The battle over this year's budget, including the growing possibility of a government shutdown, has temporarily overshadowed the larger, long-term fiscal picture. But the Government Accountability Office (GAO) recently updated its January report on the long-term outlook with numbers that underscore the serious challenges facing the country.
If the country were to continue along its current path, for example, by 2018 net interest costs on the federal debt would exceed Medicare costs. By 2024 all government revenue would be claimed by interest costs, Medicare, Medicaid and Social Security. Nine years later, federal debt held by the public would be more than twice the size of the Gross Domestic Product.
This scenario couldn’t actually happen. No one would lend us the money and the economy would crash long before Washington reached some of the projected debt levels anyway. The key question is what steps will be taken, and when, to avoid such a crisis.