CBO Projects Short-Term Deficit Trough
The Congressional Budget Office’s latest budget and economic outlook shows the federal deficit for the next two fiscal years dropping, but steadily increasing thereafter.
In part due to lower than expected Obamacare enrollments, the projected deficit for 2015 is $468 billion, lower than 2014’s $483 billion, and will bottom at $467 billion in 2016, and rise to $739 billion by 2020.
“Although federal debt relative to the size of the economy is projected to increase only modestly over the next decade, it is already high by historical standards,” the CBO report states. “Throughout the 10-year period that CBO’s baseline projections span, federal debt remains greater relative to GDP than at any time since just after World War II.”
In comparison, the deficit was only $160.7 billion in 2007, or 1.1 percent of GDP.
The projected costs from Obamacare is $68 billion lower than a previous CBO estimate from April of 2014 after it updated the estimate of enrollees by the end of 2015 down to 9 million, 4 million lower than its first estimate. However, the unexpected number of people enrolling in Medicaid added $59 billion to federal spending.
The CBO also updated its projection of average growth in the next decade from 2.7 to 2.5 percent, and the projected real GDP in 2024 is around 1 percent lower than its August estimate.
More worryingly, the rise of spending on Social Security, Medicare, and Obamacare is expected to outpace growth in the next decade. Social Security is projected to rise from 4.9 to 5.7 percent of GDP in 2025, and spending for Medicare and Obamacare from 5.1 to 6.2 percent of GDP.
The spending from Obamacare’s exchange subsidies are projected to rise sharply, from $32 billion in 2015 to $103 billion in 2019.
“The net costs of the coverage provisions of the ACA will rise sharply as the effects of the act phase in from 2015 through 2017 [and] are estimated to level off at about $145 billion in the last years of the projection period,” the report states.
The report estimates that Obamacare will reduce the number of uninsured Americans by 29 and 31 million by 2025, when only 31 million are expected to be uninsured.
The CBO report is not a complete estimate of the costs of Obamacare, as 15 tax-hikes in the law were not scored.
Even though the deficit will drop temporarily, the debt level is still increasing and is projected to reach 78.7 percent of GDP by 2025.