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March 31, 2017

The deficit is set to triple—and health care is largely to blame, CBO says

Daily Briefing

The United States' annual federal budget deficits are on track to more than triple over the next 30 years, largely because of increased spending on Medicare and Social Security, according to a budget outlook released Thursday by the Congressional Budget Office (CBO).

As it has projected in previous years, CBO estimated spending growth will outpace revenue growth, but this year's estimate suggests a steeper climb in 30-year debt than previously expected.

CBO predicted that federal budget deficits will rise from 2.9 to 9.8 percent by 2047, while the federal debt will increase from 77 to 150 percent of the country's gross domestic product (GDP). Last year, CBO estimated federal debt would reach 141 percent of GDP by 2046.

Health care key driving force

The expected deficit spike, CBO reported, is largely due to increased spending on Medicare and Social Security as the population ages and as health care costs grow, as well as higher interest payments on the rising debt.

According to the report, spending on major health care programs—CHIP, Medicare, Medicaid, and Affordable Care Act subsidies—will rise from 5.5 percent of GDP in 2017 to 9.2 percent of GDP in 2047, more than half of the spending increase would be made up by Medicare spending.

CBO projected Medicare spending will rise from 3.1 percent of GDP to 6.1 percent of GDP in 2047 and will account for more than 75 percent of the spending increase for major health care programs. Combined spending on Medicaid and CHIP is projected to rise from 2.4 percent of GDP to 3.2 percent in 2047.

However, CBO noted that those projections assume current laws, including the Affordable Care Act, will remain in place (Lane, The Hill, 3/30; Krawzak, CQ Health Beat, 3/30 [subscription required]; CBO budget outlook, 3/30; Lawder, Reuters, 3/30).

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