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United States Government Accountability Office: 

Saving Our Future Requires Tough Choices Today:

National Press Foundation: 
May 22-23, 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. 

1965: 
Defense: 43.0%; 
Social Security: 15.0%; 
Medicare & Medicaid: 0%; 
Net interest: 7.0%; 
All other spending: 35.0%. 

1985: 
Defense: 27.0%; 
Social Security: 20.0%; 
Medicare & Medicaid: 9.0%; 
Net interest: 14.0%; 
All other spending: 30.0%. 

2005: 
Defense: 20.0%; 
Social Security: 21.0%; 
Medicare & Medicaid: 19.0%; 
Net interest: 7.0%; 
All other spending: 32.0%. 

Source: Office of Management and Budget. 

[End of figure] 

Federal Spending for Mandatory and Discretionary Programs: 

[See PDF for image] - graphic text 

3 pie charts with 3 items each. 

1965: 
Discretionary: 66%; 
Mandatory: 27%; 
Net Interest: 7%. 

1985: 
Discretionary: 44%; 
Mandatory: 42%; 
Net Interest: 14%. 

2005: 
Discretionary: 39%; 
Mandatory: 54%; 
Net Interest: 7%. 

Source: Office of Management and Budget. 

[End of figure] 

Surplus or Deficit as a Share of GDP: Fiscal Years 1962-2005: 

[See PDF for image] - graphic text: 

Line/Stacked Bar combo chart with 1 line (Unified) and 44 bars. 

Fiscal year: 1962; 
On-budget: -1%; 
Off-budget: -0.2%; 
Unified: -1.3%. 

Fiscal year: 1963; 
On-budget: -0.7%; 
Off-budget: -0.1%; 
Unified: -0.8%. 

Fiscal year: 1964; 
On-budget: -1%; 
Off-budget: 0.1%; 
Unified: -0.9%. 

Fiscal year: 1965; 
On-budget: -0.2%; 
Off-budget: No data; 
Unified: -0.2%. 

Fiscal year: 1966; 
On-budget: -0.4%; 
Off-budget: -0.1%; 
Unified: -0.5%. 

Fiscal year: 1967; 
On-budget: -1.6%; 
Off-budget: 0.5%; 
Unified: -1.1%. 

Fiscal year: 1968; 
On-budget: -3.2%; 
Off-budget: 0.3%; 
Unified: -2.9%. 

Fiscal year: 1969; 
On-budget: -0.1%; 
Off-budget: 0.4%; 
Unified: 0.3%. 

Fiscal year: 1970; 
On-budget: -0.9%; 
Off-budget: 0.6%; 
Unified: -0.3%. 

Fiscal year: 1971; 
On-budget: -2.4%; 
Off-budget: 0.3%; 
Unified: -2.1%. 

Fiscal year: 1972; 
On-budget: -2.2%; 
Off-budget: 0.3%; 
Unified: -2%. 

Fiscal year: 1973; 
On-budget: -1.2%; 
Off-budget: No data; 
Unified: -1.1%. 

Fiscal year: 1974; 
On-budget: -0.6%; 
Off-budget: 0.1%; 
Unified: -0.4%. 

Fiscal year: 1975; 
On-budget: -3.5%; 
Off-budget: 0.1%; 
Unified: -3.4%. 

Fiscal year: 1976; 
On-budget: -4.1%; 
Off-budget: -0.2%; 
Unified: -4.2%. 

Fiscal year: 1977; 
On-budget: -2.5%; 
Off-budget: -0.2%; 
Unified: -2.7%. 

Fiscal year: 1978; 
On-budget: -2.5%; 
Off-budget: -0.2%; 
Unified: -2.7%. 

Fiscal year: 1979; 
On-budget: -1.5%; 
Off-budget: -0.1%; 
Unified: -1.6%. 

Fiscal year: 1980; 
On-budget: -2.7%; 
Off-budget: No data; 
Unified: -2.7%. 

Fiscal year: 1981; 
On-budget: -2.4%; 
Off-budget: -0.2%; 
Unified: -2.6%. 

Fiscal year: 1982; 
On-budget: -3.7%; 
Off-budget: -0.2%; 
Unified: -4%. 

Fiscal year: 1983; 
On-budget: -6%; 
Off-budget: No data; 
Unified: -6%. 

Fiscal year: 1984; 
On-budget: -4.8%; 
Off-budget: No data; 
Unified: -4.8%. 

Fiscal year: 1985; 
On-budget: -5.3%; 
Off-budget: 0.2%; 
Unified: -5.1%. 

Fiscal year: 1986; 
On-budget: -5.4%; 
Off-budget: 0.4%; 
Unified: -5%. 

Fiscal year: 1987; 
On-budget: -3.6%; 
Off-budget: 0.4%; 
Unified: -3.2%. 

Fiscal year: 1988; 
On-budget: -3.9%; 
Off-budget: 0.8%; 
Unified: -3.1%. 

Fiscal year: 1989; 
On-budget: -3.8%; 
Off-budget: 1%; 
Unified: -2.8%. 

Fiscal year: 1990; 
On-budget: -4.8%; 
Off-budget: 1%; 
Unified: -3.9%. 

Fiscal year: 1991; 
On-budget: -5.4%; 
Off-budget: 0.9%; 
Unified: -4.5%. 

Fiscal year: 1992; 
On-budget: -5.5%; 
Off-budget: 0.8%; 
Unified: -4.7%. 

Fiscal year: 1993; 
On-budget: -4.6%; 
Off-budget: 0.7%; 
Unified: -3.9%. 

Fiscal year: 1994; 
On-budget: -3.7%; 
Off-budget: 0.8%; 
Unified: -2.9%. 

Fiscal year: 1995; 
On-budget: -3.1%; 
Off-budget: 0.9%; 
Unified: -2.2%. 

Fiscal year: 1996; 
On-budget: -2.3%; 
Off-budget: 0.9%; 
Unified: -1.4%. 

Fiscal year: 1997; 
On-budget: -1.3%; 
Off-budget: 1%; 
Unified: -0.3%. 

Fiscal year: 1998; 
On-budget: -0.3%; 
Off-budget: 1.1%; 
Unified: 0.8%. 

Fiscal year: 1999; 
On-budget: No data; 
Off-budget: 1.4%; 
Unified: 1.4%. 

Fiscal year: 2000; 
On-budget: 0.9%; 
Off-budget: 1.5%; 
Unified: 2.4%. 

Fiscal year: 2001; 
On-budget: -0.3%; 
Off-budget: 1.6%; 
Unified: 1.3%. 

Fiscal year: 2002; 
On-budget: -3.1%; 
Off-budget: 1.5%; 
Unified: -1.5%. 

Fiscal year: 2003; 
On-budget: -4.9%; 
Off-budget: 1.5%; 
Unified: -3.5%. 

Fiscal year: 2004; 
On-budget: -4.9%; 
Off-budget: 1.3%; 
Unified: -3.6%. 

Fiscal year: 2005; 
On-budget: -4%; 
Off-budget: 1.3%; 
Unified: -2.6%. 

Source: Office of Management and Budget. 

[End of figure] 

Fiscal Year 2004 and 2005 Deficits and Net Operating Costs: 

Dollars in billions. 

On-Budget Deficit; 
Fiscal Year 2004: ($568); 
Fiscal Year 2005: ($494). 

Off-Budget Surplus*; 
Fiscal Year 2004: $155; 
Fiscal Year 2005: $175. 

Unified Deficit; 
Fiscal Year 2004: ($413); 
Fiscal Year 2005: ($318). 

Net Operating Cost; 
Fiscal Year 2004: ($616); 
Fiscal Year 2005: ($760). 

* Includes $151 billion in fiscal year 2004 and $173 billion in fiscal 
year 2005 in Social Security surpluses and $4 billion in fiscal year 
2004 and $2 billion in fiscal year 2005 in Postal Service surpluses. 

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

[End of table] 

Estimated Fiscal Exposures (in $ trillions): 

Explicit liabilities (Publicly held debt, military & civilian pensions 
& retiree health, other); 
2000: $6.9; 
2005: $9.9. 

Commitments & Contingencies: e.g., PBGC, undelivered orders; 
2000: $0.5; 
2005: $0.9. 

Implicit exposures; 
2000: $13.0; 
2005: $35.6. 

Implicit exposures: Future Social Security benefits; 
2000: $3.8; 
2005: $5.7. 

Implicit exposures: Future Medicare Part A benefits; 
2000: $2.7; 
2005: $8.8. 

Implicit exposures: Medicare Part B benefits; 
2000: $6.5; 
2005: $12.4. 

Implicit exposures: Medicare Part D benefits; 
2005: $8.7. 

Total; 
2000: $20.4; 
2005: $46.4. 

Sources: Consolidated Financial Statements. 

Note: Estimates for Social Security and Medicare are PV as of January 1 
of each year as reported in the Consolidated Financial Statements and 
all other data are as of September 30. 

[End of Table] 

How Big is Our Growing Fiscal Burden? 

Total Fiscal Exposures; 
2000: $20.4 trillion; 
2005: $46.4 trillion; 

Burden: Per Person; 
2000: $72,000; 
2005: $156,000. 

Burden: Per Full-time Worker; 
2000: $165,000; 
2005: $375,000. 

Burden: Per Household; 
2000: $189,000; 
2005: $411,000. 

Source: GAO analysis. 

[End of table] 

Composition of Spending as a Share of GDP Under Baseline 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: 1.5%; 
Social Security: 4.5%; 
Medicare & Medicaid: 5.3%; 
All other spending: 7.9%; 
Revenue: 19.6%. 

2030; 
Net interest: 2.1%; 
Social Security: 6.5%; 
Medicare & Medicaid: 8.3%; 
All other spending: 7.8%; 
Revenue: 19.7%. 

2040; 
Net interest: 4.7%; 
Social Security: 7.0%; 
Medicare & Medicaid: 10.3%; 
All other spending: 7.8%; 
Revenue: 19.7%. 

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 May 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: 2.5%; 
Social Security: 4.5%; 
Medicare & Medicaid: 5.3%; 
All other spending: 9.7%; 
Revenue: 17.5%. 

2030; 
Net interest: 6.9%; 
Social Security: 6.8%; 
Medicare & Medicaid: 8.3%; 
All other spending: 9.7%; 
Revenue: 17.6%. 

2040; 
Net interest: 13.8%; 
Social Security: 7.7%; 
Medicare & Medicaid: 10.3%; 
All other spending: 9.7%; 
Revenue: 17.6%.

Note: This includes certain tax provisions that expired at the end of 
2005, such as the increased AMT exemption amount. 

Source: GAO’s May 2006 analysis. 

[End of figure] 

Growth in Spending for Social Security, Medicare, and Medicaid Expected 
to Outpace Economic Growth: 

[See PDF for image] – graphic text: 

Bar graph with four items. 

Growth in constant dollars 2005-2030. 

GDP: 72%; 
Social Security Spending: 147%; 
Medicaid Spending: 166%; 
Medicare Spending: 331%. 

Note: Social Security and Medicare projections based on the 
intermediate assumptions of the 2005 Trustees' Reports. Medicaid 
projections based on CBO's December 2003 long-term projections for 
federal spending on Medicaid under mid-range assumptions. 

Source: GAO analysis based on data from the Office of the Chief 
Actuary, Social Security Administration, Office of the Actuary, Centers 
for Medicare and Medicaid Services, and the Congressional Budget 
Office. 

[End of figure] 

Social Security, Medicare, and Medicaid Spending as a Percent of GDP: 

[See PDF for image] - graphic text: 

Area graph with 81 Groups and 3 items per Group. 

Percent of GDP: 

Year: 2000; 
Social Security: 4.23%; 
Medicaid: 1.20%; 
Medicare: 2.29%. 

Year: 2001; 
Social Security: 4.33%; 
Medicaid: 1.30%; 
Medicare: 2.44%. 

Year: 2002; 
Social Security: 4.40%; 
Medicaid: 1.40%; 
Medicare: 2.53%. 

Year: 2003; 
Social Security: 4.35%; 
Medicaid: 1.50%; 
Medicare: 2.57%. 

Year: 2004; 
Social Security: 4.27%; 
Medicaid: 1.50%; 
Medicare: 2.63%. 

Year: 2005; 
Social Security: 4.26%; 
Medicaid: 1.48%; 
Medicare: 2.69%. 

Year: 2006; 
Social Security: 4.21%; 
Medicaid: 1.46%; 
Medicare: 3.33%. 

Year: 2007; 
Social Security: 4.19%; 
Medicaid: 1.47%; 
Medicare: 3.36%. 

Year: 2008; 
Social Security: 4.20%; 
Medicaid: 1.52%; 
Medicare: 3.41%. 

Year: 2009; 
Social Security: 4.24%; 
Medicaid: 1.57%; 
Medicare: 3.45%. 

Year: 2010; 
Social Security: 4.28%; 
Medicaid: 1.62%; 
Medicare: 3.50%. 

Year: 2011; 
Social Security: 4.34%; 
Medicaid: 1.67%; 
Medicare: 3.56%. 

Year: 2012; 
Social Security: 4.42%; 
Medicaid: 1.73%; 
Medicare: 3.67%. 

Year: 2013; 
Social Security: 4.51%; 
Medicaid: 1.79%; 
Medicare: 3.81%. 

Year: 2014; 
Social Security: 4.61%; 
Medicaid: 1.86%; 
Medicare: 3.96%. 

Year: 2015; 
Social Security: 4.71%; 
Medicaid: 1.93%; 
Medicare: 4.12%. 

Year: 2016; 
Social Security: 4.81%; 
Medicaid: 2.01%; 
Medicare: 4.29%. 

Year: 2017; 
Social Security: 4.92%; 
Medicaid: 2.10%; 
Medicare: 4.44%. 

Year: 2018; 
Social Security: 5.02%; 
Medicaid: 2.20%; 
Medicare: 4.61%. 

Year: 2019; 
Social Security: 5.13%; 
Medicaid: 2.20%; 
Medicare: 4.78%. 

Year: 2020; 
Social Security: 5.24%; 
Medicaid: 2.30%; 
Medicare: 4.96%. 

Year: 2021; 
Social Security: 5.35%; 
Medicaid: 2.30%; 
Medicare: 5.14%. 

Year: 2022; 
Social Security: 5.45%; 
Medicaid: 2.40%; 
Medicare: 5.33%. 

Year: 2023; 
Social Security: 5.55%; 
Medicaid: 2.40%; 
Medicare: 5.51%. 

Year: 2024; 
Social Security: 5.65%; 
Medicaid: 2.50%; 
Medicare: 5.71%. 

Year: 2025; 
Social Security: 5.75%; 
Medicaid: 2.60%; 
Medicare: 5.90%. 

Year: 2026; 
Social Security: 5.85%; 
Medicaid: 2.60%; 
Medicare: 6.08%. 

Year: 2027; 
Social Security: 5.93%; 
Medicaid: 2.70%; 
Medicare: 6.26%. 

Year: 2028; 
Social Security: 6.01%; 
Medicaid: 2.70%; 
Medicare: 6.43%. 

Year: 2029; 
Social Security: 6.08%; 
Medicaid: 2.80%; 
Medicare: 6.60%. 

Year: 2030; 
Social Security: 6.14%; 
Medicaid: 2.80%; 
Medicare: 6.77%. 

Year: 2031; 
Social Security: 6.19%; 
Medicaid: 2.90%; 
Medicare: 6.93%. 

Year: 2032; 
Social Security: 6.24%; 
Medicaid: 2.90%; 
Medicare: 7.08%. 

Year: 2033; 
Social Security: 6.27%; 
Medicaid: 3.00%; 
Medicare: 7.22%. 

Year: 2034; 
Social Security: 6.29%; 
Medicaid: 3.10%; 
Medicare: 7.37%. 

Year: 2035; 
Social Security: 6.31%; 
Medicaid: 3.10%; 
Medicare: 7.52%. 

Year: 2036; 
Social Security: 6.32%; 
Medicaid: 3.20%; 
Medicare: 7.67%. 

Year: 2037; 
Social Security: 6.33%; 
Medicaid: 3.30%; 
Medicare: 7.80%. 

Year: 2038; 
Social Security: 6.32%; 
Medicaid: 3.30%; 
Medicare: 7.92%. 

Year: 2039; 
Social Security: 6.32%; 
Medicaid: 3.40%; 
Medicare: 8.03%. 

Year: 2040; 
Social Security: 6.31%; 
Medicaid: 3.40%; 
Medicare: 8.14%. 

Year: 2041; 
Social Security: 6.30%; 
Medicaid: 3.50%; 
Medicare: 8.25%. 

Year: 2042; 
Social Security: 6.29%; 
Medicaid: 3.60%; 
Medicare: 8.36%. 

Year: 2043; 
Social Security: 6.28%; 
Medicaid: 3.60%; 
Medicare: 8.46%. 

Year: 2044; 
Social Security: 6.27%; 
Medicaid: 3.70%; 
Medicare: 8.58%. 

Year: 2045; 
Social Security: 6.26%; 
Medicaid: 3.70%; 
Medicare: 8.70%. 

Year: 2046; 
Social Security: 6.26%; 
Medicaid: 3.80%; 
Medicare: 8.82%. 

Year: 2047; 
Social Security: 6.25%; 
Medicaid: 3.80%; 
Medicare: 8.93%. 

Year: 2048; 
Social Security: 6.25%; 
Medicaid: 3.90%; 
Medicare: 9.03%. 

Year: 2049; 
Social Security: 6.24%; 
Medicaid: 3.90%; 
Medicare: 9.14%. 

Year: 2050; 
Social Security: 6.24%; 
Medicaid: 4.00%; 
Medicare: 9.25%. 

Year: 2051; 
Social Security: 6.24%; 
Medicaid: 4.06%; 
Medicare: 9.36%. 

Year: 2052; 
Social Security: 6.24%; 
Medicaid: 4.13%; 
Medicare: 9.47%. 

Year: 2053; 
Social Security: 6.24%; 
Medicaid: 4.19%; 
Medicare: 9.59%. 

Year: 2054; 
Social Security: 6.25%; 
Medicaid: 4.26%; 
Medicare: 9.71%. 

Year: 2055; 
Social Security: 6.25%; 
Medicaid: 4.33%; 
Medicare: 9.84%. 

Year: 2056; 
Social Security: 6.26%; 
Medicaid: 4.39%; 
Medicare: 9.98%. 

Year: 2057; 
Social Security: 6.27%; 
Medicaid: 4.46%; 
Medicare: 10.12%. 

Year: 2058; 
Social Security: 6.27%; 
Medicaid: 4.53%; 
Medicare: 10.26%. 

Year: 2059; 
Social Security: 6.28%; 
Medicaid: 4.60%; 
Medicare: 10.40%. 

Year: 2060; 
Social Security: 6.29%; 
Medicaid: 4.68%; 
Medicare: 10.55%. 

Year: 2061; 
Social Security: 6.29%; 
Medicaid: 4.75%; 
Medicare: 10.70%. 

Year: 2062; 
Social Security: 6.30%; 
Medicaid: 4.83%; 
Medicare: 10.84%. 

Year: 2063; 
Social Security: 6.31%; 
Medicaid: 4.90%; 
Medicare: 10.99%. 

Year: 2064; 
Social Security: 6.32%; 
Medicaid: 4.98%; 
Medicare: 11.14%. 

Year: 2065; 
Social Security: 6.33%; 
Medicaid: 5.06%; 
Medicare: 11.30%. 

Year: 2066; 
Social Security: 6.34%; 
Medicaid: 5.14%; 
Medicare: 11.47%. 

Year: 2067; 
Social Security: 6.35%; 
Medicaid: 5.22%; 
Medicare: 11.64%. 

Year: 2068; 
Social Security: 6.35%; 
Medicaid: 5.30%; 
Medicare: 11.81%. 

Year: 2069; 
Social Security: 6.36%; 
Medicaid: 5.38%; 
Medicare: 11.96%. 

Year: 2070; 
Social Security: 6.36%; 
Medicaid: 5.47%; 
Medicare: 12.12%. 

Year: 2071; 
Social Security: 6.37%; 
Medicaid: 5.55%; 
Medicare: 12.28%. 

Year: 2072; 
Social Security: 6.37%; 
Medicaid: 5.64%; 
Medicare: 12.44%. 

Year: 2073; 
Social Security: 6.37%; 
Medicaid: 5.73%; 
Medicare: 12.60%. 

Year: 2074; 
Social Security: 6.38%; 
Medicaid: 5.82%; 
Medicare: 12.75%. 

Year: 2075; 
Social Security: 6.38%; 
Medicaid: 5.91%; 
Medicare: 12.92%. 

Year: 2076; 
Social Security: 6.38%; 
Medicaid: 6.01%; 
Medicare: 13.08%. 

Year: 2077; 
Social Security: 6.39%; 
Medicaid: 6.10%; 
Medicare: 13.25%. 

Year: 2078; 
Social Security: 6.39%; 
Medicaid: 6.20%; 
Medicare: 13.41%. 

Year: 2079; 
Social Security: 6.39%; 
Medicaid: 6.29%; 
Medicare: 13.58%. 

Year: 2080; 
Social Security: 6.39%; 
Medicaid: 6.39%; 
Medicare: 13.75%.

Source: GAO analysis based on data from the Office of the Chief 
Actuary, Social Security Administration, Office of the Actuary, Centers 
for Medicare and Medicaid Services, and the Congressional Budget 
Office. 

Note:  Social Security and Medicare projections based on the 
intermediate assumptions of the 2005 Trustees’ Reports.  Medicaid 
projections based on CBO’s January 2006 short-term Medicaid estimates 
and CBO’s December 2005 long-term Medicaid projections under mid-range 
assumptions. 

[End of figure] 

Debt per Capita Could Exceed GDP per Capita by 2030 Assuming 
Discretionary Spending Grows with GDP after 2006 and All Expiring Tax 
Provisions are Extended: 

[See PDF for image] – graphic text: 

Bar graph with six items. 

2005; 
Debt per Capita: $15,254; 
GDP per Capita: $40,838. 

2030; 
Debt per Capita: $85,920; 
GDP per Capita: $56,607. 

2040; 
Debt per Capita: $170,150; 
GDP per Capita: $56,827. 

Source: GAO’s January 2006 analysis. 

[End of figure] 

Measured on an Outlay Equivalent Basis, Tax Expenditures Exceeded 
Discretionary Spending for Most Years in the Last Decade: 

[See PDF for image] – graphic text: 

Line graph with three lines with 24 items each. 

Dollars in billions (in constant 2004 dollars). 

Fiscal year: 1981; 
Mandatory spending: $687.6; 
Discretionary spending: $571.7; 
Sum of tax expenditure outlay equivalent estimates: $501.2. 

Fiscal year: 1982; 
Mandatory spending: $729.5; 
Discretionary spending: $566.5; 
Sum of tax expenditure outlay equivalent estimates: $544.1. 

Fiscal year: 1983; 
Mandatory spending: $757.3; 
Discretionary spending: $588.0; 
Sum of tax expenditure outlay equivalent estimates: $598.8. 

Fiscal year: 1984; 
Mandatory spending: $758.3; 
Discretionary spending: $609.0; 
Sum of tax expenditure outlay equivalent estimates: $618.3. 

Fiscal year: 1985; 
Mandatory spending: $824.9; 
Discretionary spending: $646.4; 
Sum of tax expenditure outlay equivalent estimates: $676.7. 

Fiscal year: 1986; 
Mandatory spending: $838.5; 
Discretionary spending: $666.2; 
Sum of tax expenditure outlay equivalent estimates: $728.6. 

Fiscal year: 1987; 
Mandatory spending: $829.0; 
Discretionary spending: $657.7; 
Sum of tax expenditure outlay equivalent estimates: $702.7. 

Fiscal year: 1988; 
Mandatory spending: $861.3; 
Discretionary spending: $666.6; 
Sum of tax expenditure outlay equivalent estimates: $524.7. 

Fiscal year: 1989; 
Mandatory spending: $905.1; 
Discretionary spending: $675.4; 
Sum of tax expenditure outlay equivalent estimates: $549.2. 

Fiscal year: 1990; 
Mandatory spending: $1,002.6; 
Discretionary spending: $667.0; 
Sum of tax expenditure outlay equivalent estimates: $534.6. 

Fiscal year: 1991; 
Mandatory spending: $1,015.7; 
Discretionary spending: $684.8; 
Sum of tax expenditure outlay equivalent estimates: $532.8. 

Fiscal year: 1992; 
Mandatory spending: $1,062.0; 
Discretionary spending: $668.6; 
Sum of tax expenditure outlay equivalent estimates: $551.2. 

Fiscal year: 1993; 
Mandatory spending: $1,065.7; 
Discretionary spending: $660.7; 
Sum of tax expenditure outlay equivalent estimates: $561.7. 

Fiscal year: 1994; 
Mandatory spending: $1,103.6; 
Discretionary spending: $649.2; 
Sum of tax expenditure outlay equivalent estimates: $600.3. 

Fiscal year: 1995; 
Mandatory spending: $1,140.3; 
Discretionary spending: $639.9; 
Sum of tax expenditure outlay equivalent estimates: $622.3. 

Fiscal year: 1996; 
Mandatory spending: $1,184.2; 
Discretionary spending: $613.8; 
Sum of tax expenditure outlay equivalent estimates: $620.0. 

Fiscal year: 1997; 
Mandatory spending: $1,193.6; 
Discretionary spending: $619.7; 
Sum of tax expenditure outlay equivalent estimates: $650.2. 

Fiscal year: 1998; 
Mandatory spending: $1,231.3; 
Discretionary spending: $617.7; 
Sum of tax expenditure outlay equivalent estimates: $738.7. 

Fiscal year: 1999; 
Mandatory spending: $1,247.8; 
Discretionary spending: $631.7; 
Sum of tax expenditure outlay equivalent estimates: $785.5. 

Fiscal year: 2000; 
Mandatory spending: $1,271.1; 
Discretionary spending: $665.5; 
Sum of tax expenditure outlay equivalent estimates: $825.0. 

Fiscal year: 2001; 
Mandatory spending: $1,283.5; 
Discretionary spending: $686.7; 
Sum of tax expenditure outlay equivalent estimates: $908.1. 

Fiscal year: 2002; 
Mandatory spending: $1,325.5; 
Discretionary spending: $762.4; 
Sum of tax expenditure outlay equivalent estimates: $944.2. 

Fiscal year: 2003; 
Mandatory spending: $1,361.0; 
Discretionary spending: $841.8; 
Sum of tax expenditure outlay equivalent estimates: $883.5. 

Fiscal year: 2004; 
Mandatory spending: $1,396.8; 
Discretionary spending: $895.4; 
Sum of tax expenditure outlay equivalent estimates: $852.5. 

Note: Outlay-equivalent estimates represent the amount of budget 
outlays that would be required if the government were to provide 
taxpayers with the same after-tax income they receive through the tax 
expenditure. Outlay-equivalent estimates are useful to compare tax 
expenditures and other parts of the federal budget. Summing tax 
expenditure estimates does not take into account interactions between 
individual provisions. 

Source: GAO Analysis of OMB’s Budget Reports on Tax Expenditures, 
Fiscal Years 1976-2006. 

[End of figure] 

Health Care Is the Nation’s Top Tax Expenditure in Fiscal Year 2005: 

[See PDF for image] – graphic text: 

Bar graph with five items. 

Estimated dollars in billions. 

Exclusion of employer contributions for insurance premiums and medical 
care: $118.4*; 
Deductibility of mortgage interest on owner-occupied dwellings: $62.2; 
Exclusion of pension contributions and earnings: employer-sponsored 
defined benefit plans: $50.6; 
Child tax credit: $41.8**; 
Exclusion of pension contributions and earnings: employer-sponsored 
401(K) plans: $37.4. 

Note: “Tax expenditures” refers to the special tax provisions that are 
contained in the federal income taxes on individuals and corporations. 
OMB does not include forgone revenue from other federal taxes such as 
Social Security and Medicare payroll taxes. 

* If the payroll tax exclusion were also counted here, the total tax 
expenditure for employer contributions for health insurance premiums 
would be about 50 percent higher or $177.6 billion. 

** This is the revenue loss and does not include associated outlays of 
$14.6 billion. 

Source: Office of Management and Budget (OMB), Analytical Perspectives, 
Budget of the United States Government, Fiscal Year 2007. 

[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 of 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: Three Pronged Approach: 

Re-impose Budget Controls: 

* Discretionary spending caps: 

* PAYGO rules on both sides of the ledger (both historical and enhanced 
approaches): 

* Mandatory spending triggers and appropriate default mechanisms: 

* Modified rules for selected items (e.g., earmarks and emergency 
designations):  

Improve Accounting and Reporting and Metrics: 

* Enhanced financial statement presentation: 

* Automatic present value disclosures for legislative debate on major 
tax and spending bills: 

* Issue a summary annual report that is useful and used: 

* Develop key national (outcome-based) indicators: 

Re-examine Policies and Programs: 

* Restructure existing entitlement programs: 

* Reexamine the base of all other spending programs: 

* Review and revise existing tax policy, including tax preferences and 
enforcement programs: 

* Expand scrutiny of proposed new programs, policies, or activities: 

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 OUT 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. 

[End of table] 

21st Century Challenges Report: 

Provides background, framework, and questions to assist in reexamining 
the base: 

Covers entitlements & other mandatory spending, discretionary spending, 
and tax policies and programs: 

Based on GAO's work for the Congress: 

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: 

Illustration: Political Cartoon: 

[See Powerpoint File for Image] 

Toles, Copyright 2006: 
The Washington Post: 
Reprinted with permission of Universal Press Syndicate. All rights 
reserved. 

[End of Figure] 

[End of Slide Presentation]