Unsustainable Budget Trends
February 9, 2004
The most important chapter in President Bush's 2005 budget is entitled "Stewardship." Buried in an appendix volume where reporters are unlikely to notice, it paints a chilling picture of long-term budgetary trends, says Bruce Bartlett.
- It shows federal spending rising from about 20 percent of the gross domestic product this year to 53 percent in 2080; much of this comes from interest on the debt, which rises by 20 percent of GDP.
- Spending for Social Security is only projected to rise from 4 percent of GDP to 6.8 percent in 2080, but Medicare is projected to rise from 2 percent to more than 12 percent over the same period.
The addition of an expensive new unfunded benefit to Medicare for prescription drugs means that future spending will be much, much greater than projected. When people are given something that is heavily subsidized, they use a lot more of it. Consequently, we can expect drug spending by the elderly to rise very rapidly, especially since drug prices are also likely to rise as demand outstrips supply, says Bartlett.
The budget itself admits that these trends are "unsustainable." Since Congress will never reduce benefits to retirees, the only way to make the trends sustainable is by raising taxes significantly, notes Bartlett.
Source: Bruce Bartlett, "Unsustainable Budget Trends," National Center for Policy Analysis, February 9, 2004.
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