Taxes, Entitlements and the Growing Federal Debt Crisis
Note: We've updated the first two charts below to use a log-scale vertical axes, which provides more accurate visualizations of the relative growth over time.
This morning the Congressional Budget Office published its Budget and Economic Outlook: 2014 to 2024, available as a 175-page PDF file. The main body of the document is divided into four parts: The Budget Outlook, The Economic Outlook, The Spending Outlook and The Revenue Outlook. The Appendix, which constitutes over half the document, covers a range of topics, including four decades of historical data.
First, let's review the most recent year on the books. In 2013, the U.S. took in $2,774 Billion in Revenues against $3,454 Billion in Outlays, which amounts to a calendar year deficit of $680 Billion.
The debt held by the public at the end of the year was $11.98 Trillion.
The adjacent pie-chart gives us a snapshot of the relative size of the major expense categories in the budget for the past year.
As we can see, entitlement of one sort or other accounted for approximately 62%, approaching two-thirds of the overall budget.
Now let's put the current deficit into the larger pattern of federal spending. We created the next two charts from a combination of CBO historical data since 1971 and their budget projections for 2014-2024. 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 final chart below shows the growth of entitlements as a percent of total US revenues since the early 1970s. We added a linear regression through the historical data and extended it into the future. The purpose is to illustrate that the CBO's estimates for the next decade are on the optimistic side (i.e., below) the regression, especially in light of the growing population of retiring Boomers.
We'll take another look at this data when President Obama presents his budget for Fiscal Year 2015.