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What Is Congress Waiting For?

The question arises upon reviewing the latest long-term fiscal outlook (requires Adobe) that was released last week by the U.S. General Accountability Office (GAO), the "audit arm" of the U.S. Congress.

GAO says they’ve been publishing “long-term fiscal simulations of what might happen to federal deficits and debt levels under varying policy assumptions” since 1992 “in response to a bipartisan request from Members of Congress who were concerned about the long-term effects of fiscal policy.” They conclude:

“While the factors driving the near-term outlook can be and have been quite volatile, the long-term fundamentals have not changed. Health care costs are still growing faster than the economy and the nation’s population continues to age. GAO’s long-term simulations show that absent policy actions aimed at reforming the key drivers of our structural deficits— health spending and Social Security—the federal government faces unsustainable growth in debt. The longer that action to deal with the federal government’s long-term fiscal outlook is delayed, the greater the risk that the eventual changes will be disruptive and destabilizing.” (emphasis added).

The report includes a number of slides, but the one on page 7 is worth looking at. The slide shows revenues and the composition of spending as a share of gross domestic product (GDP). In 2008, spending on interest, social security and medicare/medicaid was about 10% of GDP, leaving about 10% of GDP for all other federal spending. However, if Congress makes no changes to those entitlement programs, by 2040, spending on interest and those three programs will take up 20% of GDP, which virtually assures significant increases in income taxes in order to continue government services. The graphic below is from the GAO website:

What a legacy for this generation to leave to its children and grandchildren? Sheesh!

HT Government Bytes

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