December 20, 2014

Annual Financial Report Highlights Need for Fiscal Reform

  • The national debt has grown significantly in recent years due to rising annual deficits. A deficit occurs in any year the government spends more...

The Treasury Department has released its annual assessment of the nation’s finances, projecting that deficits under current policy will cause the government’s debt-to-GDP ratio to double over the next 30 years and quadruple over the next 75.

The 2012 Financial Report of the United States Government projects that non-interest spending will reach balance with annual revenues in 2018, partly thanks to a recovering economy. But it concludes that “increased spending for Social Security and health programs due to continued aging of the population and anticipated rising health costs” will cause the deficit to rise dramatically between 2022 and 2039.

The report emphasizes that addressing the country’s long-term challenges will be significantly easier if done sooner rather than later. The Treasury estimates that reforms will need to be 20 percent larger if they are delayed for a decade, and 50 percent  larger if delayed for two decades.

The report, released last week, was finalized before passage of the “fiscal cliff” legislation -- the American Taxpayer Relief Act of 2012 – and so does not take into account that law’s impact on federal revenue.

“While Congress and the administration have taken steps recently to improve the near-term outlook,” U.S. Comptroller General Gene L. Dodaro said following the release of the report, “our federal government’s long-term fiscal path remains unsustainable without further policy changes.”

As in past years, his agency -- the Government Accountability Office -- expressed concerns about the reliability of some numbers in the annual financial report. The GAO warns that it could not render a complete opinion on the report for a variety of reasons, including weaknesses in financial management at the Department of Defense and elsewhere.