The federal government is likely to spend $835 billion this year fighting the crises in the financial system and the economy, according to a new report by the Congressional Budget Office.
That spending represents about 6% of the nation's gross domestic product.
Of that amount, $340 billion is going toward the Troubled Asset Relief Program, which is being used primarily to bail out banks, insurers and the auto industry. Another $290 billion in 2009 outlays is being used to prop up mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500).
In addition, $187 billion is being used for economic stimulus and relief efforts such as extended unemployment insurance....
But over the long-term, CBO said, much greater pressure will bear down on the federal budget -- raising "fundamental questions about economic sustainability." That's because, barring any changes, federal debt is on track to greatly outpace economic growth over time.
The main culprits are the growth in federal spending on Medicare and Medicaid and, to a much lesser degree, Social Security. The growth rate in spending on those entitlement programs is due to two factors: the growth rate in health care spending and an increasing number of Americans growing old.
Today roughly 5% of GDP is spent on Medicare and Medicaid. By 2035, the CBO estimates, that number will double. The jump in Social Security spending is projected to rise from under 5% of GDP today to 6% by 2035.
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