My colleague, Nan Swift, neatly summarized an event she recently attended on the question, “What Will It Take to Cut Spending?” As the speakers noted, you can’t address the government’s chronic overspending simply by targeting “waste, fraud, and abuse.” Much of the projected growth in spending will come from the entitlement programs such as Medicaid, Medicare, Social Security, and the newer Obamacare subsidies. I don’t know what it will take to cut spending or enact spending restraints that Congress and the President will stop trying to buck, but we do have an idea of how much they will need to cut.
The latest Treasury figures show that the government spent $435 billion more in FY 2015 than it collected in revenues, down from the $1.4 trillion deficit in 2009. The Congressional Budget Office budget outlook provides projection of the budget picture for the next 10 years. As I pointed out last week, the deficits have been getting smaller over the last several years but the trend will soon reverse. The deficit is projected to shrink again in FY 2016 before rising steadily through 2025.
The total deficit for the next 10 years will be over $7 trillion. Federal receipts each year will hover at just over 18 percent of GDP while spending will rise from about 20.6 percent of GDP last Fiscal Year to 22 percent in 2025.
On average, spending is expected to grow by about 5 percent per year. To get the budget close to balance by 2025 without increasing the tax burden, all you have to do is restrain the growth in spending to about 2.7 percent per year.