Chapter
3

The Spending Outlook

Under an assumption that current laws and policies will remain in effect, the baseline projections prepared by the Congressional Budget Office for the next decade anticipate that, as it has for most of the past several years, mandatory spending will grow faster than the economy. In contrast, discretionary spending is projected to grow at the rate of inflation—and thus more slowly than the economy. Total outlays are projected to decline from 20.2 percent of gross domestic product in 2008 to 19.3 percent of GDP in 2018.

If current laws governing mandatory programs remain the same and if discretionary appropriations total $1,045 billion for fiscal year 2008—the amount provided thus far—outlays in 2008 will total $2.9 trillion, CBO estimates (see Table 3-1). Spending would grow by $143 billion—a 5.2 percent increase over 2007 (see Table 3-2). Excluding net interest, spending is estimated to rise by 5.9 percent in 2008. The increase for that category in 2007 was 2.7 percent, well below the average increase of 6.3 percent per year recorded between 1997 and 2006.

Table 3-1. 

CBO’s Projections of Outlays Under Assumptions for the Baseline

																	Total,	Total,
					Actual												2009-	2009-
					2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2013	2018
					In Billions of Dollars
Mandatory Outlays
	Social Security				581	611	646	682	719	761	807	856	908	965	1,027	1,092	3,615	8,464
	Medicare				436	454	485	512	561	565	629	671	719	803	841	879	2,752	6,666
	Medicaid				191	208	225	243	261	282	304	328	353	381	412	445	1,314	3,232
	Other spending				420	463	481	490	504	485	503	515	530	555	567	575	2,463	5,204
	Offsetting receipts				-178	-186	-183	-190	-200	-209	-220	-231	-241	-254	-268	-285	-1,001	-2,281
		Subtotal			1,450	1,550	1,654	1,737	1,846	1,884	2,022	2,138	2,270	2,451	2,578	2,706	9,142	21,285
Discretionary Outlays
	Defense				549	572	590	603	620	626	645	660	677	698	710	723	3,084	6,552
	Nondefense				493	517	531	542	550	560	571	583	596	610	624	637	2,754	5,804
		Subtotal			1,042	1,089	1,121	1,145	1,170	1,186	1,216	1,243	1,272	1,307	1,335	1,360	5,838	12,356
Net Interest					238	234	241	266	283	286	285	285	282	278	271	259	1,360	2,735
			Total		2,731	2,873	3,015	3,148	3,299	3,355	3,524	3,666	3,824	4,037	4,183	4,325	16,341	36,376
				On-budget	2,277	2,404	2,519	2,628	2,757	2,788	2,926	3,037	3,160	3,334	3,439	3,536	13,618	30,124
				Off-budget	454	469	496	520	541	568	597	629	664	702	744	789	2,723	6,251
					As a Percentage of GDP
Mandatory Outlays
	Social Security				4.3	4.3	4.4	4.4	4.4	4.4	4.5	4.5	4.6	4.7	4.8	4.9	4.4	4.6
	Medicare				3.2	3.2	3.3	3.3	3.4	3.3	3.5	3.6	3.7	3.9	3.9	3.9	3.3	3.6
	Medicaid				1.4	1.5	1.5	1.6	1.6	1.6	1.7	1.7	1.8	1.9	1.9	2.0	1.6	1.7
	Other spending				3.1	3.3	3.2	3.1	3.1	2.8	2.8	2.7	2.7	2.7	2.6	2.6	3.0	2.8
	Offsetting receipts				-1.3	-1.3	-1.2	-1.2	-1.2	-1.2	-1.2	-1.2	-1.2	-1.2	-1.3	-1.3	-1.2	-1.2
		Subtotal			10.6	10.9	11.2	11.1	11.2	10.9	11.2	11.3	11.5	11.9	12.0	12.1	11.1	11.5
Discretionary Outlays
	Defense				4.0	4.0	4.0	3.9	3.8	3.6	3.6	3.5	3.4	3.4	3.3	3.2	3.8	3.5
	Nondefense				3.6	3.6	3.6	3.5	3.3	3.2	3.2	3.1	3.0	3.0	2.9	2.8	3.4	3.1
		Subtotal			7.6	7.7	7.6	7.3	7.1	6.9	6.7	6.6	6.5	6.4	6.2	6.1	7.1	6.7
Net Interest					1.7	1.6	1.6	1.7	1.7	1.7	1.6	1.5	1.4	1.4	1.3	1.2	1.7	1.5
			Total		20.0	20.2	20.4	20.2	20.1	19.4	19.5	19.4	19.4	19.7	19.5	19.3	19.9	19.7
				On-budget	16.7	16.9	17.0	16.8	16.8	16.2	16.2	16.1	16.1	16.2	16.1	15.8	16.6	16.3
				Off-budget	3.3	3.3	3.3	3.3	3.3	3.3	3.3	3.3	3.4	3.4	3.5	3.5	3.3	3.4
Memorandum:
Gross Domestic Product
(Billions of dollars)					13,670	14,201	14,812	15,600	16,445	17,256	18,043	18,856	19,685	20,540	21,426	22,355	82,156	185,018

Source: Congressional Budget Office.

Table 3-2. 

Average Annual Rates of Growth in Outlays Since 1997 and Under CBO’s Baseline

(Percent)

			Actual		Actual		Estimated		Projecteda		Projecteda
			1997 to 2006		2007		2008		2009		2010 to 2018
Mandatory Outlays			6.0		2.7		6.9