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CBO: Government to Spend $47.2 Trillion Over Next 10 Years

By: Daniel Horowitz (Diary)  |  February 5th, 2013 at 04:24 PM  | 

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We’ve all been waiting to see the updated CBO Budget and Economic Outlook for 2013 and the next ten years.   Most of the news articles are focusing their headlines on the deficit and debt numbers projected in the CBO report.  But remember that the reason why CBO deficit projections always understate the reality is because they overstate the amount of revenue they expect to come into the Treasury.

CBO projects the gross federal debt to rise to $26.1 trillion by 2023, just under $10 trillion more than it is today.  However, this fails to tell the full story.  CBO is projecting revenues to climb to 19% of GDP, even as they predict lethargic economic growth and high unemployment for the foreseeable future.  This is all the result of their ridiculous practice of statically scoring every dollar of a tax increase as a dollar more earned by the Treasury.  To that end, they are projecting more revenue as a result of the Obama tax hikes.

This is why it’s important to focus on the spending figures in the report.  The projected cost of the federal government during the 10-year budget period from 2014-2023 is $47.2 trillion.  Spending will rise every year for every program (except for defense during the first few years), topping out at $5.94 trillion in annual spending in 2023.  That’s a rate of growth of about 6.7% per year, trouncing the growth of the private sector.

Mandatory spending will comprise roughly $29 trillion of all outlays for the next 10 years, while discretionary spending will top out at $12.85 trillion.  The big three entitlement programs – Social Security, Medicare, and Medicaid – will cost $11.15 trillion, $8.07 trillion, and $4.36 trillion respectively.   Spending on other welfare programs (not including Medicaid) will check in at around $3.3 trillion.

Keep in mind that none of this includes realistic projections of the cost of Obamacare.  CBO admits that it lacks the capacity to estimate the true cost because there are so many unknown variables at this point.  What they are able to project though is that 7 million workers will lose their employer-provided coverage as a result of Obamacare.

Also, CBO has historically low-balled the projected cost of welfare programs, especially on light of the ever expanding loopholes that encourage broader participation.  Here’s what CBO says about their projections of outlays on entitlements s for the later years of the budget frame:

“projections for the period covered in this report do not fully reflect long-term budgetary pressures, although upward pressure on the federal debt is evident in the later years of that period. Under current law, the aging of the population, the rising costs of health care, and the scheduled expansion in federal subsidies for health insurance will substantially boost federal spending on Social Security and the government’s major health care programs, relative to GDP, for the next 10 years and for decades thereafter. Unless the laws governing those programs are changed—or the increased spending is accompanied by corresponding reductions in other pending, sufficiently higher tax revenues, or a combination of the two—debt will rise sharply relative to GDP after 2023.”

Obviously, CBO also assumes that the 10-year defense sequester remains in place and that there are no new wars over the next 10 years.  In addition, they are assuming the treasury rates will remain at record lows for a good part of the budget frame, enabling us to borrow more money with lower interest payments.  If rates return to their historical averages at an earlier date, we could easily add several hundred billion more in interest payments on the debt per year.

When examining a report like this, the key question conservatives must ask is if government spending will continue to grow faster than the private economy.  The answer is a resounding yes.

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COMMENTS

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  • spinoneone

    Don’t hold your breath waiting for O and the Dems to cut spending. Look, instead, for a value added tax [VAT], a carbon tax [cap and trade], and the removal and/or reduction in most deductions and other tax loopholes….except those that benefit O and his cronies.

  • ipolitics

    We’re doomed. The ship is barreling toward the iceberg and the Captain has barricaded himself on the bridge. The question is, what do we do about it?

    Anybody? Anybody? Bueller?

  • davesinsanantonio

    Obummer will prove yet again that crony socialism is way worse than crony capitalism.

  • rennyangel4

    If we could open shale oil and tar sand oil to serious development, stop the hysteria about facturing for oil and nat. gas, re-start deep-water drilling in the Gulf and off Alaska, build the Keystone pipeline, yadda, the energy industry alone should make us self-sufficient and produce surplus to be sold, let along generating maybe millions of jobs and gadzillions in revenue (local, state, and fed). But this admin. won’t do that, which is why we REALLY need a Rep. in the WH in 2016, just when Karl Rove has gone over the cliff to purge the tea parties? Who does he think have voted for Reps. since Reagan? Does he think enough people belong to country clubs and own private jets to elect a pres.? If he really fractures (slight pun intended) the party of the right, we will never have another successful national election.

  • mhorner

    It is very obvious that we will fall off the proverbial “Fiscal Cliff” in the very near future. As a retired financial person I am painfully aware that the “Cliff” will arrive with startling speed. One day we will be fine and the next we will plunge into a deep Recession or even a Depression. Sadly, this may be the only way we will again learn the lessons we should have already learned from the experiences of the United States in 1929 and Germany in 1923. America will recover, but the pain will be terrific, especially since it can and should be avoided. The Great Depression was seared into the brains of everyone who went through it and they vowed to never allow that to happen again, but most of these people are no longer guiding America.

  • loganyung

    There is a circular firing squad here. If interest rates ever go back up to normal, that will explode deficits even higher. So, the Fed has said that it will keep interest rates low as long as unemployment is above 6.5%. So, there is an incentive to keep unemployment high to make sure that interest rates don’t go up. The only way to solve America’s problems is with robust growth, but, that will never be allowed to happen. This will not end nicely.

  • Ari

    Trust the GBO?
    Aren’t they the ones who gave Social Security retirees a 1.7% cost of living raise.

    Did anyones cost of living only rise 1.7% last year? Lets just consider food (mine nearly doubled) how about you? So real was their accuracy and
    compassion for the elderly. Why trust liars to figure?

    This is not trying to be fractionally accurate. But it will likely be more accurate than the
    CBO projections. pobably plus or minus 10% or at most 20 % just because of simplification.

    Quick glance: TODAY 16 trillion debt =
    $16,000, 0 00,000,000 divided among a rough US population
    of 300,000,000… (knock off the last 8 zeros) = 160,000/ 3 or $53,333 debt
    per person in the US. (Wasn’t that estimated at about $44,000 only 4 months ago?)

    In 2023 we have added (an unrealistically conservative estimate) with no interest paid.
    10,000,000,000,000 ADDITIONAL NEW DEBT.
    Add 10,0000 /3 and you have another $33,333 MORE debt per person in the US.

    At a minimum of 3% simple interest after 2014, we have more than 50% additional debt in interest –another $8,000,000,000,000 due if interest stays at 3% which is
    highly unlikely.

    More likely is, it will average over 7% for the next 10 years…
    that doubles to 16 trillion or much higher as inflation will likely drive costs up at least

    4 to 10 x.,

    Lets just use the rough interest payment to 10,000,000,000,000 or another

    $33,333 DEBT per individual US CITIZEN

    So not projecting the economy to totally collapse but to HOPEFULLY
    struggle forward – In 10 years, every person will be saddled with a $120,000
    national debt share.

    Even by using 3,200,000,000 total population ANOTHER $110,000 debt per person.

    At today’s rate 47% of adults have no income, or paying no federal taxes?

    So we must more than double the per person cost to adults working and it comes to over $250,000 debt per working adult.

    But wait, government is rising 6.7 % annually, meaning it will nearly double in size in 10 yrs. Where is that figured in the above numbers? It will certainly be double by then, and included inflation.

    Don’t know about you, but my back is already burdened beyond tolerance.
    and my mind is blown by DC arrogant stupidy and theivery. WE MUST cut the FEDERAL CREDIT CARDS. WE SIMPLY CAN’T WAIT another 2, 4 or 10 years for this to be corrected.
    The President, his cabinet, and the Democrat Congress are INSANE!

    Perhaps those naïve, stupid, and ignorant, who prefer to
    sleep until too late… maybe should starve. Those who are working for their food, shelter
    and betterment of society, better wise up quick! The burden is already way too heavy
    and cannot be sustained, so must NOT BE TOLERATED.

    Greenland rose up as a nation and Jailed their bankers and government crooks. Now their country has stabilized economically.

    With all the Trillion dollar US bank bailouts, the public remains shafted with Record
    FORECLOSURES and no relief at all, only unemployment and shrinking opportunity.
    There was no trickle down, rather debt was heaped on all working Americans.
    And if you work, the wrongfull debt is required of you, me, or stolen from the fixed income Social Security Payors, who will never get what they were promised, though they PAID for their benefits and many others.
    Those who paid in do not receive an ENTITLEMENT of government largess. THEY ARE OWED THEIR RIGHTFUL BENEFITS! They are not the spending Problem they are the true Bank of US Productivity and it is in process of being stolen, not borrowed.

  • rationalanalyst2

    So many Posters here are right, on so many fronts. My Social Security payment went up a whopping $7 a month. Walker, Peterson, and Company have been on this Debt watch for almost 10 years. Walker is as knowledgeable as they get – - since he served in either the GAO, or CBO, for several years. He quit because he didn’t want to be part of the coming collapse; opting instead, to take his message public.

    Folks, ALL the Major Countries that have spent well beyond their means are Printing Money. If, We – They – - Them Us – - hadn’t have done so; the World’s Economy would be SOL. (Technically – - it is. Without the Printing of Fiat Currency; several Countries would have, “bought the Farm – - so-to-speak!” Scary – - but interesting.

    Big Financial Conference this past week in Devo’s, Switizerland; maybe you caught it. The World’s Big Banks are getting extremely nervous about Printing Money and the accumulation of Debt. Some feel there are Bubbles brewing in Bonds, easy credit; and the lack of genuine liquidity (real money!) Even more feel that the World is living off the future earnings of the next two or three generations. There is even talk of another Real Estate Bubble.

    The phrase that I keep hearing from Economists is, “We are all in Unchartered Waters.” No one really knows what’s coming; but, inflation and higher interest rates can’t be far off. Hope for the best; but prepare for another Collapse.

  • sliverlining

    My financial advisor says if the world goes to hell financially, USA will be the richest pauper on the globe. Good or bad? Whistling in the dark?
    Also, who is going to buy my gold if that’s what I save? Or the obvious question: What do I get for a one ounce coin during the apocalypse?

    He’s been good up until now but nobody can tell the future.

    So I guess articles like this one fall into the gray abyss of financial overkill.