New study warns of US long-term debt problems
By ANDREW TAYLOR September 17, 2013
WASHINGTON (AP) — A new government study says that federal health care and retirement programs threaten to overwhelm the federal budget and harm the economy in coming decades unless Washington finds the political will to restrain their inexorable growth. The long-term pressures promise to quickly reverse recent improvements in the deficit.
Tuesday's Congressional Budget Office report says that government spending on health care and Social Security would double relative to the size of the economy in 25 years and that spending on other programs like defense, transportation and education would decline to its smallest level by the same measure since the Great Depression.
The share of federal spending devoted to health care would rise from 4.6 percent of gross domestic product today to 8 percent in 2038; spending on Social Security would rise as well, as the number of people receiving benefits rises to more than 100 million in 25 years, compared with 57 million people taking benefits now...
Most economists measure deficits and debt in relation to the size of the economy. By that measure, the debt would actually decline slightly under the current trajectory over the next five years, dropping from 73 percent of the economy now to 68 percent in 2018. But the ongoing retirement of the Baby Boom generation would contribute to rising debt after that, ultimately bringing the debt to 108 percent of GDP by 2038
, with 8 percentage points of that figure caused by the economic drag the debt would have on the economy.