Although spending cuts in last year’s Budget Control Act (BCA) lead to an improved fiscal outlook, the Government Accountability Office (GAO) reminded policymakers this week that the larger long-term budget challenges remain.
The law targets discretionary spending and, under two different simulations used by GAO, such spending as a share of the economy would be lower in 2022 than at any time over the last five decades. But much more remains to be done elsewhere in the federal budget.
In the spring update to its report on the government’s long-term fiscal outlook, GAO emphasizes that last year’s law “did not focus on the fundamental drivers of the government’s future fiscal imbalances – a structural gap between revenues and spending driven by health care costs and demographics.”
The GAO update notes that last year about 7,600 Americans a day turned 65, the eligibility age for Medicare. That number will rise to about 11,400 people a day by 2029.
In years past, Social Security ran cash surpluses that reduced government borrowing from the public. But GAO points out that Social Security “is now projected to pay more in benefits than it receives in tax income each year into the future.”
Even if government revenues eventually return to the 40-year historical average as a share of the economy and remain there, GAO says, the imbalance between those revenues and government spending would continue to increase.
Under one of the GAO’s scenarios (“the alternative simulation”), by 2023 the government’s net interest costs would exceed the cost of Medicare. By 2025 federal debt held by the public would exceed the country’s GDP, and by 2038 that debt would be more than double the GDP.
The GAO’s latest statistics and analysis underscore the need for elected officials to put the nation on a more sustainable course as quickly as possible.