With a new administration coming into office, a report on the nation’s fiscal health provides a timely and emphatic reminder of the need for the new president and Congress to pursue sweeping long-term changes in the federal budget.
Released this week by the Government Accountability Office (GAO), the report provides a good look at the nation’s unsustainable fiscal path and deserves close scrutiny by elected officials in both parties.
Although our nation’s leaders face an array of serious short-term challenges and difficult policy choices, the new report reminds them — and the American public — that the federal government is already “highly leveraged in debt by historical norms.”
So in addition to the near-term financing decisions that must be made, the GAO says, “a broader plan is needed to put the government on a more sustainable long-term path.”
The report draws on the work of the GAO itself as well as Congressional Budget Office (CBO) projections and the recently issued Fiscal Year 2016 Financial Report of the United States Government.
Their projections, the GAO says, “all show that, absent policy changes, the federal government’s fiscal path is unsustainable and that the debt-to-GDP ratio would surpass its historical high of 106 percent within 15 to 25 years.”
The GAO, CBO and the 2016 Financial Report also agree on the need to act sooner rather than later on our largest fiscal challenges. The longer action is delayed, GAO says, “the greater and more drastic the changes will have to be.”
The annual federal deficit is already rising rapidly. In the fiscal year that ended last September, it grew to $587 billion, up from $439 billion the previous year.
“Federal receipts grew by a modest $18 billion due primarily to extensions of tax preferences,” the GAO says of Fiscal 2016, “but that was outweighed by a $166.5 billion increase in spending, driven by Social Security, Medicare, and Medicaid, and interest on the debt held by the public (net interest).”
The Concord Coalition has long argued — in a 2014 update of the Kerrey-Danforth commission findings, for example — that the central fiscal challenges we face are a faulty tax system and the growing cost of entitlement programs for an aging population. Meeting these challenges will likely require bipartisan cooperation and compromise.
The GAO again urges Congress to consider alternatives to the federal debt limit, which Concord and many other budget watchdogs consider ineffective and in need of reform. The GAO report explains the problem clearly:
“The current debt limit is not a control on debt, but rather an after-the-fact measure that restricts the Department of the Treasury’s authority to borrow to finance the decisions already enacted by Congress and the President.”
As GAO says, Congress should consider alternatives “that would better link decisions about borrowing to finance the debt with decisions about spending and revenue at the time those decisions are made.”
All too often, elected officials in Washington have expressed concern about the growing debt but have put off dealing with it — or approved legislation that made matters even worse. The new administration and Congress should take a different course.