Reducing the Deficit: Spending and Revenue Options.
Abstract
After declining significantly over the past four years, the deficit is projected to begin a slow but steady ascent. Under current policies and current expectations about the economy, the Congressional Budget Office (CBO) projects that the deficit will creep up from just under 2 percent of gross domestic product (GDP) in 1997 to just over 3 percent of GDP by 2006. Yet projected growth in deficits over the next 10 years is relatively benign. The real trouble begins just beyond that decade. Beginning about 2010, the first wave of the baby-boom generation reaches retirement age and ushers in an era of unprecedented pressure on federal spending for the Social Security, Medicare, and Medicaid programs. At about the same time, the number of people working and paying taxes to support those and other programs will grow much more slowly. Under cur rent policies, the deficits that those long-term demographic trends suggest would easily dwarf even the largest deficits experienced to date. Indeed, by the middle of the next century, they threaten to drive the federal debt to levels that the economy could not possibly sustain. During the 1O4th Congress, concern over the deficit has dominated the budget debate and fueled broad support for a balanced budget. The President and the Congress have expressed their mutual commitment to a balanced budget by 2002, and have promoted budgetary balance by that year as the center-piece of their most recent budget plans. Yet policymakers continue to disagree over the specific changes in budget laws that are necessary to carry out their common goal of a balanced budget. Moreover, even if policymakers ultimately enact legislation to balance the budget by 2002, the demographic trends that arise after 2010, if not addressed, will undermine efforts to keep the federal debt from burgeoning over the long term.
Document Details
- Document Type
- Technical Report
- Publication Date
- Aug 01, 1996
- Accession Number
- ADA311612
Entities
Organizations
- Congressional Budget Office