The 2020 Long-Term Budget Outlook

After 2030, in CBO’s projections, discretionary spending transitions over a five-year period from growing with the rate of inflation to growing with nominal GDP. Beyond 2035, CBO’s extended baseline projections reflect the assumption that discretionary spending will grow with nominal GDP and remain constant at 5.6 percent of GDP through 2050 (see Figure 12).32[24]

Figure 12.

Other Federal Noninterest Spending

Percentage of Gross Domestic Product

Over the long term, other federal noninterest spending, measured as a percentage of economic output, declines in CBO’s projections.

Source: Congressional Budget Office.

a. Consists of all mandatory spending other than that for Social Security and the major health care programs. It includes the refundable portions of the earned income tax credit, the child tax credit, and the American Opportunity Tax Credit.

Other Mandatory Spending. Since the mid-1960s, mandatory spending excluding that for Social Security and the major health care programs has generally remained between 2 percent and 4 percent of GDP. That category of spending includes outlays for SNAP, unemployment compensation, retirement programs for federal civilian and military employees, certain veterans’ programs, Supplemental Security Income, and certain refundable tax credits.33

Other mandatory spending is projected to equal 11.0 percent of GDP in 2020 and 3.7 percent in 2021, an increase from its value of 2.7 percent in 2019, mainly because of policies enacted in response to the pandemic and associated economic downturn. For the rest of the 10-year period, such spending declines gradually as a share of the economy, reaching 2.3 percent of GDP in 2030.34 The projected decline occurs in part because benefit amounts for many of those programs are adjusted for inflation each year, and inflation in CBO’s economic forecast is estimated to be less than the rate of growth in nominal GDP.

In CBO’s extended baseline projections, other mandatory spending falls to 2.0 percent of GDP by 2050. In part, that reduction is attributable to growth in income, which decreases the number of people who qualify for refundable tax credits. That reduction also reflects the assumption that after 2030 other mandatory spending, excluding outlays for such tax credits, declines at roughly the same rate by which it is projected to fall between 2026 and 2030.35

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