Relative to the size of the economy, mandatory spending varied between roughly 9 percent and 10 percent of gross domestic product (GDP) from 1975 through 2007. Such spending peaked in 2009 at 14.5 percent of GDP, before dropping to 12.6 percent of GDP in 2012. That decline reflects the economy’s gradual recovery from the 2007–2009 recession and the waning budgetary effects of policies enacted in response to the recession. CBO estimates that mandatory outlays fell to about 12 percent of GDP in 2013; much of that decline was attributable to payments from Fannie Mae and Freddie Mac (see Figure 2-1).
If no new laws were enacted that affected mandatory programs, CBO estimates, mandatory outlays would remain fairly stable as a share of the economy, between 12.6 percent and 13.1 percent, from 2014 through 2021. Mandatory spending would accelerate in the final two years of the projection period, however, reaching 13.5 percent of GDP in 2022 and 2023, by CBO’s estimate. By comparison, such spending averaged 11.5 percent of GDP over the past 10 years and 9.9 percent over the past four decades.
CBO’s projections for total mandatory spending mask diverging trends for different components of such spending. CBO projects that, under current law, spending for Social Security and the major health care programs, notably Medicare and Medicaid, would grow from 9.8 percent of GDP in 2014 to 11.2 percent by 2023, driven largely by the aging of the population, rising health care costs per person, and an expansion of federal subsidies for health insurance. At the same time, outlays for all other mandatory programs would decline relative to GDP, from 3.0 percent in 2014 to 2.3 percent by 2023. That projected decline reflects an anticipated economic expansion, which would reduce the number of people who are eligible for many income security programs, and scheduled changes to tax provisions, which would reduce outlays arising from some tax credits.