The United States faces a growing fiscal challenge as spending on Social Security, Medicare, and interest payments continues to rise sharply relative to GDP. Two charts illustrate these trends, providing a clear picture of the drivers behind future federal spending.

The first chart shows that spending on Social Security, Medicare, and healthcare, as a percentage of GDP, is set to rise steadily through 2033. Notably, Social Security and healthcare spending climb at a steady pace, reflecting an aging population and increasing healthcare costs. In contrast, defense and non-defense discretionary spending show a decline relative to GDP, leaving entitlement programs and net interest costs as the primary drivers of federal spending growth.

Interest costs on the national debt are a particularly concerning aspect of this forecast. As interest rates normalize after years of historically low levels, debt servicing will consume a larger share of federal resources. By 2033, interest payments alone are projected to account for over 3% of GDP—more than double the level seen in 2023.

The second chart quantifies the impact of these spending trends in inflation-adjusted terms. By 2033, Social Security and healthcare entitlements are expected to account for an additional $2.4 trillion in spending compared to 2008 levels, dwarfing increases in other areas. Meanwhile, net interest costs will rise by $902 billion, making these two categories responsible for 86% of the projected spending increase over this period.

The implications of these trends are profound. Discretionary spending, including defense, education, and infrastructure, faces increasing pressure as mandatory entitlement programs and interest costs consume a growing share of the federal budget. Without policy changes, the federal government may struggle to fund critical programs or respond to unexpected crises.

Policymakers face difficult decisions to address this imbalance. Options include reforms to entitlement programs, such as adjusting eligibility ages or modifying benefit formulas, and measures to reduce the national debt and curb interest costs. However, such changes are politically challenging, given the popularity of programs like Social Security and Medicare.

These projections serve as a stark reminder of the fiscal challenges ahead. As entitlement spending and interest costs continue to rise, finding a sustainable path forward will require a combination of fiscal discipline, innovative policy solutions, and political will.