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CBO: Federal Spending Will Soon Exceed Spending During Parts of WWII

1:54 PM, Jun 22, 2011 • By JEFFREY H. ANDERSON
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The CBO’s newly released 2011 Long-Term Budget Outlook forecasts that federal spending will soon exceed spending during parts of World War II. In 1942, federal spending equaled 24.3 percent of the gross domestic product (GDP) (Table 1.3). Less than 25 years from now (in 2035), according to the CBO, federal spending would equal 27.4 percent of GDP under current law, and 33.9 percent of GDP under changes to current law “that are widely expected to occur.”

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In comparison, between the end of World War II and the year that President Obama was inaugurated, federal spending averaged 19.6 percent of GDP. 

Such unprecedented spending would be driven almost entirely by entitlement programs. The CBO writes, “In the…longterm projections of spending, growth in noninterest spending as a share of gross domestic product (GDP) is attributable entirely to increases in spending on several large mandatory programs”—Social Security, Medicare, Medicaid, and Obamacare (which, in addition to spawning taxpayer financed “exchanges,” would add more than 20 million people to the Medicaid rolls).  

The CBO adds that, under the scenario in which “widely expected” changes to current law would occur, health care costs would rise from 5.6 percent of GDP this year to 10.4 percent of GDP in 2035. The CBO writes, “Such rates of growth cannot continue indefinitely, however, because if they did, total spending on health care would eventually account for all of the country’s economic output — an implausible outcome.”

The CBO has projected that President Obama’s budget would actually increase federal spending versus current law. In comparison, it has projected that the Paul Ryan-authored budget passed by the House of Representatives would reduce federal spending to 20.75 percent of GDP by 2030 and 18.75 percent by 2040 — or about 8 to 14 percent of GDP less than under the CBO’s projections for where we’re otherwise headed.  

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