January 27, 2010
Today CBO released a letter to Congressman Paul Ryan, Ranking Member of the House Budget Committee, analyzing the Roadmap for Americas Future Act of 2010. This legislation, which Congressman Ryan introduced today, would make comprehensive changes to the Social Security program; to federal involvement in health care, including Medicare, Medicaid, and the tax treatment of health insurance; to other federal spending; and to other features of the tax system. CBOs analysis is based on the proposal as modified by specifications provided by Congressman Ryans staff. In particular, the specifications for Medicaid and the tax system that CBO analyzed are highly stylized versions of the more detailed provisions in the bill.
CBOs letter summarizes the agencys analysis of the impact that the bill (along with the simplifying specifications) would have on federal outlays, budget deficits, and debt during the next 75 years. The analysis is subject to a great deal of uncertainty, because of both the complexity of the proposal and the very long time horizon over which its many provisions would unfold. The analysis does not represent a cost estimate for the legislation, which would require much more detailed analysis and would be much more limited in the time span that could be examined.
The Roadmap, in the form that CBO analyzed, would result in less federal spending for Medicare and Medicaid as well as lower tax revenues than projected under CBOs alternative fiscal scenario described in CBOs June 2009 publication The Long-Term Budget Outlook. Federal spending for Social Security would be slightly higher than under CBOs alternative fiscal scenario for much of the projection period, but the system would become sustainable as revenues increase and traditional benefits decline. The budget deficit would peak at 5 percent of GDP in 2034 and then decline. By 2080, the Roadmap would generate a budget surplus of about 5 percent of GDP. Under the Roadmap, the ratio of government debt held by the public to economic output (the ratio of debt to GDP) would be lower than that under the alternative fiscal scenario in every year. In particular, debt is projected to peak at 100 percent of GDP in 2043 and to decline thereafter, reaching zero by 2080. (Debt held by the public was about 53 percent of GDP at the end of fiscal year 2009.) The federal government would accumulate net financial assets equal to 17 percent of GDP by 2083. In contrast, under the alternative fiscal scenario, debt is projected to skyrocket over the next several decades.
This analysis was undertaken by Joyce Manchester, Charles Pineles-Mark, Michael Simpson, and Julie Topoleski of CBOs Long-Term Modeling Group.