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posted on 16 June 2015

What Is The Outlook For The Federal Budget In The Next 40 Years?

by Congressional Budget Office

The economy's gradual recovery from the recession, the waning budgetary effects of policies enacted in response to the weak economy, and other changes to tax and spending laws will cause the deficit to shrink in 2015 to its smallest percentage of GDP since 2007, CBO projects - 2.7 percent, a much smaller percentage than the recent peak of nearly 10 percent in 2009. Throughout the next decade, however, an aging population, rising health care costs per person, and an increasing number of recipients of exchange subsidies and Medicaid benefits attributable to the Affordable Care Act would push up spending for some of the largest federal programs if current laws governing those programs remained unchanged.

Moreover, CBO expects interest rates to rebound in coming years from their current unusually low levels, raising the government's interest payments on debt. Budget deficits would not substantially increase at first, but eventually they would begin to rise. They would approach 4 percent of GDP toward the end of the 10-year period spanned by CBO's baseline budget projections, the agency anticipates. Deficits over the entire period would total about $7.4 trillion.

With deficits projected to remain close to their current percentage of GDP for the next few years, federal debt held by the public would remain at a very high level, between 73 percent and 74 percent of GDP, from 2016 through 2021. Thereafter, the larger deficits would boost debt - to 78 percent of GDP by the end of 2025.

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