Projected annual deficits of $1 trillion and more for the next decade will be driven by an increasingly aging society and the growing costs of Social Security and Medicare, according to the Congressional Budget Office's Budget and Economic Outlook for the next decade.

"The number of people age 65 or older is now more than twice what it was 50 years ago, and that number is expected to rise by about one-third by 2030," CBO's report says.

Social Security's outlays in 2019 were about $1.04 trillion. The costs are projected to surpass $1.5 trillion by 2026, and reach more than 1.92 trillion by 2030. The Old Age and Survivors Insurance program—Social Security's main pension for retirees—will cost $1.71 trillion in 2030. The Disability Insurance program will cost $213 billion.

As more retirees move to Medicare, its cost too will explode, ultimately overtaking Social Security's OASI as the most expensive mandatory spending program in the federal budget.

Medicare cost $775 billion in 2019, and is projected to grow to $1.2 trillion by 2025, and $1.72 trillion by 2030.

Beyond the growth in retiring participants, health care costs per beneficiary are also expected to grow, as the volume of consumption will increase health care inflation.

In 2019, the payroll taxes that fund Social Security and Medicare totaled $1.2 trillion. Outlays for Social Security and Medicare were about $1.8 trillion.

Payroll taxes now account for 5.9 percent of GDP, a ratio CBO expects will hold over the next decade.

But the deficit from social insurance programs will balloon.

By 2030, CBO projects payroll taxes will generate about $1.9 trillion. The cost of Social Security and Medicare will be $3.65 trillion.

Outlays for Social Security, Medicare, and the other federal health programs account for more than 90 percent of the projected growth in mandatory spending through 2030, according to the CBO.

In 1970, Social Security's outlays were 2.8 percent of GDP, and 4.4 percent in 1995. Medicare and other federal health insurance programs accounted for 0.8 percent of GDP in 1970, and 3.2 percent in 1995.

CBO is projecting slowing but positive GDP growth over the next decade. The agency estimates it will be 2.2 percent in 2020, and will subsequently average 1.7 percent throughout the next decade.

The $1 trillion-plus annual deficits projected over the next 10 years will grow the federal debt from 81 percent of GDP to 98 percent in 2030, the highest since World War II.

Under current law, the federal debt is projected to be 180 percent of GDP by 2050, according to the CBO.

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Social Security, Medicare spending will drive increases in federal debt over next decade

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