1. Revenue (that is, taxes) will go up to 18.5% of GDP. For comparison, in 2018 taxes were 16.4% and in 2019 they will be 16.5%. But according to the CBO projection, they will be 18.3% in 2029. I just make this 18.4% in 2030 and 18.5% in 2031, and leave them at 18.5% thereafter.
2. Nominal GDP will go up every year by 4%. This includes both inflation and increases in real GDP.
3. Social Security is capped at 6% of GDP. For comparison, in 2018 SS is 4.9% and in 2019 SS is 4.9%. The CBO projects that in 2029 they will be at 6%. So I leave them there in 2030 and for future years. However, under the official Social Security projections, SS will peak at 6.38% in 2044 and then gradually decrease thereafter. I am assuming that there will be some sort of SS reform by 2030.
4. Medicare is capped at 5% of GDP. For comparison, this number is 3.5% in 2018 and 3.6% in 2019.
5. Average interest rates will decrease by 0.02% per year until they reach 2.0%. For comparison this number is 2.06% in 2018 and 2.3% in 2019. The CBO projects that in 2029 this will be 3.21%. I set this to 3.19% in 2030 and decrease it by 0.02% per year thereafter until it hits 2.0% in 2090.
Using these assumptions, Debt Held By the Public will never exceed 136.6% of GDP, which it will hit in 2082 and maintain until 2086 and then start decreasing thereafter.
So here is what my revised projection looks like, in the same format as the previous one. I only display this through 2070, because that is 51 years from now and is long enough.
| Memo | Memo | ||||||||
| Debt | Debt % | Net | SS | ||||||
| Year | Revenues | Outlays | Deficit | Public | GDP | of GDP | Interest | Outlays | |
| 2018 | 3,329 | 4,108 | -779 | 15,751 | 20,236 | 77.8% | 325 | 982 | |
| 2019 | 3,515 | 4,416 | -901 | 16,636 | 21,252 | 78.3% | 383 | 1,039 | |
| 2020 | 3,686 | 4,604 | -918 | 17,601 | 22,120 | 79.6% | 465 | 1,102 | |
| 2021 | 3,841 | 4,830 | -989 | 18,626 | 22,939 | 81.2% | 528 | 1,171 | |
| 2022 | 4,012 | 5,061 | -1,049 | 19,795 | 23,778 | 83.2% | 571 | 1,245 | |
| 2023 | 4,208 | 5,329 | -1,121 | 20,976 | 24,672 | 85.0% | 641 | 1,323 | |
| 2024 | 4,448 | 5,577 | -1,129 | 22,112 | 25,642 | 86.2% | 692 | 1,403 | |
| 2025 | 4,647 | 5,835 | -1,188 | 23,300 | 26,656 | 87.4% | 720 | 1,487 | |
| 2026 | 4,956 | 6,156 | -1,200 | 24,500 | 27,667 | 88.6% | 775 | 1,574 | |
| 2027 | 5,254 | 6,468 | -1,214 | 25,714 | 28,738 | 89.5% | 833 | 1,664 | |
| 2028 | 5,447 | 6,778 | -1,331 | 27,044 | 29,862 | 90.6% | 866 | 1,759 | |
| 2029 | 5,672 | 7,095 | -1,423 | 28,467 | 31,006 | 91.8% | 930 | 1,856 | |
| 2030 | 5,933 | 7,411 | -1,478 | 29,945 | 32,246 | 92.9% | 930 | 1,935 | |
| 2031 | 6,204 | 7,724 | -1,519 | 31,465 | 33,536 | 93.8% | 949 | 2,012 | |
| 2032 | 6,452 | 8,071 | -1,619 | 33,083 | 34,878 | 94.9% | 991 | 2,093 | |
| 2033 | 6,710 | 8,435 | -1,725 | 34,808 | 36,273 | 96.0% | 1,036 | 2,176 | |
| 2034 | 6,979 | 8,816 | -1,837 | 36,645 | 37,724 | 97.1% | 1,083 | 2,263 | |
| 2035 | 7,258 | 9,214 | -1,956 | 38,601 | 39,232 | 98.4% | 1,132 | 2,354 | |
| 2036 | 7,548 | 9,631 | -2,083 | 40,684 | 40,802 | 99.7% | 1,185 | 2,448 | |
| 2037 | 7,850 | 10,067 | -2,217 | 42,901 | 42,434 | 101.1% | 1,241 | 2,546 | |
| 2038 | 8,164 | 10,523 | -2,359 | 45,260 | 44,131 | 102.6% | 1,300 | 2,648 | |
| 2039 | 8,491 | 11,001 | -2,510 | 47,770 | 45,896 | 104.1% | 1,362 | 2,754 | |
| 2040 | 8,830 | 11,452 | -2,622 | 50,391 | 47,732 | 105.6% | 1,428 | 2,864 | |
| 2041 | 9,184 | 11,921 | -2,738 | 53,129 | 49,642 | 107.0% | 1,497 | 2,978 | |
| 2042 | 9,551 | 12,409 | -2,858 | 55,987 | 51,627 | 108.4% | 1,567 | 3,098 | |
| 2043 | 9,933 | 12,916 | -2,983 | 58,970 | 53,692 | 109.8% | 1,640 | 3,222 | |
| 2044 | 10,330 | 13,442 | -3,112 | 62,082 | 55,840 | 111.2% | 1,716 | 3,350 | |
| 2045 | 10,744 | 13,990 | -3,246 | 65,328 | 58,074 | 112.5% | 1,794 | 3,484 | |
| 2046 | 11,173 | 14,558 | -3,385 | 68,713 | 60,397 | 113.8% | 1,875 | 3,624 | |
| 2047 | 11,620 | 15,149 | -3,529 | 72,241 | 62,812 | 115.0% | 1,958 | 3,769 | |
| 2048 | 12,085 | 15,763 | -3,678 | 75,919 | 65,325 | 116.2% | 2,044 | 3,919 | |
| 2049 | 12,569 | 16,400 | -3,832 | 79,750 | 67,938 | 117.4% | 2,133 | 4,076 | |
| 2050 | 13,071 | 17,063 | -3,991 | 83,742 | 70,655 | 118.5% | 2,225 | 4,239 | |
| 2051 | 13,594 | 17,751 | -4,157 | 87,899 | 73,482 | 119.6% | 2,320 | 4,409 | |
| 2052 | 14,138 | 18,466 | -4,328 | 92,226 | 76,421 | 120.7% | 2,417 | 4,585 | |
| 2053 | 14,703 | 19,208 | -4,505 | 96,731 | 79,478 | 121.7% | 2,518 | 4,769 | |
| 2054 | 15,292 | 19,979 | -4,688 | 101,419 | 82,657 | 122.7% | 2,621 | 4,959 | |
| 2055 | 15,903 | 20,780 | -4,877 | 106,296 | 85,963 | 123.7% | 2,728 | 5,158 | |
| 2056 | 16,539 | 21,612 | -5,073 | 111,369 | 89,402 | 124.6% | 2,838 | 5,364 | |
| 2057 | 17,201 | 22,477 | -5,276 | 116,645 | 92,978 | 125.5% | 2,951 | 5,579 | |
| 2058 | 17,889 | 23,374 | -5,485 | 122,130 | 96,697 | 126.3% | 3,068 | 5,802 | |
| 2059 | 18,604 | 24,306 | -5,702 | 127,832 | 100,565 | 127.1% | 3,188 | 6,034 | |
| 2060 | 19,349 | 25,274 | -5,926 | 133,757 | 104,587 | 127.9% | 3,311 | 6,275 | |
| 2061 | 20,123 | 26,279 | -6,157 | 139,914 | 108,771 | 128.6% | 3,438 | 6,526 | |
| 2062 | 20,928 | 27,323 | -6,396 | 146,310 | 113,122 | 129.3% | 3,568 | 6,787 | |
| 2063 | 21,765 | 28,407 | -6,643 | 152,953 | 117,647 | 130.0% | 3,702 | 7,059 | |
| 2064 | 22,635 | 29,533 | -6,898 | 159,851 | 122,352 | 130.6% | 3,839 | 7,341 | |
| 2065 | 23,541 | 30,702 | -7,161 | 167,012 | 127,247 | 131.3% | 3,980 | 7,635 | |
| 2066 | 24,482 | 31,916 | -7,434 | 174,446 | 132,336 | 131.8% | 4,125 | 7,940 | |
| 2067 | 25,462 | 33,176 | -7,715 | 182,161 | 137,630 | 132.4% | 4,274 | 8,258 | |
| 2068 | 26,480 | 34,485 | -8,005 | 190,165 | 143,135 | 132.9% | 4,427 | 8,588 | |
| 2069 | 27,539 | 35,844 | -8,304 | 198,470 | 148,860 | 133.3% | 4,583 | 8,932 | |
| 2070 | 28,641 | 37,255 | -8,614 | 207,084 | 154,815 | 133.8% | 4,743 | 9,289 |
So I fixed it. And it isn't much of a tweak. Compared to my old 2053 projection, let's look at 2053. Previously I saw revenues as 14,306, now they are 14,703. Previously, the deficit was 6,562 in 2053, now it is 4,505. Ok that's a big change. And previous, interest in 2053 was 3979 and now it is 2518.
So what needs to happen to make this fix? 1. Tax reform, and yes that means increasing taxes by 2030. 2. Entitlement reform, and yes that means a cap on SS payments starting in 2030. 3. Interest rates decrease. This may happen naturally if you look at Japan.
So maybe my entire premise is completely wrong and we can continue as is, with minor changes, forever.
Update 1: The forecast for revenue is reasonable. " By 2028, revenues are projected to total 18.5 percent of GDP ... and, two decades later, would total 19.8 percent of GDP."
https://www.cbo.gov/system/files/2018-06/53919-2018ltbo.pdf
Update 2: "CBO projects an increase in real potential GDP of 1.9 percent per year, on average, over the next 30 years." Growth of the CPI-U is expected to average 2.4% through 2048.
Update 3: Social Security is expected to increase to 6.3% of GDP by 2048.
Update 4: Healthcare spending (including Medicaid) is expected to increase up to 9.2% of GDP by 2048, much higher than my "cap" of 5.0%
Update 5: Interest rates will jump up to 6.3% of GDP. Definitely not sustainable.
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