Some Actual Facts On Government Spending

In the next several months you will hear a great deal about raising taxes, lowering taxes, spending, interest rates, federal deficits and debt. Much of what you will hear will be inaccurate or misleading, sometimes outright naive.

imageFollowing are excerpts from a new Congressional Budget Office (CBO) report. Note the growing debt and deficits, note that almost half of the increase in spending is for Social Security and Medicare, note the growth in health care related spending including Obamacare and note the growing burden of interest payments.

What is clear, but not said, is that the deficit will grow rapidly after Obama leaves office. I wonder if his successor will spend six years blaming his predecessor?😎

You sure don’t hear much about all this on the campaign trail do you?

Keep all this in mind when you hear all the promises to be made in the next ten months, especially the “free” ones. 

In 2016, the federal budget deficit will increase, in relation to the size of the economy, for the first time since 2009, according to the Congressional Budget Office’s estimates. If current laws generally remained unchanged, the deficit would grow over the next 10 years, and by 2026 it would be considerably larger than its average over the past 50 years, CBO projects. Debt held by the public would also grow significantly from its already high level…

… Federal spending for the major health care programs accounts for a much larger fraction—more than 60 percent—of the projected growth in mandatory spending: Outlays for Medicare (net of premiums and other offsetting receipts), Medicaid, and the Children’s Health Insurance Program, plus subsidies for health insurance purchased through exchanges and related spending, are expected to be $104 billion (or 11 percent) higher this year than they were in 2015…

In CBO’s projections, federal outlays remain near 21 percent of GDP for the next few years—higher than their average of 20.2 percent over the past 50 years. Later in the coming decade, if current laws generally remained the same, growth in outlays would outstrip growth in the economy, and outlays would rise to 23 percent of GDP by 2026. That increase reflects significant growth in mandatory spending and interest payments, offset somewhat by a decline (in relation to the size of the economy) in discretionary spending.

Outlays for mandatory programs are projected to rise from their current 13.1 percent of GDP (a figure that has been adjusted for the timing shift mentioned above) to
15.0 percent by the end of the 10-year projection period. That increase is mainly attributable to the aging of the population and rising health care costs per person. (According to CBO’s projections, the number of people who are at least 65 years old will increase by 37 percent between now and 2026.) Of the 1.8 percentage-point increase in projected mandatory outlays, 0.9 percentage points come from a projected increase in Social Security outlays, and 0.8 percentage points come from a projected increase in Medicare outlays (net of premiums and other offsetting receipts).Almost half of the projected $2.5 trillion increase in total outlays from 2016 to 2026 is for Social Security and Medicare.

Because of rising interest rates and growing federal debt held by the public, the government’s interest payments on that debt are projected to rise sharply over the next 10 years—more than tripling in nominal terms and more than doubling as a percentage of GDP, from 1.4 percent to 3.0 percent. Interest rates are now very low by historical standards, so net outlays for interest (in nominal dollars) are similar to their levels 15 to 20 years ago, even though federal debt now equals a considerably larger share of the economy. As interest rates rise, the government’s cost of financing its debt will climb—especially if that debt continues to mount, as it does in CBO’s projections.

Source: The Budget and Economic Outlook: 2016 to 2026 January 2016

One comment

  1. Most people do not even think about where the money is going to come from to pay Social Security, Medical programs, Highways, Defense or any of the other things the Federal and State governments pile on every year. 51% of workers make less than $30,000 per year. 74% of workers make less than $50,000. The 26% that make more than $50,000 pay most of the taxes, now.
    If we need additional tax revenue, do the math, they will be taking it from the 74%, it is a bigger pool of income, to tax. Even if they could get it all from the top 20% and the Corporations, everyone would pay more for the goods and services that the Corporations and business owners provide, because the cost of higher taxes would just be passed to the end user.
    Does anyone really think that if the auto repair shop owner”s taxes go up, the hourly service rate charged will stay the same.
    Sometimes I think the politicians flunked math class and never attended a basic economics class.
    The people that want the government to give them free stuff will not be happy until everyone is this country is on food stamps. Remember the government that has the power to give you everything you want today; also, has the power to take from you everything it wants tomorrow.


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