Taxes, Entitlements and Federal Debt: New Update
In response to a request, I've updated some charts and tables on federal taxes, entitlements and the overall trend in federal debt. My data sources are the various reports from the Congressional Budget Office (CBO).
The CBO has a wealth of historical data as well as future projections, the latest of which extend from 2013 to 2023.
For openers, here is a 2012 snapshot of taxes and entilements. The left column is Uncle Sam's revenue from the three major tax sources: Personal Income Tax, Corporate Income Tax and Social Insurance Tax (aka the payroll tax paid by employers and employees). Over the past 40 years big three have account for an average of 91 percent of the total revenue, the remainder being the taxes from excises, estate and gifts and customs.
As we can see, 2012 entitlement costs slightly exceeded the entire tax revenue for the year — personal, corporate, and social.
However, according to the Congressional Budget Office (CBO), entitlements accounted for only about 58% of 2012 spending. Defense spending took another 19%, nondefense discretionary 17%, and interest payments 6%. We ended 2012 with an on-budget deficit of $1.151 trillion.
The debt held by the public at the end of the year was $11.280 trillion.
Now let's put the current deficit into the larger pattern of federal spending. I created the next two charts from a combination of CBO historical data since 1971 and their budget projections for 2013-2023. The first chart shows the astonishing growth of entitlements.
The next chart shows the projected gap between revenues and outlays over the next decade together with an overlay of the accelerating growth of public debt. As long as the red line is above the green, the size of the debt burden will accelerate.
The next chart below shows the growth of entitlements as a percent of total US revenues since the early 1970s. We're off recent peak following the Financial Crisis, but as you look at this chart, bear in mind that the wave of retiring boomers is in its early stages.
How much of a financial burden will our aging population be? I'll close with a look at a projection of the elderly dependency ratio to 2050 based on Census Bureau forecasts.
Of course, the future budgetary pressures can be managed by tax increases, benefit cuts, or some combination of the two.