On February 7, the Congressional Budget Office (CBO) published its Budget and Economic Outlook with a sobering topline projection: Federal debt as a percentage of gross domestic product (GDP), or the size of the American economy each year, will reach a record amount in 2028 and continue to skyrocket thereafter. Other budget experts have written broadly about CBO’s budget outlook and how the actual situation is more dire for two reasons: (1) CBO must assume that current tax and spending programs expire, and Congress will almost certainly override the expiration for many of them, and (2) CBO assumes relatively low long-run interest rates, and if interest rates are higher, net-interest payments will increase. This post deals with the No. 1 problem: high and rapidly increasing spending on federal health-care programs.
Main Problem: Rising Cost of Federal Health-Care Programs and Interest Payments
Rising deficits and debt are largely the result of the growth in federal health-care programs and interest payments on the debt. While Social Security is also a problem, the program stabilizes as a share of GDP in the next decade under current law.
