The Congressional Budget Office last week released The Long-Term Budget Outlook. Here is the Executive Summary:

As health care costs continue to grow faster than the economy and the baby-boom generation nears eligibility for Social Security and Medicare, the United States faces inevitable decisions about the fundamentals of its spending policies and its means of financing those policies. This Congressional Budget Office report looks at a range of possible paths for federal spending and revenues through 2050 and combines them into various hypothetical scenarios. Analysis of the scenarios suggests the following conclusions:

• Driven by rising health care costs and an aging population, federal spending for Medicare, Medicaid, and Social Security will claim a sharply increasing share of the nation’s economic output over the coming decades.
• Even if taxation reached levels that were unprecedented in the United States, current spending policies could become financially unsustainable. An evergrowing burden of federal debt held by the public would have a corrosive and potentially contractionary effect on the economy.
• As the U.S. tax system is now configured, federal revenues will grow faster than the overall economy. Under current law, taxpayers will face higher rates, with detrimental consequences for work, saving, and economic growth.
• Fiscal policy could be financially sustainable if the growth of health care costs slowed significantly from historical rates. But even in that case, tax revenues would probably need to be higher than they have been in the past, unless the growth of other spending was curbed.
• If taxation is restricted to the levels that prevailed in the past, the growth of spending on programs for the elderly will have to be reduced substantially. Limiting the growth of outlays for defense, education, transportation, and other discretionary programs would not be enough to ensure fiscal sustainability.
• Likewise, economic growth alone is unlikely to bring the nation’s long-term fiscal position into balance. Moreover, issuing ever-larger amounts of debt or dramatically raising tax rates could significantly reduce economic growth.