The Long-Term Budget Outlook
Abstract
Projected growth in spending on the federal government's big health and retirement programs -Medicare, Medicaid, and Social Security dominates the long-run budget outlook. If current policies continue, that spending is likely to grow significantly faster than the economy as a whole over the next few decades. By 2040, the Congressional Budget Office (CBO) projects those outlays will rise to about 17 percent of gross domestic product (GDP)-more than double their current share. The expected surge in health and retirement spending stems from three fundamental factors. First, the large baby-boom generation will begin to reach retirement age within the next decade or so and become eligible to receive benefits from Social Security and Medicare. Second, people are likely to live longer than they did in the past and spend more time in retirement. Third, advances in medical technology will probably keep pushing up the cost of providing health care. The demographic changes projected over the coming decades will significantly increase the number of retirees per worker in the labor force and affect both sides of the federal government's budgetary ledger. In 1960, 5.1 workers supported each beneficiary in the Social Security program; today, the ratio is about 3.4 to 1, and in 2040, it is projected to fall to just 2.1 workers per beneficiary. As a result, the growth of federal outlays for Social Security and Medicare will climb rapidly, whereas the growth of revenues from payroll taxes (which largely finance those programs now) will slow.
Document Details
- Document Type
- Technical Report
- Publication Date
- Oct 01, 2000
- Accession Number
- ADA384055
Entities
People
- Ben Page
Organizations
- Congressional Budget Office