CBO projects that the combined federal spending on Social Security, Medicare, Medicaid, and the ACA subsidies will grow from 11 percent of GDP in 2016 to 16.3 percent of GDP in 2046. This run-up in spending will increase annual federal budget deficits and push cumulative federal debt to 141 percent of GDP in 2046 — well past the point that most economists would consider dangerous for the economy. (Spain’s debt is 99 percent of GDP in 2016).
CBO’s base case scenario is also probably too optimistic. CBO’s projection assumes federal revenue will grow from 18.2 percent of GDP in 2016 to 19.4 percent in 2046 (the 50-year average of federal revenue, from 1966 to 2015, was 17.7 percent of GDP). But the projected growth in federal revenue derives from tax provisions that are sure to change in coming years. For instance, under the ACA, a new 3.8 percent tax was imposed on non-wage income for persons with incomes over $200,000 annually and on couples with incomes over $250,000 per year. These thresholds are not indexed, which means more and more taxpayers, and, eventually, the middle class, will pay this tax as their incomes grow naturally with inflation.
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