While deficits will remain modest through 2018, the federal deficit will balloon to 4% of GDP by 2025 from 2.8% today, thanks in large part to entitlement programs, the Congressional Budget Office predicts.
Lawmakers and political strategists were quick to weigh in on CBO's budget and economic outlook for the next 10 years, released Monday afternoon, with Senate Finance Committee Chairman Orrin Hatch, R-Utah, declaring that CBO's estimates support reining in entitlement spending.
Hatch and other Republican lawmakers have vowed to also dismantle President Barack Obama's Affordable Care Act. The CBO report notes that both CBO and the Joint Committee on Taxation currently estimate that the ACA's coverage provisions will result in net costs to the federal government of $76 billion in 2015 and $1.350 trillion over the 2016–2025 period.
Compared with the projection from last April, which spanned the 2015–2024 period, "the current projection represents a downward revision in the net costs of those provisions of $101 billion over those 10 years, or a reduction of about 7%," the CBO report says. Compared with the projection made by CBO and JCT in March 2010, just before the ACA was enacted, "the current estimate represents a downward revision in the net costs of those provisions of $139 billion—or 20%—for the five-year period ending in 2019, the last year of the 10-year budget window used in that original estimate," the report says.
CBO notes that while the economy will "expand at a solid pace" in 2015 and for the next few years with the unemployment rate projected to fall a bit further, beyond 2017, CBO projects that real (inflation-adjusted) gross domestic product will grow at a rate that is "notably less than the average growth during the 1980s and 1990s."
If current laws stay in place, CBO says that spending will grow faster than the economy for Social Security and the major health care programs, including Medicare, Medicaid and subsidies offered through insurance exchanges.
Hatch is pressing for five entitlement reforms he calls bipartisan: raising the Medicare eligibility age; putting limits on Medigap plans; simplifying Medicare beneficiary cost-sharing; boosting private-sector competition with Medicare; and capping Medicaid per capita spending.
Mandatory spending other than that for Social Security and health care, as well as both defense and nondefense discretionary spending, will shrink relative to the size of the economy, the report states.
CBO estimates in its report that the deficit for this fiscal year will amount to $468 billion, or 2.6% of GDP, slightly less than the 2014 deficit of 483 billion, or 2.8% of GDP. This year's deficit is projected to be the smallest relative to the nation's output since 2007 but close to the 2.7% that deficits have averaged over the past 50 years, the report states.
