Comptroller General Issues Warning on Current U.S. Fiscal Policy
GAO-07-222CG
- AuthorsWalker, David M.
- Institutional AuthorsGovernment Accountability Office
- Subject Area/Tax Topics
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 2006-23681
- Tax Analysts Electronic Citation2006 TNT 226-31
United States Government Accountability Office
Fiscal Wake-up Tour
University of Chicago
Chicago, IL
November 8, 2006
The Honorable David M. Walker
Comptroller General of the United States
Composition of Federal Spending
*Preliminary.
Source: Office of Management and Budget and the Department of the Treasury.
Note: Numbers may not add to 100 percent due to rounding.
Fiscal Year 2004 and 2005 Deficits and Net Operating Costs
Fiscal Year 2004 Fiscal Year 2005
($ Billion)
On-Budget Deficit (568) (494)
Off-Budget Surplus* 155 175
Unified Deficit (413) (318)
Net Operating Cost (616) (760)
FOOTNOTE TO TABLE
* Includes $151 billion in fiscal year 2004 and $173 billion in
fiscal year 2005 in Social Security surpluses and $4 billion in fiscal year
2004 and $2 billion in fiscal year 2005 in Postal Service surpluses.
END OF FOOTNOTE TO TABLE
Sources: The Office of Management and Budget and the Department of the
Treasury.
Estimated Fiscal Exposures
($ trillions)
2000 2005
o Explicit liabilities $6.9 $9.9
o Publicly held debt
o Military & civilian pensions & retiree health
o Other
o Commitments & contingencies 0.5 0.9
o E.g., PBGC, undelivered orders
o Implicit exposures 13.0 35.6
o Future Social Security benefits 3.8 5.7
o Future Medicare Part A benefits 2.7 8.8
o Future Medicare Part B benefits 6.5 12.4
o Future Medicare Part D benefits -- 8.7
Total $20.4 $46.4
Source: U.S. government's consolidated financial statements (CFS).
Note: Estimates for Social Security and Medicare are at present value as
of January 1 of each year as reported in the CFS and all other data are as of
September 30.
How Big is Our Growing Fiscal Burden?
Our total fiscal burden can be translated and compared as follows:
Total fiscal exposures $46.4 trillion
Total household net worth1 $51.1 trillion
Burden/Net worth ratio 91 percent
Burden2
Per person $156,000
Per full-time worker $375,000
Per household $411,000
Income
Median household income3 $44,389
Disposable personal income per capita4 $30,431
FOOTNOTES TO TABLE
1 Federal Reserve Board, Flow of Funds Accounts, Table B.100,
2005:Q3 (Dec. 8, 2005);
2 Burdens are calculated using total U.S. population as of
9/30/05, from the U.S. Census Bureau, full-time workers for 2004,
reported by the Bureau of Economic Analysis, in NIPA table 6.5D (Aug. 4,
2005); and households for 2004, reported by the U.S. Census Bureau, in Income
Poverty & Health Insurance Coverage in the US: 2004 (Aug. 2005);
3 U.S. Census Bureau, Income Poverty & Health Insurance Coverage
in the US: 2004 (Aug. 2005); and
4 Bureau of Economic Analysis, Personal Income and Outlays:
October 2005, table 2, 2005:Q3, (Dec.1, 2005).
END OF FOOTNOTES TO TABLE
Sources: GAO analysis.
Under Baseline Extended (January 2001)
*All other spending is net of offsetting interest receipts.
Source: GAO's January 2001 analysis.
Composition of Spending as a Share of GDP
Under Baseline Extended (August 2006)
Notes: In addition to the expiration of tax cuts, revenue as a share of GDP increases through 2016 due to (1) real bracket creep, (2) more taxpayers becoming subject to the AMT, and (3) increased revenue from tax-deferred retirement accounts. After 2016, revenue as a share of GDP is held constant.
Source: GAO's August 2006 analysis.
Composition of Spending as a Share of GDP
(Assuming Discretionary Spending Grows with GDP After 2006 and All
Expiring Tax Provisions are Extended)
Source: GAO's August 2006 analysis.
Current Fiscal Policy Is Unsustainable
The "Status Quo" is Not an Option
We face large and growing structural deficits largely due to known demographic trends and rising health care costs.
GAO's simulations show that balancing the budget in 2040 could require actions as large as
Cutting total federal spending by 60 percent or
Raising federal taxes to 2 times today's level
Faster Economic Growth Can Help, but It Cannot Solve the Problem
Closing the current long-term fiscal gap based on reasonable assumptions would require real average annual economic growth in the double digit range every year for the next 75 years.
During the 1990s, the economy grew at an average 3.2 percent per year.
As a result, we cannot simply grow our way out of this problem. Tough choices will be required.
A Three-Pronged Approach
2. Improve Financial Reporting and Performance Metrics
3. Fundamental Reexamination & Transformation for the 21st Century (i.e., entitlement programs, other spending, and tax policy)
Legislative Branches
Key National Indicators
WHAT: A portfolio of economic, social, and environmental outcome-based measures that could be used to help assess the nation's and other governmental jurisdictions' position and progress
WHO: Many countries and several states, regions, and localities have already undertaken related initiatives (e.g., Australia, New Zealand, Canada, United Kingdom, Oregon, Silicon Valley (California) and Boston)
WHY: Development of such a portfolio of indicators could have a number of possible benefits, including
Serving as a framework for related strategic planning efforts
Enhancing performance and accountability reporting
Informing public policy decisions, including much needed baseline reviews of existing government policies, programs, functions, and activities
Facilitating public education and debate as well as an informed electorate
WAY FORWARD: Consortium of key players housed by the National Academies domestically and related efforts by the OECD and others internationally
Where the World's Sole Superpower Ranks
The United States may be the only superpower, but compared to most other OECD countries on selected key economic, social, and environmental indicators, on average, the U.S. ranks
16 OUT OF 28
OECD Categories for Key Indicators
(2006 OECD Factbook)
o Population/Migration o Energy o Environment o Quality of Life
o Macroeconomic Trends o Labor Market o Education o Economic
Globalization
o Prices o Science & Tech. o Public Finance
Source: 2006 OECD Factbook
The Sooner We Get Started, the Better
The miracle of compounding is currently working against us
Less change would be needed, and there would be more time to make adjustments
Our demographic changes will serve to make reform more difficult over time
Need Public Education, Discussion, and Debate
The role of government in the 21st Century
Which programs and policies should be changed and how
How government should be financed
Values & People
United States Government Accountability Office
Saving Our Future requires Tough Choices Today
Fiscal Wake-up Tour
University of Chicago
Chicago, IL
November 8, 2006
The Honorable David M. Walker
Comptroller General of the United States
On the Web
Web site: www.gao.gov/cghome.htm
Contact
Paul Anderson, Managing Director, Public Affairs
AndersonP1@gao.gov (202) 512-4800
U.S. Government Accountability Office
441 G Street NW, Room 7149
Washington, D.C. 20548
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- AuthorsWalker, David M.
- Institutional AuthorsGovernment Accountability Office
- Subject Area/Tax Topics
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 2006-23681
- Tax Analysts Electronic Citation2006 TNT 226-31
