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Taxes, Entitlements and Federal Debt: Latest CBO Projections

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    February 6, 2014

    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 65%, almost two-thirds, of the overall budget.

    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 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. I 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.

    Images: Flickr (licence attribution)

    About The Author

    My original dshort.com website was launched in February 2005 using a domain name based on my real name, Doug Short. I’m a formerly retired first wave boomer with a Ph.D. in English from Duke. Now my website has been acquired byAdvisor Perspectives, where I have been appointed the Vice President of Research.

    My first career was a faculty position at North Carolina State University, where I achieved the rank of Full Professor in 1983. During the early ’80s I got hooked on academic uses of microcomputers for research and instruction. In 1983, I co-directed the Sixth International Conference on Computers and the Humanities. An IBM executive who attended the conference made me a job offer I couldn’t refuse.

    Thus began my new career as a Higher Education Consultant for IBM — an ambassador for Information Technology to major universities around the country. After 12 years with Big Blue, I grew tired of the constant travel and left for a series of IT management positions in the Research Triangle area of North Carolina. I concluded my IT career managing the group responsible for email and research databases at GlaxoSmithKline until my retirement in 2006.

    Contrary to what many visitors assume based on my last name, I’m not a bearish short seller. It’s true that some of my content has been a bit pessimistic in recent years. But I believe this is a result of economic realities and not a personal bias. For the record, my efforts to educate others about bear markets date from November 2007, as this Motley Fool article attests.


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