessen, Ed Harris, Athiphat Muthitacharoen, Larry Ozanne, Kurt Seibert, and Joshua Shakin. Sarah Axeen, Stephanie Burns, Jimmy Jin, and Kalyani Parthasarathy provided research assistance.

Christine Bogusz, Christian Howlett, Kate Kelly, Leah Mazade, and John Skeen edited the report. Maureen Costantino and Jeanine Rees prepared the report for publication, and Maureen Costantino designed the cover. Monte Ruffin printed the initial copies, and Linda Schimmel handled the print distribution. The report is available at CBO’s Web site (www.cbo.gov).

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The Long-Term Outlook for the Federal Budget………….1
Alternative Scenarios for the Long-Term Budget Outlook……….2
The Long-Term Outlook for Spending…………..7
The Long-Term Outlook for Revenues………….12
The Size of the Fiscal Imbalance……….13
Uncertainty of Long-Term Budget Projections………….16

The Economic Impact of Long-Term Budget Policies………….22
CBO’s Long-Term Economic Benchmark………..22
How Rising Debt and Changing Marginal Tax Rates Would Affect Output…..26
Economic Effects of the Fiscal Policies Assumed in CBO’s Extended-Baseline and Alternative Fiscal Scenarios……..28
The Effects of Waiting to Resolve the Long-Term  Budgetary Imbalance……..31
Other Consequences of Rising Federal Debt

The Long-Term Outlook for Mandatory Spending on Health Care…..35
Overview of Major Government Health Care programs……….36
The Historical Growth of Health Care Spending………….40
CBO’s Methodology for Long-Term Projections………42
Long-Term Projections of Mandatory Spending on Health Care…………..45

The Long-Term Outlook for Social Security…………….51
How Social Security Works……….51
The Outlook for Social Security Spending and Revenues

The Long-Term Outlook for Other Federal Spending………57
Other Federal Spending over the Past Four Decades………….57
Projections of Other Federal Spending Under CBO’s Long-Term  Budget Scenarios...59

The Long-Term Outlook for Revenues……………61
Revenues Over the Past 40 Years…………62
Revenue Projection Under CBO’s Long-Term Budget Scenarios……….64
Long-Term Implications for Tax Rates and the Tax Burden………..69

Changes in CBO’s Long-Term Projections Since June 2010………73

Long-Term Projections through 2085……………..79

Glossary………………….85

High school students and above may find this report beneficial for U.S. economy, economic conditions, and America’s debt research papers. American citizens, small businesses, corporations, lobbyists, fiscal managers, economists, and media news outlets may find this information invaluable for understanding America’s future growth and management of debt.