The Congressional Budget Office has just issued its annual Budget and Economic Outlook, which attempts to project what the federal government’s revenues from taxes and spending will be from 2013 through 2023. Here’s a quick rundown of what they foresee.
For 2013, the CBO projects that the deficit will be $847 billion, which rounds up to $850 billion. If you recall from a previous article here at MyGovCost, that’s 10 times the amount by which the federal government’s spending in 2013 will be reduced in the 2013 fiscal year if President Obama’s sequester goes into effect, and is about how much the Federal Reserve plans to loan the U.S. federal government over the next 10 months.
The chart below shows how much the CBO projects the federal government will either collect in taxes or spend over the next 10 years.
Here, we see that spending continues to be the problem — staying well above its historic average level. Meanwhile, we see that tax collections are projected to move and stay well above their historic average level, which is mainly due to the expiration of the 2% Social Security payroll tax cut and other taxes that took effect in January 2013.
We should note at this point that these projections assume that there will be no recession in the U.S. economy over the next 10 years, which may not be a very realistic assumption.
The next chart from the CBO’s report shows where the real spending problems will be over the next 10 years:
Here, we see that defense and other discretionary spending is set to decline, largely due to the drawdown of military operations in both Iraq and Afghanistan. However, those declines are more than offset by projected increases in spending for net interest and major health care programs, and to a lesser extent, Social Security.
The increase in net interest expenditures is expected as interest rates are projected to rise after 2015 as the Federal Reserve’s quantitative easing program which has lowered interest rates is expected to expire.
As for spending over which the federal government has some control, the increase in spending to fund major medical programs will be mostly consumed by the Medicare, Medicaid, and “ObamaCare” spending programs.
Speaking of which, the CBO now also projects that 7 million families will lose their employer-provided insurance coverage because of the perverse incentives that President Obama’s Patient Protection and Affordable Care Act set in place. The CBO also projects that ObamaCare will reduce the nation’s budget deficit over what it might otherwise be for the next ten years, however that’s mainly because taxes are going up today to pay for the program, while much of the increased spending associated with it is still several years away.
Source: Wall Street Journal