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269CG entitled 'Saving Our Future Requires Tough Choices Today' which 
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United States Government Accountability Office:

Saving Our Future requires Tough Choices: 

Fiscal Wake-up Tour: 
Denver City College: 
Denver, CO: 
November 28, 2006:

The Honorable David M. Walker: 
Comptroller General of the United States:

Composition of Federal Spending:

[See PDF for image] - graphic text 

3 pie charts with 5 items each. 

1966: 
Defense: 43.0%; 
Social Security: 15.0%; 
Medicare & Medicaid: 1.0%; 
Net interest: 7.0%; 
All other spending: 34.0%. 

1986: 
Defense: 28.0%; 
Social Security: 20.0%; 
Medicare & Medicaid: 10.0%; 
Net interest: 14.0%; 
All other spending: 29.0%. 

2006*: 
Defense: 20.0%; 
Social Security: 21.0%; 
Medicare & Medicaid: 19.0%; 
Net interest: 9.0%; 
All other spending: 32.0%. 

*Preliminary

Source: Office of Management and Budget and the Department of the 
Treasury. 

Note: Numbers may not add to 100 percent due to rounding. 

[End of Figure]

Fiscal Year 2005 and 2006 Deficits and Net Operating Costs:

Dollars in billions. 

On-Budget Deficit; 
Fiscal Year 2005: ($494); 
Fiscal Year 2006: ($434). 

Off-Budget Surplus*; 
Fiscal Year 2005: $175; 
Fiscal Year 2006: $186. 

Unified Deficit; 
Fiscal Year 2005: ($319); 
Fiscal Year 2006: ($248). 

Net Operating Cost; 
Fiscal Year 2005: ($760); 
Fiscal Year 2006: Not available.  

* Includes $173 billion in Social Security surpluses for fiscal year 
2005 and $185 billion for fiscal year 2006; $2 billion in Postal 
Service surpluses for fiscal year 2005 and $1 billion for fiscal year 
2006.

Sources: The Office of Management and Budget and the Department of the 
Treasury. 

[End of Figure] 

Estimated Fiscal Exposures (s trillions):

Explicit liabilities (Publicly held debt, military & civilian pensions 
& retiree health, other); 
2000: $6.9; 
2006: $10.2. 

Commitments & Contingencies: e.g., PBGC, undelivered orders; 
2000: $0.5; 
2006: $0.9. 

Implicit exposures; 
2000: $13.0; 
2006: $38.8. 

Implicit exposures: Future Social Security benefits; 
2000: $3.8; 
2006: $6.4. 

Implicit exposures: Future Medicare Part A benefits; 
2000: $2.7; 
2006: $11.3. 

Implicit exposures: Medicare Part B benefits; 
2000: $6.5; 
2006: $13.1. 

Implicit exposures: Medicare Part D benefits; 
2006: $8.0. 

Total; 
2000: $20.4; 
2006: $49.9. 

Source: U.S. government's consolidated financial statement, Social 
Security and Medicare Trustees reports and Monthly Treasury Statement, 
September 30, 2006.

Note: 2006 estimates are preliminary. Estimates for Social Security and 
Medicare are at present value as of January 1 of each year and all 
other data are as of September 30.

[End of table]

How Big is Our Growing Fiscal Burden?

Our total fiscal burden can be translated and compared as follows:

Our total fiscal burden can be translated and compared as follows: 

Total fiscal exposures: $49.9 trillion; 
Total household net worth: $53.3 trillion: 
* Burden/Net worth ratio: 94 percent. 

Burden: 
Per person: $165,000; 
Per full-time worker: $395,000; 
Per household: $435,000. 

Income: 
Median household income: $46,326; 
Disposable personal income per capita: $32,392. 

Notes: (1) Federal Reserve Board, Flow of Funds Accounts, Table B.100, 
2006:Q2 (Sept. 19, 2006); (2) Burdens are calculated using estimated 
total U.S. population as of 9/30/06, from the U.S. Census Bureau; full- 
time workers reported by the Bureau of Economic Analysis, in NIPA table 
6.5D (Aug. 2, 2006); and households reported by the U.S. Census Bureau, 
in Income. Poverty, and Health Insurance Coverage in the United States: 
2005 (Aug. 2006); (3) U.S. Census Bureau, Income, Poverty, and Health 
Insurance Coverage in the United States: 2005 (Aug. 2006); and (4) 
Bureau of Economic Analysis, Personal Income and Outlays: September 
2006, table 2, 2006:Q3, (Oct. 30, 2006).

Sources: GAO analysis.

[End of table]

Composition of Spending as a Share of GDP Under Baseline Extended 
(January 2001):

[See PDF for image] - graphic text: 

Line/Stacked Bar combo chart with 4 groups, 1 line (Revenue) and 4 bars 
per group. 

2005; 
Net interest: 0.8%; 
Social Security: 4.3%; 
Medicare & Medicaid: 3.7%; 
All other spending: 8.0%; 
Revenue: 20.3%. 

2015*; 
Net interest: 0%; 
Social Security: 5.1%; 
Medicare & Medicaid: 4.9%; 
All other spending: 5.6%; 
Revenue: 20.4%. 

2030*; 
Net interest: 0%; 
Social Security: 6.6%; 
Medicare & Medicaid: 9.4%; 
All other spending: 4.0%; 
Revenue: 20.4%. 

2040*; 
Net interest: 0%; 
Social Security: 6.7%; 
Medicare & Medicaid: 9.0%; 
All other spending: 4.4%; 
Revenue: 20.4%.

* All other spending is net of offsetting interest receipts. 

Source: GAO's January 2001 analysis.

[End of Figure] 

Composition of Spending as a Share of GDP Under Baseline Extended 
(August 2006):

[See PDF for image] - graphic text: 

Line/Stacked Bar combo chart with 4 groups, 1 line (Revenue) and 4 bars 
per group. 

2005; 
Net interest: 1.5%; 
Social Security: 4.2%; 
Medicare & Medicaid: 3.9%; 
All other spending: 10.5%; 
Revenue: 17.5% 

2015; 
Net interest: 1.6%; 
Social Security: 4.6%; 
Medicare & Medicaid: 5.3%; 
All other spending: 8.5%; 
Revenue: 19.7% 

2030; 
Net interest: 2.6%; 
Social Security: 6.4%; 
Medicare & Medicaid: 8.3%; 
All other spending: 8.4%; 
Revenue: 19.8% 

2040; 
Net interest: 5.5%; 
Social Security: 6.9%; 
Medicare & Medicaid: 10.3%; 
All other spending: 8.4%; 
Revenue: 19.8%. 

Notes: In addition to the expiration of tax cuts, revenue as a share of 
GDP increases through 2016 due to (1) real bracket creep, (2) more 
taxpayers becoming subject to the AMT, and (3) increased revenue from 
tax-deferred retirement accounts. After 2016, revenue as a share of GDP 
is held constant.

Source: GAO's August 2006 analysis.

[End of Figure] 

Composition of Spending as a Share of GDP (Assuming Discretionary 
Spending Grows with GDP After 2006 and All Expiring Tax Provisions are 
Extended):

[See PDF for image] - graphic text: 
	
Line/Stacked Bar combo chart with 4 groups, 1 line (Revenue) and 4 bars 
per group. 

2005; 
Net interest: 1.5%; 
Social Security: 4.2%; 
Medicare & Medicaid: 3.9%; 
All other spending: 10.5%; 
Revenue: 17.5% 

2015; 
Net interest: 2.4%; 
Social Security: 4.6%; 
Medicare & Medicaid: 5.3%; 
All other spending: 9.9%; 
Revenue: 17.5% 

2030; 
Net interest: 6.9%; 
Social Security: 6.7%; 
Medicare & Medicaid: 8.3%; 
All other spending: 9.9%; 
Revenue: 17.6% 

2040; 
Net interest: 13.7%; 
Social Security: 7.5%; 
Medicare & Medicaid: 10.3%; 
All other spending: 9.9%; 
Revenue: 17.6%

Source: GAO's August 2006 analysis.

[End of Figure] 

Current Fiscal Policy Is Unsustainable:

The "Status Quo" is Not an Option:

* We face large and growing structural deficits largely due to known 
demographic trends and rising health care costs.

* GAO's simulations show that balancing the budget in 2040 could 
require actions as large as:

- Cutting total federal spending by 60 percent or: 

- Raising federal taxes to 2 times today's level:

Faster Economic Growth Can Help, but It Cannot Solve the Problem:

* Closing the current long-term fiscal gap based on reasonable 
assumptions would require real average annual economic growth in the 
double digit range every year for the next 75 years.

* During the 1990s, the economy grew at an average 3.2 percent per year.

* As a result, we cannot simply grow our way out of this problem. Tough 
choices will be required.

The Way Forward: A Three-Pronged Approach:

1. Strengthen Budget and Legislative Processes and Controls:

2. Improve Financial Reporting and Performance Metrics:

3. Fundamental Reexamination & Transformation for the 21st Century 
(i.e., entitlement programs, other spending, and tax policy):

Solutions Require Active Involvement from both the Executive and 
Legislative Branches:

Key National Indicators:

What: A portfolio of economic, social, and environmental outcome-based 
measures that could be used to help assess the nation's and other 
governmental jurisdictions' position and progress:

Who: Many countries and several states, regions, and localities have 
already undertaken related initiatives (e.g., Australia, New Zealand, 
Canada, United Kingdom, Oregon, Silicon Valley (California) and Boston):

Why: Development of such a portfolio of indicators could have a number 
of possible benefits, including:

* Serving as a framework for related strategic planning efforts: 

* Enhancing performance and accountability reporting:

* Informing public policy decisions, including much needed baseline 
reviews of existing government policies, programs, functions, and 
activities:

* Facilitating public education and debate as well as an informed 
electorate:

Way Forward: Consortium of key players housed by the National Academies 
domestically and related efforts by the OECD and others internationally:

Key National Indicators: Where the World's Sole Superpower Ranks:

The United States may be the only superpower, but compared to most 
other OECD countries on selected key economic, social, and 
environmental indicators, on average, the U.S. ranks:

16 0ut Of 28:

OECD Categories for Key Indicators (2006 OECD Factbook): 

* Population/Migration; 
* Energy; 
* Environment; 
* Quality of Life;
* Macroeconomic Trends; 
* Labor Market; 
* Education; 
* Economic Globalization; 
* Prices; 
* Science & Tech; 
* Public Finance.

Source: 2006 OECD Factbook:

Moving the Debate Forward:

The Sooner We Get Started, the Better:

* The miracle of compounding is currently working against us: 

* Less change would be needed, and there would be more time to make 
adjustments:

* Our demographic changes will serve to make reform more difficult over 
time:

Need Public Education, Discussion, and Debate: 

* The role of government in the 21st Century:

* Which programs and policies should be changed and how: 

* How government should be financed:

These Challenges Go Beyond Numbers and Dollars- It's About Values and 
People: 

On the Web:

Web site: [Hyperlink, http://www.gao.gov/cghome.htm]:

Contact:

Paul Anderson, Managing Director, Public Affairs AndersonP1@gao.gov 
(202) 512-4800:

U.S. Government Accountability Office 441 G Street NW, Room 7149 
Washington, D.C. 20548:

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from GAO. However, because this work may contain copyrighted images or 
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