THE FEDERAL BUDGET: OUTLOOK, IMPORTANCE, AND ALTERNATIVES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85B01152R001001350034-3
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• Document Creation Date: December 20, 2016
• Document Release Date: January 28, 2008
• Sequence Number: 34
• Content Type: REPORT

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The Federal Budget: Outlook, Importance, and Alternatives*
by James Capra
Senior Economist, Lehman Brothers Kuhn Loeb
Despite the cyclical economic rebound the economy is now
experiencing, the outlook for the federal budget remains a
serious problem. It is a threat to continued noninflationary
growth.
This morning, I want to briefly bring a few facts to your
attention.
? First, with the Congress being in and out of recess for
.the last few months and decision-making on the budget
grinding to a halt, it is useful to re-examine the numbers
to see if anything has changed -- especially since
economic statistics that have been released recently have
been so good.
? Secondly, there are those who suggest that the economy
will grow out of the deficits or that deficits are
unimportant, regardless. These points need to be examined
critically. Maybe, they are true, in which case the budget
conservatives are simply "crying wolf."
? Once these questions are disposed of, I would like to look
at what needs to be done to start to bring the budget
under control. In that regard H.R. 3790 is a possible
first step. But, what of the objections that it is unfair
to go back to social security for budget cuts after the
recent legislation or that social security is a separate
system that should be considered apart from the budget.
? Finally, I would like to do something unusual and outline
what kind of fiscal imbalance we might be bequeathing to
our children and grandchildren early in the next century
if the deficit problems are not alleviated--soon.
The Outlook -- An Update
Using the latest technical estimates and reestimates and a
robust economic growth scenario -- about 5.0 percent real growth
in 1984, and 3.5 percent growth (on average) in 1985-1988, we
find that the outlook for the deficit has changed little.
Testimony Before the Task Force on Entitlements, House
Committee on the Budget, November 9, 1983.
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Deficits of about $200 billion in 1984-1986 and $250 billion in
1987-1988 are what is in store in the absence of a major policy
shift. (See Table _1). To those who would argue that the
country can grow out of the deficits, Table 2 responds with
figures. showing that with 6 percent real economic growth over
the next few years, the deficit would still be $160 billion by
1986 and we would only start to inflate our way out by 1988. In
all likelihood, ,however, in contrast to these optimistic
scenarios, the economy will experience a recession sometime
within the next five years. In that case the deficits will
become larger than shown here -- about $300 billion by the end
of the period.
Y'~ 1983 FY1984 198 TY1986 FY1987 PY1988
$197.4 $196.2 $199.4 $218.0 $243.0 $244.5
-- As a Percentage of GNP -
6.1% 5.6% 5.3% 5.2% 5.3% 5.0%
'Assumes real GNP growth of 5.4%, 3.6%, 3.2%, 3.4%, and 3.4% In fiscal
years 1984-1988, no change in tax and nondefense spending policies, and a
S percent real growth in defense budget authority in each year.
Record Growth Scenario
Slightly Slower Growth Scenario
Baseline Growth Scenario (1962-1966 Growth)
(1976-1980 Growth)
Real
GNP
Growth
Inflation
(GNP
ator
eficit
Real
GNP
Growth
Inflation
(GNP
Deflator
of it'
Real
GNP
Growth
Inflation
(GNP
Deflator)
eficit?
1984
5.4%
4.2%
$ 196b
6.0%
4.5%
$ 191b
4.5%
4.0%
$ 204b
1985
3.6
4.5
199
5.0
5.2
171
3.4
4.2
209
1986
3.2
5.2
215
5.5
6.1
160
3.4
4.9
229
1987
3.4
5.3
243
5.0
7.2
148
3.4
5.0
257
1986
3.4
5.4
245
4.6
8.3
102
3.4
5.0
264
Cumulative
5 year real
growth" 20.5%
24.0%
19.5%
Average
Annual Rate
of Growth
3.8%
4.4%
3.6%
'Deficits were computed by adjusting baseline estimates of revenues for the difference in
nominal Incomes relative to the baseline scenario and by adjusting outlay estimates for
unemployment compensation, food stamps, and other means tested programs for the
difference in the projected unemployment rate relative to the baseline. Finally, estimates
for interest on the debt were adjusted, relative to the baseline, to reflect both the effects
of higher (or lower) nominal interest rates because of changes In the Inflation rate and the
effect of changes in the volume of government financing.
"No 5-year period In the 1970's had cumulative real growth as high as 20%.
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Are Federal Deficits Important?
Some public officials have recently been repeating a point
made by academicians in the 1970's -- namely, historically,
deficits were not high at the same 'time interest rates were
high, and so, even if the economy does not grow out of the
projected deficits, they do not pose a threat.
First, it is important to point out that the deficits we
.face are without precedent in the postwar period, both in
magnitude and duration. As shown in Table 3, for example, the
deficit and its drain on the credit markets peaked in calendar
year 1975 and quickly subsided. That is not the case now, as
shown, in the accompanying Table 4. In 1977, in the third year
of the recovery, public sector borrowing absorbed only 20
percent of funds raised in the credit and equity markets. In
1985, at what would be a comparable stage of the business cycle,
public borrowing is projected to absorb 40 to 55 percent of the
funds raised.
Funds Raised Is the Credit and Eacity M
tots
Calendar
Year
Total Funds'
Raised
Public Sector
Borrowine
Public Sector
Percentage
Private Sector
Percentage
1973
$201.7b
$ 21.5b
10.6%
89.4%
1974
193.9
27.3b
14.1
85.9
1975 (1st Recovery year)
214.4
M.1
46.2
83.8
1976 (2nd Recovery year)
273.5
94.2
30.9
69.2
1977 (3rd Recovery year)
334.3
72.2
21.6
78.4
1978
401.7
72.8
18.1
81.9
1979
402.0
57.6
14.3
85.7
1980
397.1
106.3
26.8
73.2
1981
406.9
109.7
27.0
73.0
1982
440.7
207.1
47.0
53.0
Table 4. Funds Raised to the Credit
markets - Alternative Scenario.
Total F
Raise
unds Public Sector
d* Borrowine
Public
Percentage
Private
Percentage
Calendar
Year
8%
Seen-
rio
11%
Seen-
alto
Fed-
oral
Stat
loc
e-
al
8% 11%
Seen- Seen-
allo {o
8% 11%
Seen- Seen-
jILL9 ri
1993 (est.) 3 $03b 3
214b
3
45b
$1.5% 48.5%
1975 First Recovery Year
46.2 53.8
1984 450 606
215
43
57.3 42.6
42.7 57.4
1976 Second Recovery Year
30.8
89.2
1985 476 662
218
46
55.5 39.9
45.5 60.1
1977 Third Recovery Year
21.6
78.4
*Includes domestic nonfinancial borrowing, nonfinancial borrowing by foreigners,
domestic and foreign equities issued in the United States.
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A second reason why it is likely that deficits now projected
will affect interest rates (and may be affecting them now) is
that we are now operating under a different monetary policy
regime. There is no indication that this Federal Reserve Board
Chairman or other members of the Federal Open Market Committee
are going to accommodate these deficits. My colleague Allen
Sinai has put these two facts together -- the expected size and
persistence of large deficits and the post-October, 1979
monetary policy regime -- into an analytical relationship that
suggests that long term corporate bond rates are 200 to 300
basis? points higher than they would be if the expectation were
for $100 billion rather than $200 billion deficits.
Where will all the funds needed to finance the deficits come
from and what will be the effects? The answer is, from our
savings and the savings of the rest of the world. Table 5 is
extremely important, demonstrating a couple of critical facts.
Table 5. Savlnf Available for Investment
(By calendar year, as a percent of GNP)
1961
to
1970
1971
to
1980
1985
Projection
Private Savings
4.7%
4.9%
4.0%
Business savings (gross)
11.7
12.0
13.5
Subtotal gross private saving
16.4
16.9
17.5
State-local budget surplus
+1.0
+1.0
Net foreign investment
-0.5
-0.1
+1.6
(net flows of capital)
Subtotal amount available to finance
the federal deficit and for
investment
15.9
17.8
20.1
Federal deficit
-0.5
-f
-1.9
-5.3
Subtotal, amount available for
gross private investment
15.4
15.9
14.8
Capital consumption allowance
-8.4
-9.9
-11.0
Total amount available for
net new investment
7.0
6.0
3.8
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First, even with larger domestic private savings (as a share
of GNP) and large foreign capital inflows, the 1985 deficit
would still siphon off enough saving to reduce the funds
available for private investment as a share of GNP to well below
the 1960's and 1970's averages. Also,. those foreign capital
inflows, "net foreign investment" in the table, are the
financial counterpart of massive current account deficits, which
have literally cost millions of jobs in export and import
competitive manufacturing sectors. This year the merchandise
trade deficit is likely to be $60 billion and we forecast that
it could grow to $90-$100 billion in 1984. The deficit on
manufactured goods, where the Institute for International
Economics estimates there are 25,000 to 40,000 jobs per billion.
dollars of exports, will grow by $25 billion in 1983 and
probably by another $25 billion in 1984. Lasting damage is being
inflicted on our international trade competitiveness that may be
hard to repair. In short, foreign capital inflows are helping
to reduce somewhat the financial crowding out of private
borrowing. (That is the significance of the +1.6 percent of GNP
that is made available for financing the federal deficit and for
investment in the last column of the table.) But, this
reduction in financial crowding out is taking place through a
process that crowds U.S. exporters and domestic competitors to
.foreign imports out of the markets for manufactured goods. It
is their products, their profits, and ultimately their workers
that will be crowded out by large federal deficits. An
important byproduct of this is increasing discussion of
protectionist legislation, an outcome in which no one comes out
a winner.
I find that when looking at the budget problem and trying to
evaluate goals, it is useful to use Table 5. Its clear from
that table that cutting the deficit to 2 percent of GNP would
markedly improve things. Funds available for investment would
rise, provided that the budget cuts were not directed at cutting
personal and business saving. In that light, the table makes it
clear that budget restraint that would reduce the flow of saving
would not be a helpful step. Although such actions may have to
be part of a package of changes for political reasons, it is
clear that they do not contribute to a long run goal of
improving capital formation and easing credit market pressures.
What Will It Take to Reduce The Deficit Significantly?
The deficit is a little like the weather. Everyone talks
about it, but no one does anything about it. That may be
because the choices are very difficult ones.
To reduce the deficit to 2 percent of GNP by, say, 1986
would require $135 billion of budget changes, according to our
calculations -- $100 billion of combined spending cuts and
revenue increases and we estimate about a $35 billion reduction
in interest costs.
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On the revenue side $50 billion in tax increases is about
what the First Concurrent Budget Resolution had in mind. The
tax part of HR. 3790 could be a part of the total but would not
raise nearly enough. It would take some major new tax -- like
some form of consumption tax -- together with miscellaneous
other changes like those currently being considered by the tax
committees to reach this goal. On the tax side, embedded within
what I believe to be an extreme position taken by supply-siders
-- such as Norman Ture in his Wall Street Journal article -- is
an important point.- Tax increases that reduce saving are not
very useful.
It is clear that something can be done on the revenue side.
Outlays are another matter. And here I am primarily referring
to nondefense outlays. Congress has already set out on a course
that is scaling back the President's defense buildup. The
baseline projections that were shown in Table 1 assume a cut of
$18 billion in outlays from the President's proposals for 1985
and a bigger cut for 1986. This is what was assumed in the
First Concurrent Resolution and action to date by the
authorization and appropriation committees is consistent with
those cuts.
With respect to nondefense outlays, the view exists that
with the Social Security (OASDI) legislation of this year,
further changes -- such as COLA freezes -- are not legitimate
options. As shown in Table 6, this results in an untenable
position from which to try to get $50 billion in spending cuts.
When interest, defense and OASDI are excluded from projected
1986 outlays, all that is left is $387 billion. Many of the
programs that are left, shown in Table 7, are ones that have
already been cut. It is unreasonable to expect that $50 billion
would be taken from these programs -- reducing them in 1986 to
$10 billion below the estimated level for 1984. I believe we
are left with the inescapable conclusion that if a big cut --
like $50 billion -- is to be made in spending, social security
and maybe even defense will have to suffer some further cuts.
Table 6. What Is Left When Interest, Defense,
and OASDI are Rzciuded7
Projected 1986 Total Outlsys $ 1010.4 b
lean interest 143.4
Defense 276.9
Social Security (OASDI) 203.0
Projected Remainder, nondefense,
noninterest, non-OASDI
Total, Nondefense, noninterest, non-OASDI $387.1 b
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Table 7. Composition of Nondefense, lioninterest,
Non-OASDI Spending for 1986
Medicare
$85.5 b
Civil Service/Military Retirement
45.0
$187.8 b- Limited reductions
Other nonmeans tested benefits
57.3
in these programs.
Means tested benefits
85.3
Grants to state-local governments
$7.4
$199.3 b -- Where most of reductions
Civilian agency pay
39.0
in growth of spending have
Other Operations and Subsidies
taken place.
(agricultural price supports,
business subsidies, etc.)
17.6
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Social Security and H.R. 3790
The proposal by Chairman Jones and others, H.R. 3790, would
index social security and other nonmeans tested benefit programs
to the CPI minus 2 percentage points in 1985-1990. One argument
made against this proposal and other proposals, such as the call
for a two year freeze on COLAs, is that future benefits for
current social security recipients were already cut in the
recently passed legislation and so it is not appropriate to
return to them for further reductions. Another argument is that
social security is a separate system and should be considered
outside the budget. In fact, after, 1990, the new law orders
that it be taken "off-budget."
There are some important counterarguments that should be
brought up. First, most of the recipients who would be affected
by H.R. 3790 received COLA adjustments well in excess of what is
generally accepted as having been the rate of inflation at the
time, because of distortions in the CPI. In 1978 to 1981, COLAs
increased benefits by 59.8 percent while consumer prices, as
measured by the personal consumption deflator, rose by 47.7
percent, when meansured on the first quarter to first quarter
basis used for indexing social security. This "overindexing"
gap of 12 percentage points is almost exactly what would be lost
between 1985 and 1990 under the "CPI minus 2" formula in H.R.
3790.
Second, a careful examination of some of the effects of the
new law make it clear why it may be appropriate to cut back
COLA's for current beneficiaries and why it will soon not be
possible to suggest that social security be viewed as a separate
system, outside the budget.
The long term social security problem, prior to the recent
amendments, is depicted in Figure 1, which shows that on a
present value basis, expected lifetime benefits were scheduled
to exceed lifetime employer-employee tax payments for all
cohorts of workers, forever. In other words, the fact that the
average worker could expect to get more out of the system than
he and his employer had contributed was not jest a temporary,
transitional phenomenon that would disappear once the system had
matured. Rather, a subsidy was built into the system. This
just could not continue if the system was to remain
self-financed. s
Some theoretical research had at one time suggested that such
a Ponzi scheme in a pay-as-you-go social insurance program
could continue forever, but that work was based on the
assumptions of steady rates of population and productivity
growth. The real world, where there are wide year to year
fluctuations in the rates of population and productivity
growth, is simply not consistent with those theoretical
models, making them at best useless and at worst misleading
for policymakers.
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Figure 1
Present Value Ratios Prior to
the 1983 Nre +ents
IRLSDtT VAL RATIO
3.0 r-----
-------------------------------------
0L
1983 1990 2000
l Figures were estimated under the intermediate sosiario in the Social Security
Administration's 1983 Trustees Report for a retiree with average lifetime
earnings who is single or has a working sparse who qualifies for benefits
ux1ecendently.
The changes made by the new legislation are shown in
Table B. We estimate that some small reduction was made in the
returns on employer-employee taxes for a 1983 retiree, but the
largest changes were made in the returns for retirees after 2010
-- individuals who entered the workforce after 1965 and will
enter-the workforce in the future. Starting with 2006 retirees,
an average wage earner can expect to receive a present value of
benefits that will. be less than the present value of taxes. The
new plot of the ratio of the present value of benefits over the
present value of taxes is shown in Figure 2. In the next
figure, the same type of plot is made, by pre-retirement income
group. A maximum wage earner will have a very low ratio --
about 0.6.
Table 8 _ --
E timatsd Savings to OASDI Overatlons From the 1983 Amendments
Dnder the Intsresdiate and Pessimistic Scenarios-
(Calendar year, billions of dollars)
1983
1986
98
1986
JW-
19*81989
Total.
1983-1989
Tax benefits
--
2.6
3.2
3.9
4.2
5.6, 6.7
0
5 16
14
26.6
39.4
Now up scheduled tax increases
6.6
0.3
--
2
.
.
4
7 4
3
14.5
increase tax on wait-saployed
--
1.1
3.1
3.0
3.
4
.
.
-
4 -
4
16.1
Military wage credits
16.4
-.4
-.4
-.3
-.
2
.
.
3
7
6
7
39.4
COLA delays
3.2.
5.2
5.4
5.5
6.
9
3
.
.
.
0 6
1
6
21.8
coverage
Lapsed
-
1.5
2.2
3.0
-
.
-
.
.
- -
--
Raise retirement age
--
-
--
--
COLA stabilizer
-'
0
4
7 1
1
0
4.3
Other
1.2
0.6
0.1
0.2
.
0
6
.
.
5 41
2
35
166.2
Total for all changis
22.8
19.2
13.9
15.3
.
1
0
.
.
0
0 17
16
117.0
Deficits prior to Amendments ,
23.0
20.0
12.0
14.0
15.
.
.
Figures are based-on the 1983 Trustees Report. Figures in parentheses are .stiaated from
the pessimistic scenario. Components may not sus to total* due for ounding. Since the
figures are based solely on OASDI operations, they do not include the $12.4 billion owed by
OASDI to RI.
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3.0
Figure 2
Present Value Ratios Alter
the 1983 Aura
Effect of H.R. 3790
719S M VAL08 BASO
3.0 ..~ ._-
Figure 3
Prescmt Value Ratios After the
1983 is
Pre-retirement Inome Gzumsl
1 Figures were estimated umdnr the inta:sediate aomario in the Social Seaaity
Adminietratirn'a 1983 Trustees Peport for a retiree with average 11feti
O-Lngs ~yis single ac h" a working apmm who qualitise for baafit
0''
1081 1000 2000 2010 2020 2010 2040 2030
1 Pigua+e. were estimated under the intamediate a0erario in Ow Social Security
Adainiatratioa'. 1983 '$latae. Report for retismes at hd earned the
mWam, average and meaiiaa wage (as defined by the 80cia1 Seasity Addaia-
tratian) and who is single ar has a wacking .pmam %ft qualities. for benefits
trdapadentiv.
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The charts convey two messages. First, current
beneficiaries are still receiving returns on benefits that are
well in excess of the value of their lifetime employee-employer
contributions. It is difficult to make the argument that
reducing these subsidies a bit is unfair. As shown in Figure 2,
H.R. 3790 would lower the subsidy and flatten out the curve
somewhat, but the subsidies to current beneficiaries would still
be there and would still be substantial.
A second message of the charts is that it is unlikely that
social security, as a self-financed and isolated social
insurance system, will be able to survive, for the following
reason. Public support for the system is likely to erode as
people realize the poor return they will be getting on their
contributions. (Surveys show that even though social security
has been paying enormous subsidies since its inception, many
people are still under the impressing that they don't get their
"money's worth.") One can only speculate what the surveys will
show when people in fact do not get their "money's worth."
Thus, even though the new legislation technically takes social
security "off budget" in 1990, it is clear that at some point,
the system will be lumped together with other government
expenditures, and decisions on social security will have to be
made within the context of decisions about the level and
composition of all government spending. It will not be possible
to act as if social security is a program apart from the rest of
the budget.
The Consequences of Delay -- Long Term Projections
The political difficulty of undertaking the types of changes
that would be required in order to substantially cut the deficit
leads quite naturally to the question of what happens if nothing
is done.
This is not the time to discuss what. happens to the economy
if nothing is done. So many short and long term factors are
involved that it would take more time than is available to
discuss them thoroughly. What we have done for today, though,
is take a futuristic look-at the budget to see if the problem
ever goes away or simply gets worse. The analysis is
preliminary and will be elaborated upon in the future. But,
even these early results are quite revealing.
A projection of the budget in 2000 and 2025 was done under
the Social Security Administration's II-B and III economic and
demographic scenarios. These scenarios were chosen not
necessarily because they are the most likely -- although if we
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had to choose between them we would select Scenario III, shown
in Table 9. The advantage of using these scenarios is that they
are well known and ready-made estimates for three big programs
-- OASDI, Hospital Insurance, and Supplementary Medical
Insurance -- are available.
For the two scenarios, we assumed no change in tax laws,
current services for nondefense spending and two possibilities
for defense:
real growth equivalgnt to the economy's
real growth rate, so that the GNP share
for defense (excluding retired pay)
remains at 6.7 percent forever.
or a continuation of 5 percent real growth
through the year 2000, until the GNP share
for defense reaches about 9 percent, and
then a constant GNP share thereafter.
Love Itwwe Economic Assumptions Used In
llocial Security Trustee' Scenarios' - I?
('intermediate Pessimistic") and Q
("Pessimistie")
Real GNP Growth
Inflation
Rate
Unemployment
Rate
Year
lIB
Ill
1I13
Ill
UB
1990
3.0%
2.796
4.0%
5.0%
6.5%
7.4%
1991
3.0
2.6
4.0
5.0
6.2
7.0
1992
3.0
2.5
4.0
5.0
5.6
6.6
1993
2.5
2.3
4.0
5.0
5.7
6.5
1994
2.5
2.0.
4.0
5.0
5.6
6.5
1995
2.6
2.1
4.0
5.0
5.5
6.5
2000 &
later
2.6
2.1
4.0
5.0
5.5
6.5
'Source: 1983 Annual Report - Federal Old-Are and Survivors
Insurance and Disability Insurance Trust Fund.
June 27, 1983. .
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' - 1 L -
The estimates for the year 2000 (Table 10) show some
moderation in social security costs under the II-B scenario and
slightly higher costs as a share of GNP, under the pessimistic
scenario. In both scenarios, expenditures for medicare
(Hospital Insurance and Supplementary Medical Insurance) rise
significantly. Depending on the policy for defense and on the
economic scenario, interest costs would continue to climb, as a
share of GNP, even though nominal interest rates are only 6.1 to
6.6 percent. By the year 2000, the deficit could be a bit lower
than projected for 1988, 4.2 percent of GNP under the most
optimistic case, or could rise to 9.9 percent of GNP under the
more pessimistic scenario.
Table 10
Year 2000 Protections of Federal Outlays as a Percent of
GNP - Using Social Security II-B and III Scenarios
1988 Year 2000
IIB III
OASDI --Retirement and Disability
Part of Social Security 4.6% 4.3% 4.8%
HI --Hospital Insurance Part of
Social Security 0.9% 2.0 2.6
Supplemental Medical Insurance (SMI) 0.3 1.0 1.3
Civil Service/Military Retirement 1.1 1.1 1.1
Other Nonmeans Tested Benefits 1.4 0.9 1.0
Means Tested Benefits 1.9 1.9 1.9
Grants 1.2 1.2 1.2
Other Operations/Subsidies Civilian
Agency Payroll 1.4 1.4 1.4
Defense' 6.7 6.7 to 9.0 6.7 to 9.2
Interest 3.9 3.6 to 4.5 4.3 to 5.4
Total 24.6% 24.2% to 27.3% 26.3% to 29.9%
*The range gives what happens if (a) defense grows in real terms as fast as
GNP after 1988 (low end) and (b) defense grows in real terms by 5 percent
each year (upper end.) This range for defense expenditures under each
scenario causes a range for interest costs.
By the year 2025, the situation becomes untenable, as shown
in Table 11, with deficits shooting up well into double digits.
Entitlements, like social security and medicare, play an
important part in the projected long range growth of the
deficit. But the acceleration in the growth in interest costs
is most important. It turns out that although nominal interest
rates are assumed to be below GNP growth rates throughout the
period, the massive buildup of debt, because the budget
excluding interest runs large deficits, causes the debt-GNP
ratio to rise and interest costs to increase along with that
ratio. The possibility of just such a "blowup" of interest
costs has been raised by some economists, such as James Tobin,
and Albert Ando, but this is the only example I have seen of
calculations that try to show the order of magnitude of the
numbers.
Approved For Release 2008/01/28: CIA-RDP85BO1152RO01001350034-3
 Approved For Release 2008/01/28: CIA-RDP85BO1152RO01001350034-3
Federal spending in 2025, As a Share of GNP -- Using Social
Security II-B and III Scenarios
OASDI -- Retirement and Disability
Part of Social Security
4.6
5.6%
6.7%
HI -- Hospital Insurance Part
of Social Security
0.9
3.2
4.1
SMI -- Supplementary Medical
Insurance
0.3
1.6
2.1
Civil
Service/Military Retirement
1.1
1.1
1.1
Other
Nonmeans Tested Benefits
1.4
0.6
0.7
Means
Tested Benefits
1.9
1.9
1.9
Grants
1.2
1.2
1.2
Other
Operations/Subsidies Civilian
Agency Pay
1.4
1.4 1.4
Defenses
6.7
6.7 to 9.0 6.7 to 9.2
Interest
3.9
6.3 to 11.6 11.9 to 18.4
Total
24.6
29.7% to 37.2% 37.8% to 46.8%
The purpose of these long range projections, especially the
2025 estimate, is not to make a prediction. Neither we nor
anyone else can foretell what' policies and external shocks will
come to pass over the next 50 years. Rather, the calculations
represent another way of showing, first, that the problem of
large deficits is not a temporary one and second that there is a
very good chance that it will get worse unless something is
done.
Approved For Release 2008/01/28: CIA-RDP85BO1152RO01001350034-3