The Government Accountability Office (GAO) recently issued its fall report on the federal government’s long-term fiscal outlook, providing two basic scenarios for policymakers to consider: a "baseline extended simulation" and an "alternative simulation" that relies on spending and revenue assumptions that The Concord Coalition considers more realistic. (See below for details of the GAO's simulations.)
The report underscores the serious problems our country faces if it continues on its current fiscal path. Some of the projections in the alternative simulation illustrate just how serious those problems are likely to be:
- 2022 -- Net interest costs would exceed Medicare.
- 2026 -- Federal debt held by the public would exceed the Gross Domestic Product (GDP).
- 2026 -- Social Security, Medicare, Medicaid and net interest would consume all government revenues.
- 2030 -- Net interest costs would exceed Social Security.
- 2039 -- Debt held by the public would exceed 200 percent of GDP.
- 2039 -- Net interest would exceed both Medicare and Medicaid.
- 2041 -- The federal deficit would exceed all government revenues.
- 2048 -- The deficit would reach 22.6 percent of GDP, more than the entire federal budget in 2008 (22.4 percent of GDP).
- 2048 -- Federal debt held by the public would equal 300 percent of GDP.
- 2054 -- Government spending would reach 45.1 percent of GDP, more than twice the size of the budget in 2008 (22.4 percent of GDP).
- 2055 -- Net interest on the debt would exceed all government revenues.
- 2057 -- Federal debt held by the public would exceed 400 percent of GDP.
- 2061 -- Net interest, at 22.6 percent of GDP, would exceed the size of the entire 2008 federal budget.
- 2064 -- Federal debt held by the public would exceed 500 percent of GDP.
These ominous numbers demonstrate how unsustainable our current path is and how badly corrective action is needed. It’s time for our leaders in Washington to get serious about making the tough choices to put our fiscal house in order.
It is also incumbent on ordinary citizens to recognize how the budget problems affect them, and to put pressure on Washington to address these problems. Waiting will only make the corrective measures more painful.
The scenario laid out in the GAO report will not actually happen. It couldn't. No one would lend us the money and, in any event, the economy would crash long before debt reached some of the levels shown in these projections. The key question is what steps will be taken, and when, to keep things from reaching a crisis.