This isn't exactly surprising news, but a new GAO report finds that the long-term fiscal outlook for the nation remains unsustainable, with rising debt and enormous future deficits in our largest entitlement programs. BTW, GAO's estimates do not factor in the current proposals for health care reform. The main takeaways from the report:
- "In little over 10 years, debt held by the public as a percent of GDP under our Alternative simulation is projected to exceed the historical high reached in the aftermath of World War II and grow at a steady rate thereafter."
- Beginning in 2009, our Alternative simulation shows persistent annual budget deficits in excess of 7 percent of GDPâ€”levels not seen since the aftermath of World War II.
- "[A]ssuming revenue remains constant at 20.2 percent of GDPâ€”higher than the historical averageâ€”by 2030 there will be little room for 'all other spending,' which consists of what many think of as 'government,' including national defense, homeland security, investment in highways and mass transit and alternative energy sources, plus smaller entitlement programs such as Supplemental Security Income, Temporary Assistance for Needy Families, and farm price supports.
- "[R]oughly 92 cents of every dollar of federal revenue will be spent on the major entitlement programs and net interest costs by 2019. This is due largely to a substantial increase in interest on federal debt."
- "[R]evenue would have to increase by about 47 percent or noninterest spending would have to be reduced by 33 percent on average over the next 75 years to keep debt at the end of the period from exceeding its level at the beginning of 2009 (40.8 percent of GDP)."
- "[T]he longer action to deal with the nationâ€™s long-term fiscal outlook is delayed, the greater the risk that the eventual changes will be disruptive and destabilizing."
Commenting on the GAO report, Jason Mercier at the Washington Policy Center suggests, "Perhaps it is time to bring back consideration of a federal balanced budget amendment to the Constitution." State governments have to balance their budgetsâ€”why shouldn't the feds? While it's true that balanced budget requirements in state Constitutions cannot prevent fiscal crises, nor can they prevent state policymakers from using accounting gimmicks and other questionable methods to close budget deficits, they at least provide some ongoing fiscal reality checks and trigger course corrections that keep things from spiralling too far out of control.
Meanwhile, in DC, the lack of significant fiscal restraints promotes obscene amounts of debt and perpetual deficit spending, creating a policy environment in which officials are seriously talking about digging the hole deeper by expanding entitlements through health care reform, rather than reforming the unsustainable entitlement programs we already have. When your boat springs a leak, wouldn't you focus on getting water out of the boat rather than pouring buckets of water into it? Option A helps you stay afloat, while Option B accelerates the eventual sinking.