On Feb. 4, the Congressional Budget Office (CBO) reported that although deficits in the economy are expected to drop through 2015, they will rise shortly after, increasing the federal debt in the U.S.
The CBO reports that under current law, the economy’s deficit would total to $514 billion in fiscal 2014. In fiscal year 2009, the deficit totaled to $1.4 trillion.
“Assuming no legislative action that would significantly affect revenues or spending, CBO projects that the federal budget deficit will fall from 4.1 percent of GDP last year to 2.6 percent in 2015—and then rise again, equaling about 4 percent of GDP between 2022 and 2024,” the CBO’s “Budget and Economic Outlook: 2014-2024” says.
After 2017, the CBO expects economic growth will be well below the average recognized in the last couple of decades. The CBO growth projections for the potential GDP for the next 10 years is much slower than the average in the 1950s.
“That projected slowdown mainly reflects long-term trends—particularly, slower growth in the labor force because of the aging of the population,” the CBO says.
In the next 10 years, deficits will total to $7.9 trillion, and public debt will rise from $13 trillion in 2014 to $21 trillion in 2024.
“That difference stems primarily from demographic trends that have significantly reduced the growth of the labor force. In addition, changes in people’s economic incentives caused by federal tax and spending policies set in current law are expected to keep hours worked and potential output during the next 10 years lower than they would be otherwise,” the CBO says.
The first generation of “baby-boomers” turned 65 in 2011, becoming eligible for Social Security benefits and Medicare, according to The Peter G. Peterson Foundation (PGPF).
“As the baby boomers continue to age and retire, the number of Social Security, Medicare, and Medicaid beneficiaries will grow, placing increasing pressure on the federal budget,” PGPF says.
The PGPF also says that between 2014 and 2025, the amount of Social Security beneficiaries will grow three times faster than the number of workers that pay taxes to support the program.
Justin Hayden, a Georgia State freshman expected to graduate in 2017, said that the CBO’s economic predictions can be seen either in a positive or negative light.
“The fact that there would be more people moving into retirement, there may be more opportunities for people to get a job,” Hayden said. “However, the way that the economy is going down like it is already, there will be no way to support everyone in the retirement category.”
As an exercise science major, Hayden believes that future employment will remain the same or solidify due to demand.
“In jobs such as exercise science and physical therapy there may be a greater demand for those positions if there was a larger amount of retirees present and life-spans continuing longer,” he said.
