{ "id": "RL32747", "type": "CRS Report", "typeId": "REPORTS", "number": "RL32747", "active": false, "source": "EveryCRSReport.com, University of North Texas Libraries Government Documents Department", "versions": [ { "source": "EveryCRSReport.com", "id": 390026, "date": "2011-08-16", "retrieved": "2016-04-07T00:37:08.521439", "title": "The Economic Implications of the Long-Term Federal Budget Outlook", "summary": "Following the financial crisis, the budget deficit reached 10% of gross domestic product (GDP) in 2009 and 9% of GDP in 2010, a level that cannot be sustained in the long run. Concerns about long-term fiscal sustainability depend on the projected future path of the budget, absent future policy changes. While entitlement spending made little contribution to current budget deficits, the retirement of the baby boomers, rising life expectancy, and the rising cost of medical care result in projections of large and growing budget deficits over the next several decades. Social Security outlays are projected to rise from 4.8% of GDP today to 6.1% of GDP in 2035, and federal health outlays (mainly on Medicare and Medicaid) are projected to rise from 5.6% today to as much as 10.3% of GDP in 2035. These increases in spending are not expected to subside after the baby boomers have passed away. Without any corresponding rise in revenues, this spending path would maintain unsustainably large and persistent budget deficits, which would push up interest rates and the trade deficit, crowd out private investment spending, and ultimately cause fiscal crisis.\nTo avoid this outcome, taxes would need to be raised or expenditures would need to be reduced. Altering taxes and benefits ahead of time would reduce the size of adjustments required in the future, if the proceeds were used to increase national saving. (Making changes ahead of time would also allow individuals time to adjust their private saving behavior.) National saving can be increased by reducing the budget deficit. But if the budget savings is subsequently offset by new spending or tax cuts, the government\u2019s ability to finance future benefits will not have improved. Individual accounts financed by increasing the budget deficit would not increase national saving or reduce the government\u2019s fiscal imbalance, and could exacerbate that imbalance over the 75-year projection.\nRelatively small tax increases or benefit reductions could return Social Security to long-run solvency. Restraining the growth in Medicare and Medicaid spending is more uncertain and difficult, however. The projected increase in spending is driven more by medical spending outpacing general spending increases than by demographic change. But it is uncertain how to restrain cost growth because much of it is the result of technological innovation that makes new and expensive treatments available. If future medical spending grows more slowly than projected, then the long-term budget outlook improves dramatically. From a government-wide perspective, Social Security or Medicare trust fund assets cannot help finance future benefits because they are redeemed with general revenues at a time when the overall budget is in deficit.\nThe reason revenues are not projected to rise along with outlays is that these programs are financed on a pay-as-you-go basis: current workers finance the benefits of current retirees. In the future, there will be fewer workers per retiree. Once a pay-as-you-go system is up and running and faced with an adverse demographic shift, there is no reform that can avoid making some present or future generation receive less than past generations. Under current policy, future generations will be made worse off by higher taxes or lower benefits. Under a reform that increases national saving, some of that burden would be shifted to current generations. Overall, current budget deficits negate the system\u2019s limited existing prefunding, exacerbating the future fiscal shortfall. While entitlement spending on the elderly is the major driver behind future deficits, it played little part in the growth of the current budget deficit to unsustainable levels. Reducing the current deficit is the most straightforward and concrete step that can be taken today to reduce the future shortfall.", "type": "CRS Report", "typeId": "REPORTS", "active": false, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "http://www.crs.gov/Reports/RL32747", "sha1": "7f304313656ad4ff9e5b17c2060429b412cdad0d", "filename": "files/20110816_RL32747_7f304313656ad4ff9e5b17c2060429b412cdad0d.html", "images": null }, { "format": "PDF", "encoding": null, "url": "http://www.crs.gov/Reports/pdf/RL32747", "sha1": "4bb0be4d1c637e7ff294417055c70a10669c6e56", "filename": "files/20110816_RL32747_4bb0be4d1c637e7ff294417055c70a10669c6e56.pdf", "images": null } ], "topics": [] }, { "source": "University of North Texas Libraries Government Documents Department", "sourceLink": "https://digital.library.unt.edu/ark:/67531/metadc228007/", "id": "RL32747_2011Jan03", "date": "2011-01-03", "retrieved": "2013-11-05T18:07:05", "title": "The Economic Implications of the Long-Term Federal Budget Outlook", "summary": "Report that analyzes the long-run path of the federal budget in the face of a projected demographic shift as aging baby boomers retire, coupled with the 2007 financial crises.", "type": "CRS Report", "typeId": "REPORT", "active": false, "formats": [ { "format": "PDF", "filename": "files/20110103_RL32747_37eeabf700fab1e14f008cbdc2b6909612c75b70.pdf" }, { "format": "HTML", "filename": "files/20110103_RL32747_37eeabf700fab1e14f008cbdc2b6909612c75b70.html" } ], "topics": [ { "source": "LIV", "id": "Finance", "name": "Finance" }, { "source": "LIV", "id": "Budgets", "name": "Budgets" }, { "source": "LIV", "id": "Federal budgets", "name": "Federal budgets" }, { "source": "LIV", "id": "Federal budget process", "name": "Federal budget process" }, { "source": "LIV", "id": "Fiscal policy", "name": "Fiscal policy" }, { "source": "LIV", "id": "Economic policy", "name": "Economic policy" } ] }, { "source": "University of North Texas Libraries Government Documents Department", "sourceLink": "https://digital.library.unt.edu/ark:/67531/metadc505456/", "id": "RL32747_2010Jan04", "date": "2010-01-04", "retrieved": "2015-05-29T05:37:21", "title": "The Economic Implications of the Long-Term Federal Budget Outlook", "summary": "This report analyzes the long-run path of the federal budget. The United States is projected to undergo a demographic shift as the aging of the baby boomers causes an unprecedented increase in the fraction of the population that is retired. Coupled with rising life expectancy, this means, under current policy, a steady increase in the portion of the population that is both out of the workforce and receiving social insurance benefits from the government.", "type": "CRS Report", "typeId": "REPORT", "active": false, "formats": [ { "format": "PDF", "filename": "files/20100104_RL32747_ebfcee7148e5d06b94f58f0789d770692912f7cb.pdf" }, { "format": "HTML", "filename": "files/20100104_RL32747_ebfcee7148e5d06b94f58f0789d770692912f7cb.html" } ], "topics": [ { "source": "LIV", "id": "Finance", "name": "Finance" }, { "source": "LIV", "id": "Budgets", "name": "Budgets" }, { "source": "LIV", "id": "Federal budgets", "name": "Federal budgets" }, { "source": "LIV", "id": "Federal budget process", "name": "Federal budget process" }, { "source": "LIV", "id": "Fiscal policy", "name": "Fiscal policy" }, { "source": "LIV", "id": "Economic policy", "name": "Economic policy" } ] }, { "source": "University of North Texas Libraries Government Documents Department", "sourceLink": "https://digital.library.unt.edu/ark:/67531/metadc807738/", "id": "RL32747_2008Aug27", "date": "2008-08-27", "retrieved": "2016-03-19T13:57:26", "title": "The Economic Implications of the Long-Term Federal Budget Outlook", "summary": null, "type": "CRS Report", "typeId": "REPORT", "active": false, "formats": [ { "format": "PDF", "filename": "files/20080827_RL32747_2a822476e589f9cfe4b5f8ac8fac548766f2647a.pdf" }, { "format": "HTML", "filename": "files/20080827_RL32747_2a822476e589f9cfe4b5f8ac8fac548766f2647a.html" } ], "topics": [] }, { "source": "University of North Texas Libraries Government Documents Department", "sourceLink": "https://digital.library.unt.edu/ark:/67531/metacrs7546/", "id": "RL32747 2005-01-28", "date": "2005-01-28", "retrieved": "2005-10-24T11:35:03", "title": "Social Security and Medicare: The Economic Implications of Current Policy", "summary": null, "type": "CRS Report", "typeId": "REPORT", "active": false, "formats": [ { "format": "PDF", "filename": "files/20050128_RL32747_9bbfd770c4544c07d5c1f534976ac7057c0b970e.pdf" }, { "format": "HTML", "filename": "files/20050128_RL32747_9bbfd770c4544c07d5c1f534976ac7057c0b970e.html" } ], "topics": [ { "source": "LIV", "id": "Social security", "name": "Social security" }, { "source": "LIV", "id": "Medicare - Economic aspects", "name": "Medicare - Economic aspects" }, { "source": "LIV", "id": "Social security - Economic aspects", "name": "Social security - Economic aspects" }, { "source": "LIV", "id": "Economic policy", "name": "Economic policy" }, { "source": "LIV", "id": "Welfare", "name": "Welfare" }, { "source": "LIV", "id": "Health policy", "name": "Health policy" } ] } ], "topics": [ "Economic Policy" ] }