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Long-term health care spending to drop but debt remains high, CBO says

July 16, 2014 - 12:05am

WASHINGTON — The government’s long-term spending on health care is projected to decline slightly in the next 25 years, but the rising federal debt load remains on an unsustainable trajectory, according to the Congressional Budget Office.

The long-term fiscal outlook has not changed markedly over the last year, the nonpartisan CBO concluded in a report released Tuesday after an era of robust budget battles between Congress and the White House.

The annual budget deficit, which peaked at $1 trillion during the recession in President Barack Obama’s first term, remains at about half that level and is on track this year to be the smallest since 2007, or 3 percent 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 percent of GDP by 2039, slightly more than the 102 percent projected by the CBO last year.

One improvement is the long-term outlook for federal health care spending, which is projected to drop by 1.5 percent of GDP in 2039, thanks to a variety of factors.

“Actual spending on health care 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 report said.

Health care spending has declined in recent years as a percentage 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 because of an aging population that is putting more pressure on federal spending and budget battles in Congress that, so far, are failing to produce stable solutions to keeping revenue and expenditures in balance.

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