Debt And Deficits: Nostalgia For The 1980s

CBO explains the rise in outlays: 

Larger deficits in the last few years of the decade result from increases in spending that outpace increases in revenues. In particular:

  • Mandatory spending increases as a percentage of GDP. Those increases stem both from the aging of the population, which causes the number of participants in Social Security and Medicare to grow faster than the overall population, and from growth in federal health care costs per beneficiary that exceeds the growth in GDP per capita.
  • Net spending for interest as a percentage of GDP is projected to increase over the remainder of the decade as interest rates rise and federal debt remains high. 

There's been some talk in recent years about how, in a time of low-interest rates, it could be an excellent time for the US government to make long-run investments that would pay off in future productivity. This case has some merit to me, but it's not what is actually happening. Instead, the fundamental purpose of the US government has been shifting. Back in 1970, about one-third of all federal spending was direct payments to individuals: now, direct payments to individuals are 70% of all federal spending. The federal government use to have missions like fighting wars and putting a person on the moon: now, it cuts checks. The CBO has this to say about the agenda of using federal debt to finance investments: 

Moreover, the effects on economic outcomes would depend on the types of policies that generate the higher deficits and debt. For example, increased high-quality and effective federal investment would boost private-sector productivity and output (though it would only partially mitigate the adverse consequences of greater borrowing). However, in CBO’s projections, the increasing deficits and debt result primarily from increases in noninvestment spending. Notably, net outlays for interest are a significant component of the increase in spending over the next 30 years. In addition, federal spending for Social Security, Medicare, and Medicaid for people age 65 or older would account for about half

of all federal noninterest spending by 2051, rising from about one-third in 2021.

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