CBO Projects Record Deficits
August 29, 2003 - In its mid-year
budget and economic outlook, released Aug. 26, the Congressional
Budget Office (CBO) projects record federal budget deficits
for $401 billion for 2003 and $480 billion for 2004. However,
CBO points out that, at about 4 percent of the nation's gross
domestic product (GDP), these deficits are smaller than the
deficits of the mid-1980s.
In 2002, the federal government recorded a deficit of $158
billion. CBO attributes the dramatic increase in the deficit
projected for 2003 to declining revenues - for the third year
in a row - combined with double-digit growth in discretionary
spending. CBO projects spending for discretionary programs
- determined annually through the appropriations process -
will increase by $91 billion (12.4 percent) in 2003.
The fastest growing component of discretionary spending is
defense, which CBO projects will rise by $58 billion (about
17 percent) in 2003, to a total of $407 billion. Roughly half
of this increase results from funds provided for the war in
Iraq and continuing operations for the war on terrorism. Discretionary
defense spending will total about 3.8 percent of GDP in 2003
- the highest level since 1994 but well below the levels recorded
in the mid-1980s and early 1990s (which were generally between
4.5 percent and 6 percent of GDP).
Nondefense discretionary spending is expected to grow by
$33 billion (8.5 percent) in 2003, reaching a total of $419
billion, with the largest increases for education, health,
and transportation. Nondefense discretionary spending will
total about 3.9 percent of GDP, its highest level since 1985.
Spending for entitlements and other mandatory programs -
whose spending levels are usually determined by eligibility
rules and other levels set forth in existing laws - is projected
to increase by $83 billion (7.5 percent). This is down from
the 10 percent growth recorded in 2002. Medicare is the only
program in this category that is forecast to grow at a faster
rate in 2003 (nearly 8 percent) compared to 2002 (6.4 percent).
CBO notes that Medicare spending continues to rise primarily
because of automatic updates to payment rates and increases
in caseloads. Medicaid spending is projected to grow at 9.8
percent in 2003, a slowdown from last year's growth rate of
13.2 percent. According to CBO, this slowdown results mainly
from slower growth in enrollment and the implementation of
constraints on certain payments to public health care providers.
The report states Medicaid's growth rate this year would be
even lower had the Jobs and Growth Tax Relief Reconciliation
Act of 2003 (JGTRRA) not allotted states nearly $4 billion
in additional funds through an increase in the federal share
of Medicaid costs.
Information:
Dave Moore, Senior Associate Vice President
AAMC Government Relations
dbmoore@aamc.org
(202) 828-0525
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