Access the dashboard here
In our March 2025 working paper, we (and co-authors John Mantus and Gaobo Pang) explain, justify, and show the results of our updated macroeconomic projection model of the US economy and federal budget. We argue that debt, deficits, and health care spending will grow beyond levels projected by Congressional Budget Office (CBO) and others, in turn causing welfare losses for future generations. In addition, in Warshawsky and Bokhua, we show possible policy steps for reducing health care expenditures and other fiscal changes to put the US back on a sustainable budget path.
As a companion to our working paper, we have developed a dashboard which allows users to adjust assumptions and implement their own policies to reduce future levels of debt and improve welfare for generations to come. By adjusting the sliders on the left-hand side of the screen, users can, e.g., increase income taxes, increase levels of investment, reduce Social Security benefits, and change projected health care elasticities. In doing so, we hope users can learn more about the key relationships driving our projections and gain a better understanding of what can be done about America’s current fiscal trajectory.
In this post, we briefly demonstrate how to use the dashboard. After a few seconds of loading, the dashboard will display our baseline assumptions (left) and projections of key outcome variables (right), specifically the ratios of debt, deficits, and national health expenditures (NHE) to GDP, and our measure of welfare, computed as growth in consumption less health care expenditures. This screen is shown below.
Users can adjust various assumptions or implement policy changes using the sliders on the left, then click “Run Model” to produce new projections using this new set of assumptions. For example, to reduce deficits, one could increase income and Social Security payroll tax rates by one percentage point each, cut non-health federal spending by ten percent, and increase the average Social Security replacement rate by five percentage points. New projections after making these changes are shown below. The solid circles continue to show baseline assumptions while the empty circles represent outcomes under the new set of assumptions.
We see that, as expected, ultimate levels of debt and deficits decrease. Further, welfare improves as, in our model (based on assumptions made by CBO), deficits crowd out investment, reduce capital, and slow economic growth, so efforts to reduce the deficit will generally improve welfare. However, further welfare gains are possible by reducing health care expenditures. To do this, we can change the magnitudes of our health care elasticities with respect to income and prices. As incomes grow, all else equal, we expect consumers to spend more on all normal goods, including health care services. As the price of health care increases relative to all other goods, we would expect the opposite. Elasticities capture the extent of these relationships in our projections.
Because both income and the relative price of health care are projected to rise, decreasing (increasing) our health care elasticity with respect to income (prices) will reduce NHE as a share of GDP. In the example shown above, ultimate levels of NHE are reduced from about 37 percent of GDP to just 20 percent. This spills over into improved measures of welfare and lower debt as spending on federal health programs like Medicare and Medicaid decrease, as well.
(On the dashboard webpage itself, hovering over a line in the chart will show which projection you are looking at, i.e., “Baseline,” “Alternative 1,” “Alternative 2,” etc. We allow for up to four alternatives to be shown at once before overwriting past alternatives.)
As you can see, however, even these drastic changes to consumer behavior and federal finances still lead to rising debt, which reaches 146 percent of GDP in 2072 and over 240 percent by the end of the projection period.
Can you put us on a sustainable fiscal path? Try the dashboard here.
The working paper can be found here.
The shorter policy analysis paper can be found here.
The code underlying this dashboard can be found here.
The post A Revised Macroeconomic Projection Dashboard: Can You Put the US Back on a Sustainable Budget Path? appeared first on American Enterprise Institute – AEI.
