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A 125-Year Picture of the Federal Government's Share of the Economy, 1950 to 2075 [i] (July 2002)

handle is hein.congrec/cbo0713 and id is 1 raw text is: CBO LONG-RANGE FISCAL POLICY BRIEF A series of issue sunmaries from the Congressional Budget Office Revised July 3, 2002 A 125-Year Picture of the Federal Government's Share of the Economy, 1950 to 2075 Summary This policy brief presents a long view of the federal government's finances and the potential impact of two critical drivers of federal spending: the government's largest entitlement programs--Social Security, Medicare, and Medicaid--and interest on the federal debt held by the public. Under the projections shown here, outlays for those entitlement programs would rise from 8 percent of gross domestic product (GDP) today to 21 percent in 2075, which would exceed the share of GDP now absorbed by all federal revenues. Even if other major categories of federal spending remained fixed as a share of GDP, the growth of those programs would push total federal spending well above the level that it has been throughout much of the post-World War II period. Left unchecked, such spending could cause major deficits to emerge, propelling the government's debt and interest expenditures to unprecedented levels. The total cost of government, including interest expense, could more than double as a share of the economy, rising from 19 percent of GDP in 2002 to 40 percent in 2075. Introduction Presenting a 125-year picture of the financial affairs of the federal government, this policy brief shows the size of the federal budget in relation to the general economy from the middle of the last century through the projected retirement years of the children of the post-World War II baby boomers. Of course, the future path of the budget is highly uncertain and subject to wide variation. Except for the first 10 years, which is the period covered by the Congressional Budget Office's (CBO's) projection of a baseline, the path shown here is simply a representation based on an illustrative set of key assumptions. Using CBO's new long-range projection model, the report merges the actual revenue and spending trends from 1950 through 2001 with projections for 2002 through 2075. For that purpose, the federal budget totals include the operations of the Social Security trust funds, which by law are considered to be off-budget Treasury accounts. The report expresses the budget figures as a share of gross domestic product (GDP) so that the magnitude of federal receipts and expenditures can be observed in relation to the total economic activity of the nation in any given year and over time.(I) Assumptions

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