This is the accessible text file for CG Presentation number GAO-07-
624CG entitled 'Saving Our Future Requires Tough Choices Today' which 
was released on March 13, 2007. 

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as part 
of a longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to Webmaster@gao.gov. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

United States Government Accountability Office: 

Saving Our Future requires Tough Choices Today: 

Fiscal Wake-up Tour: 
Cincinnati, OH: 
March 9, 2007: 

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%. 

Source: Office of Management and Budget. 

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

[End of figure] 

Federal Spending for Mandatory and Discretionary Programs: 

[See PDF for image] - graphic text 

3 pie charts with 3 items each. 

1966: 
Discretionary: 67%; 
Mandatory: 26%; 
Net Interest: 7%. 

1986: 
Discretionary: 44%; 
Mandatory: 42%; 
Net Interest: 14%. 

2006: 
Discretionary: 38%; 
Mandatory: 53%; 
Net Interest: 9%. 

Source: Office of Management and Budget. 

[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). 

Unified Deficit[A]; 
Fiscal Year 2005: ($318); 
Fiscal Year 2006: ($248). 

Net Operating Cost[B]; 
Fiscal Year 2005: ($760); 
Fiscal Year 2006: (450).  

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

[A] 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. 

[B] Fiscal year 2005 and 2006 net operating cost figures reflect 
significant but opposite changes in certain actuarial costs. For 
example, changes in interest rates and other assumptions used to 
estimate future veterans' compensation benefits increased net operating 
cost by $228 billion in 2005 and reduced net operating cost by $167 
billion in 2006. Therefore, the net operating costs for fiscal years 
2005 and 2006, exclusive of the effect of these actuarial cost 
fluctuations, were ($532) billion and ($617) billion, respectively. 

[End of table] 

Major Reported Long-Term Fiscal Exposures ($ trillions): 

Explicit liabilities (Publicly held debt, military & civilian pensions 
& retiree health, other); 	
2000: $6.9; 
2006: $10.4; 
Percent Increase: 52%. 

Commitments & Contingencies: e.g., PBGC, undelivered orders; 
2000: $0.5; 
2006: $1.3; 
Percent Increase: 140%. 

Implicit exposures; 
2000: $13.0; 
2006: $38.8; 
Percent Increase: 197%.

Implicit exposures: Future Social Security benefits; 
2000: $3.8; 
2006: $6.4; 
Percent Increase: [Empty]. 

Implicit exposures: Future Medicare Part A benefits; 
2000: $2.7; 
2006: $11.3; 
Percent Increase: [Empty]. 

Implicit exposures: Medicare Part B benefits; 
2000: $6.5; 
2006: $13.1; 
Percent Increase: [Empty]. 

Implicit exposures: Medicare Part D benefits; 
2006: $8.0; 
Percent Increase: [Empty]. 

Total; 
2000: $20.4; 
2006: $50.5; 
Percent Increase: 147%. 

Source: 2000 and 2006 Financial Report of the United States Government. 

Note: 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. 
Totals may not add due to rounding. Percentage increases are based on 
actual data and may differ from increases calculated from rounded data 
shown in table. 

[End of table] 

Understanding the Size of Major Reported Fiscal Exposures: 

Our fiscal burden can be translated and compared as follows: 

2006 data: 

Major reported fiscal exposures: $50.5 trillion. 
Total household net worth: $53.3 trillion: 
* Ratio of fiscal exposures to net worth: 95 percent. 

Burden: 
Per person: $170,000; 
Per full-time worker: $400,000; 
Per household: $440,000. 

Income: 
Median household income: $46,326; 
Disposable personal income per capita: $31,519. 

Ratio of household burden to median income: 9.5. 

Sources: GAO analysis of data from the Department of the Treasury, 
Federal Reserve Board, U.S. Census Bureau and Bureau of Economic 
Analysis. 

[End of table] 

Potential Fiscal Outcomes: 

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

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

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

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

Source: GAO's January 2001 analysis. 

Notes: In addition to the expiration of tax cuts, revenue as a share of 
GDP increases through 2017 due to (1) real bracket creep, (2) more 
taxpayers becoming subject to the AMT, and (3) increased revenue from 
tax-deferred retirement accounts. After 2017, revenue as a share of GDP 
is held constant-implicitly assuming action to offset the impact of 
bracket creep and to modify or offset the AMT. 

[A] All other spending is net of offsetting interest receipts. 

[End of figure] 

Potential Fiscal Outcomes Alternative Simulation-Discretionary Spending 
Grows with GDP and Expiring Tax Provisions Extended (January 2007) 
Revenues and Composition of Spending as a Share of GDP: 

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

2006; 
Net interest: 1.7%; 
Social Security: 4.2%; 
Medicare & Medicaid: 3.9%; 
All other spending: 10.5%; 
Revenue: 18.4%. 

2015; 
Net interest: 2.1%; 
Social Security: 4.6%; 
Medicare & Medicaid: 4.9%; 
All other spending: 9.6%; 
Revenue: 17.6%. 

2030; 
Net interest: 5.9%; 
Social Security: 6.8%; 
Medicare & Medicaid: 8.3%; 
All other spending: 9.5%; 
Revenue: 17.8%. 

2040; 
Net interest: 12.1%; 
Social Security: 7.6%; 
Medicare & Medicaid: 10.3%; 
All other spending: 9.5%; 
Revenue: 17.8%.

Source: GAO's January 2007 analysis. 

Notes: AMT exemption amount is retained at the 2006 level through 2017 
and expiring tax provisions are extended. After 2017, revenue as a 
share of GDP is held constant-implicitly assuming action to offset the 
impact of bracket creep and to modify the offset of AMT. 

[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. Improve Financial Reporting, Public Education, and Performance 
Metrics: 

2. Strengthen Budget and Legislative Processes and Controls: 

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 United States 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:  

Source: GAO.

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: 

Copyright: 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. The published product may be 
reproduced and distributed in its entirety without further permission 
from GAO. However, because this work may contain copyrighted images or 
other material, permission from the copyright holder may be necessary 
if you wish to reproduce this material separately.