From the U.S. Government Accountability Office, www.gao.gov Transcript for: America's Fiscal Health Update Description: Susan Irving joins the Watchdog Report to talk about forecasting the nation's fiscal health for the next three decades. Related GAO Work: GAO-20-403SP, The Nation's Fiscal Health: Action Is Needed to Address the Federal Government's Fiscal Future Released: March 2020 [ Background Music ] [Susan Irving:] Time to get serious. When we ask for something in government, think about either what we're willing to give up or what we want to pay for. [Matt Oldham:] Welcome to GAO's Watchdog Report, your source for news and information from the U.S. Government Accountability Office. I'm Matt Oldham. Every year, GAO sends a report to Congress on the nation's fiscal health. It projects what we could expect federal finances to look like over the next 30 years, if we continue on our current trajectory. I'm with Susan Irving. She's a Senior Advisor on Debt and Fiscal Issues here are GAO, and she's here to talk about updates to this year's report. Thanks for taking the time to speak with me, Susan. [Susan Irving:] Happy to do so. I wish I could tell you the outlook had changed. [Matt Oldham:] Well, I was going to say, I've got a feeling this may be one of our shortest podcasts ever, because the first question is, any changes from last year? [Susan Irving:] Well, there's some small changes, but fundamentally, the outlook is unsustainable. I mean, debt as a share of the economy did grow to 79 percent of GDP, and the danger is not so much that level. It's that if you program the government to continue just as is, pretty much, it would top 106 percent. I mean, you would end up with it higher than it was right after World War II. [Matt Oldham:] So, why should this matter to the average taxpayer? [Susan Irving:] Well, I think a couple of reasons. One is, as debt grows, interest payments grow. And even in our recent years in continued very low interest rates, interest is now the fastest growing component of the federal budget. And the thing to remember about interest is, it's off the top. We pay that, no matter what. So, as it uses up more and more room, it squeezes everything else. And interest is something we don't argue about. You can't have someone say, "Let's use that money for a battleship," and someone else say, "Let's use it for schools," and someone else say, "Let's use it for a tax cut." It just pays interest. [Matt Oldham:] Is this feeding into the unsustainable aspect? [Susan Irving:] Yes, also if interest grows too fast, it does. But we say the path is unsustainable, because the debt is growing faster than the economy that has to support its debt. That by definition is unsustainable. [Matt Oldham:] This might sound like a simple question, but we couldn't just print more money? [Susan Irving:] Well, it is true that we issue debt in our own currency. But as a general rule, the saga of countries that decide to inflate their debt is not a good one. We can think after World War I. We can also think about Argentina in the past. Generally, it's much better if we maintain the belief that the full faith and credit of the United States is sound. [ Music ] [Matt Oldham:] So, it sounds like we're in pretty much the same situation we were last year, except maybe even a little worse. Interest is growing at a rate faster than we can keep up with paying for it. So, what can we expect if we continue down this path? [Susan Irving:] The time to respond gets shorter. We are unlikely to face the same kind of crunch some countries have. We are the largest, most stable political economy in the world. Our treasure market is deeper, and the full faith and credit of the United States is sound. But at some point, this becomes overwhelming. It begins to squeeze out private investment. It begins to reduce productivity. We don't know when that is. [Matt Oldham:] So, what do you think's the bottom line of this report? [Susan Irving:] Time to get serious. When we ask for something in government, think about either what we're willing to give up or what we want to pay for it. And think about it in the mode of compromise. And one of us could probably sit down and rewrite a budget that we'd be happy with, but for some of us, it would be a large tax increase, and for some of us, it would be a large spending cut, and for some of us, who knows. But we have to use real arithmetic and real forecasts and just think about what path we use. And it may be that replacing nominal dollar deficit numbers is thinking about a path of debt to GDP and how do we get down to where it's not growing faster than the economy. [Matt Oldham:] Susan Irving is a GAO Senior Advisor on Debt and Fiscal Issues, and she was talking about an annual report on the future of the nation's fiscal health. Thank you for your time, Susan. [Susan Irving:] Thank you. 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