Long Run Growth of Entitlement Spending

In 2007, combined spending on the three major entitlement programs -- Social Security, Medicare, and Medicaid -- amounted to 8.4 percent of gross domestic product (GDP), or about $1.1 trillion. Under the Congressional Budget Office's extended baseline (as detailed in their December 2007 Long-Term Budget Outlook report), these three programs will claim 25 percent of GDP by 2082, or almost triple their present share (see Chart A).

Social Security began paying benefits in 1940. Medicare and Medicaid came online in the 1960s. While Social Security will grow rapidly over the next couple of decades because of the aging of the population and the declining birth rate, the Medicare and Medicaid programs will virtually explode as the population ages and the cost of high quality medical services continues its recent rapid rate of increase.

The assumptions underlying these forecasts are key. Program costs will grow less rapidly under more optimistic assumptions and faster if assumptions are more pessimistic (see chart B). Under the extended baseline, the three programs will claim 25 percent of GDP by 2082. More pessimistic assumptions, under CBO’s alternative fiscal scenario) raise it to 26 percent of GDP. Put another way, CBO forecasts that the big three entitlement programs will cost the country somewhere around one-fourth of GDP by 2082. (See also Long Run Growth of Medicare and Medicaid Spending)

Underlying data:download

Underlying data:download