GAO Issues Another Gloomy U.S. Fiscal Outlook

In 1992, the Government Accountability Office (GAO) said: "The federal budget is structurally unbalanced. This will do increasing damage to the economy and is unsustainable in the long term. Regardless of the approach chosen, prompt and meaningful action is essential. The longer it is delayed, the more painful it will be." Looks like little if any essential action -- prompt, meaningful or otherwise -- has been taken since.

Reporting on its The Nation's Long-Term Fiscal Outlook: January 2007 (.pdf), based on simulations of federal deficits and debt, the GAO says: "GAO's current long-term simulations continue to show ever-larger deficits resulting in a federal debt burden that ultimately spirals out of control. Although the timing of deficits and the resulting debt build up varies depending on the assumptions used, both simulations GAO produced show that we are on an unsustainable fiscal path."

The GAO's simulations, issued three times-a-year, are not forecasts or predictions. Rather, they are an analysis of various "what if?" scenarios. Specifically, the GAO considered "what if" discretionary spending grows faster or slower, and "what if" current tax cuts continue or are allowed to expire. In both cases, GAO found the nation's long-term fiscal future is headed in harm's way. "Under both sets of expectations about future spending and revenues, the risks posed to the Nation's future financial condition are too high to be acceptable."

"The spending that drives the outlook is primarily spending on the large federal entitlement programs (i.e., Social Security, Medicare, Medicaid). The retirement of the baby boom generation is one key element of this. In 2008 the first boomers will be eligible to draw Social Security 'early retirement' benefits, and in 2011 the first boomers will become eligible for Medicare. In the succeeding 2 decades America's population will age dramatically, and relatively fewer workers will be asked to support ever larger costs for retirees."

While stability of Social Security continues to be a major fiscal challenge, GAO identified spending on major federal health care programs, like Medicare and Medicaid as a larger and faster growing problem. "In fact, the federal government's obligations for Medicare Part D alone exceed the unfunded obligations for Social Security," found the GAO

"Over the past several decades, health care spending on average has grown much faster than the economy, absorbing increasing shares of the Nation's resources, and this rapid growth is projected to continue. For this reason and others, rising health care costs pose a fiscal challenge not just to the federal budget but to American business and our society as a whole."

GAO's Long-term Simulations

Also See:
U.S. Debt vs. U.S. Deficit: What's the Difference?
Congress Increases US Debt Limit Again
FY 2008 Budget "Borrows" $674 Billion from Social Security (US Economy)
Why the U.S. Public Rightfully Rejects Bush's Handling of the Economy (Liberal Politics: US)