My latest commentary discusses the GAO’s latest Federal Fiscal Outlook, which as one might expect is not bullish on our fiscal future:
Back in December, the U.S. Government Accountability Office (GAO) issued a fairly dire long-term fiscal outlook for states and local governments, finding that they will continue to face long-term fiscal challenges and a growing gap between revenue and spending through the year 2060, absent significant policy changes. GAO estimated that to close the gap state and local government expenditures would need to be cut by 18% and then held flat as a percentage of GDP for decades to come. As it turns out, the picture at the federal level is no better-if not worse.
Earlier this month, GAO released its annual Federal Fiscal Outlook, which similarly finds a fundamental, long-term imbalance between revenue and spending, which if unaddressed will lead to an unsustainable scenario of ever-increasing debt as a share of GDP, regardless of which set of spending assumptions are used. Also similar to state and local governments, the growing fiscal imbalance at the federal level is largely a result of an aging population and the associated spending on entitlement programs-Social Security and Medicare. Further, the report suggests that the growing debt and cost of interest will limit the federal government’s ability to respond to future challenges (e.g., financial or natural disasters) and emerging fiscal issues. In short, an already tenuous fiscal situation is set to become increasingly risky in the coming decades.
To read the full article, click here.