Access the dashboard here
In a March 2025 working paper, Mark Warshawsky along with John Mantus and Gaobo Pang (WMP) updated and explained the results of their macroeconomic projection model of the US economy, health care spending, and federal budget. They argue that debt, deficits, and health care spending will grow even beyond the high levels projected by the Congressional Budget Office (CBO) and others, in turn causing welfare losses for future generations, and are unsustainable. Warshawsky again updated the model in a recent 2026 blog post where, despite a slightly improved fiscal outlook due to lower real interest rates from a higher capital stock and lower labor force growth, the CBO’s and US Treasury’s long-range projections continue to be more optimistic than the WMP model.
As an aid, we have developed a dashboard which allows users to adjust assumptions and implement their own policy preferences to reduce future levels of debt and improve welfare for future generations. By adjusting the sliders on the left-hand side of the screen, users can increase income taxes, increase levels of investment, reduce Social Security benefits, change health care income and price elasticities, and more. In doing so, 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 the baseline assumptions (left) and projections of key outcome variables (right), specifically the ratios of debt, deficits, and national health expenditures (NHE) to Gross Domestic Product (GDP), and a measure of welfare, computed as growth in consumption less health care expenditures. This dashboard is shown below.
Users can adjust various assumptions or implement policy changes using the sliders on the left, then click the blue “Run Model” button 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-half of a percentage point each, cut non-health federal spending by fifteen percent, and reduce 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 because, in our model, deficits crowd out investment, reduce capital, and slow economic growth, so efforts to reduce the deficit will generally improve welfare.
Further welfare gains are possible by reducing health care expenditures and altering other economic parameters. 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. Furthermore, increased usage of AI in the health care space could boost both health care productivity and lower the relative price of health care. Although this change in health care sector productivity to .008 increases the demand for capital and therefore interest rates, it can be counteracted by an increase in the rate of investment to 0.24.
Decreasing health care elasticities with respect to income to 0.8 (and price elasticity to -1.1) and increasing health productivity, will reduce NHE as a share of GDP. Increases in the investment share of GDP raises capital, lowering interest rates and all these changes together spill over into improved measures of welfare and lower debt.
(On the dashboard webpage, 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.)
These significant changes to consumer and producer behavior and federal finances curb rising debt, to 133 percent of GDP in 2072 and 212 percent by the end of the projection period. Deficits are brought down too, although they rise over time, so more policy changes are needed, but those presented in this example represent a substantial improvement over the current path.
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 The Macroeconomic Budget and Health Care Projection Dashboard, Revisited: Can You Put the US Back on a Sustainable Path? appeared first on American Enterprise Institute – AEI.
