Long-term healthcare spending dips but debt remains high, CBO says

The government’s long-term spending on healthcare is projected to decline slightly in the next 25 years, but the rising federal debt load remains on an unsustainable trajectory, the CBO said Tuesday in its annual budget outlook.

The long-term fiscal outlook has not remarkably changed over the last year, the nonpartisan Congressional Budget Office report concluded, following an era of robust budget battles between Congress and the White House.

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FOR THE RECORD

An earlier version of this post said the CBO last year projected federal debt of 104% of GDP by 2039. It should have said 102%.

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The annual budget deficit, which peaked at $1 trillion during the recession in President Obama’s first term, remains at about half that level and is on track this year to be the smallest since 2007, or 3% of gross domestic product, according to the CBO report.

But sluggish economic growth has continued to be a drag on federal balance sheets, and debt is expected to rise to an unwieldy 106% of GDP by 2039, slightly more than the 102% projected by the CBO last year.

One improvement is the long-term outlook for federal healthcare spending, which is projected to dip by 1.5% of GDP in 2039, thanks to a variety of factors.

“Actual spending on healthcare has been lower than CBO had anticipated, and analysis by CBO and others suggests that such spending will grow more slowly in the future,” the CBO said.

Healthcare spending has declined in recent years as a share of GDP, which could be partly a result of the Affordable Care Act, but also comes from other changes in economic projections.

The long-term fiscal outlook, though, remains dim, as the aging population will continue to put pressure on federal spending, and budget battles in Congress have failed to produce stable solutions to the imbalance in revenue and expenditures.

@LisaMascaroinDC