We told you yesterday about the Congressional Budget Office’s latest update to the federal government’s fiscal outlook, which forecast that the deficit would fall to $1 trillion this year before rising again and that the government’s net interest payments as a share of the economy would jump from 1.6% this year to 3.3% in 2032.
Those rising interest costs will put more of a squeeze on the federal budget, adding to other pressures. Namely, the report also projects that, given the continued aging of the U.S. population and the growth in federal health care costs, outlays for Social Security and Medicare will continue to drive an increase in mandatory spending, with outlays for those two programs rising from 8.2% in 2023 to 10.3% in 2032. Discretionary spending, meanwhile, is projected to grow more slowly than the economy overall, resulting in such spending falling as a percentage of GDP. See the chart above from the Peter G. Peterson Foundation. (The Fiscal Times in an editorially independent organization financed separately by the late Pete Peterson and his family.)