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: America's Fiscal Future: The Honorable David M. Walker: Comptroller General of the United States: National Conference of State Legislatures: April 8, 2006: The Case for Change: The federal government is on a "burning platform," and the status quo way of doing business is unacceptable for a variety of reasons, including: * Past fiscal trends and significant long-range challenges: * Rising public expectations for demonstrable results and enhanced responsiveness: * Selected trends and challenges having no boundaries: * Additional resource demands due to recent terrorism events in the United States: * Government performance/accountability and high risk challenges, including the lack of effective human capital strategies: 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: 19.5%. 2030; Net interest: 2.2%; Social Security: 6.4%; Medicare & Medicaid: 8.5%; All other spending: 7.8%; Revenue: 19.5%. 2040; Net interest: 4.8%; Social Security: 6.9%; Medicare & Medicaid: 10.3%; All other spending: 7.8%; Revenue: 19.5%. 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 January 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: 9.8%; Revenue: 17.5%. 2030; Net interest: 7%; Social Security: 6.7%; Medicare & Medicaid: 8.5%; All other spending: 9.8%; Revenue: 17.5%. 2040; Net interest: 14%; Social Security: 7.6%; Medicare & Medicaid: 10.3%; All other spending: 9.8%; Revenue: 17.5%. Note: This includes certain tax provisions that expired at the end of 2005, such as the increased AMT exemption amount. Source: GAO’s January 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. 2000: Total value: 7.75% of GDP. Medicare value: 2.29% of GDP, which is 29.5% of 2000 spending. Medicaid value: 1.23% of GDP, which is 15.9% of 2000 spending. Social Security value: 4.23% of GDP, which is 54.6% of 2000 spending. 2001: Total value: 8.14% of GDP. Medicare value: 2.46% of GDP, which is 30.2% of 2001 spending. Medicaid value: 1.33% of GDP, which is 16.3% of 2001 spending. Social Security value: 4.35% of GDP, which is 53.4% of 2001 spending. 2002: Total value: 8.4% of GDP. Medicare value: 2.55% of GDP, which is 30.4% of 2002 spending. Medicaid value: 1.44% of GDP, which is 17.1% of 2002 spending. Social Security value: 4.41% of GDP, which is 52.5% of 2002 spending. 2003: Total value: 8.44% of GDP. Medicare value: 2.59% of GDP, which is 30.7% of 2003 spending. Medicaid value: 1.49% of GDP, which is 17.7% of 2003 spending. Social Security value: 4.36% of GDP, which is 51.7% of 2003 spending. 2004: Total value: 8.52% of GDP. Medicare value: 2.68% of GDP, which is 31.5% of 2004 spending. Medicaid value: 1.51% of GDP, which is 17.7% of 2004 spending. Social Security value: 4.33% of GDP, which is 50.8% of 2004 spending. 2005: Total value: 8.52% of GDP. Medicare value: 2.76% of GDP, which is 32.4% of 2005 spending. Medicaid value: 1.48% of GDP, which is 17.4% of 2005 spending. Social Security value: 4.28% of GDP, which is 50.2% of 2005 spending. 2006: Total value: 9.16% of GDP. Medicare value: 3.44% of GDP, which is 37.6% of 2006 spending. Medicaid value: 1.47% of GDP, which is 16.0% of 2006 spending. Social Security value: 4.25% of GDP, which is 46.4% of 2006 spending. 2007: Total value: 9.23% of GDP. Medicare value: 3.51% of GDP, which is 38.0% of 2007 spending. Medicaid value: 1.49% of GDP, which is 16.1% of 2007 spending. Social Security value: 4.23% of GDP, which is 45.8% of 2007 spending. 2008: Total value: 9.34% of GDP. Medicare value: 3.56% of GDP, which is 38.1% of 2008 spending. Medicaid value: 1.54% of GDP, which is 16.5% of 2008 spending. Social Security value: 4.24% of GDP, which is 45.4% of 2008 spending. 2009: Total value: 9.49% of GDP. Medicare value: 3.61% of GDP, which is 38.0% of 2009 spending. Medicaid value: 1.6% of GDP, which is 16.9% of 2009 spending. Social Security value: 4.28% of GDP, which is 45.1% of 2009 spending. 2010: Total value: 9.64% of GDP. Medicare value: 3.66% of GDP, which is 38.0% of 2010 spending. Medicaid value: 1.66% of GDP, which is 17.2% of 2010 spending. Social Security value: 4.32% of GDP, which is 44.8% of 2010 spending. 2011: Total value: 9.82% of GDP. Medicare value: 3.72% of GDP, which is 37.9% of 2011 spending. Medicaid value: 1.73% of GDP, which is 17.6% of 2011 spending. Social Security value: 4.37% of GDP, which is 44.5% of 2011 spending. 2012: Total value: 10.06% of GDP. Medicare value: 3.81% of GDP, which is 37.9% of 2012 spending. Medicaid value: 1.8% of GDP, which is 17.9% of 2012 spending. Social Security value: 4.45% of GDP, which is 44.2% of 2012 spending. 2013: Total value: 10.34% of GDP. Medicare value: 3.93% of GDP, which is 38.0% of 2013 spending. Medicaid value: 1.87% of GDP, which is 18.1% of 2013 spending. Social Security value: 4.54% of GDP, which is 43.9% of 2013 spending. 2014: Total value: 10.6% of GDP. Medicare value: 4.07% of GDP, which is 38.4% of 2014 spending. Medicaid value: 1.9% of GDP, which is 17.9% of 2014 spending. Social Security value: 4.63% of GDP, which is 43.7% of 2014 spending. 2015: Total value: 10.88% of GDP. Medicare value: 4.24% of GDP, which is 39.0% of 2015 spending. Medicaid value: 1.9% of GDP, which is 17.5% of 2015 spending. Social Security value: 4.74% of GDP, which is 43.6% of 2015 spending. 2016: Total value: 11.15% of GDP. Medicare value: 4.4% of GDP, which is 39.5% of 2016 spending. Medicaid value: 1.9% of GDP, which is 17.0% of 2016 spending. Social Security value: 4.85% of GDP, which is 43.5% of 2016 spending. 2017: Total value: 11.41% of GDP. Medicare value: 4.55% of GDP, which is 39.9% of 2017 spending. Medicaid value: 1.9% of GDP, which is 16.7% of 2017 spending. Social Security value: 4.96% of GDP, which is 43.5% of 2017 spending. 2018: Total value: 11.69% of GDP. Medicare value: 4.72% of GDP, which is 40.4% of 2018 spending. Medicaid value: 1.9% of GDP, which is 16.3% of 2018 spending. Social Security value: 5.07% of GDP, which is 43.4% of 2018 spending. 2019: Total value: 12% of GDP. Medicare value: 4.89% of GDP, which is 40.8% of 2019 spending. Medicaid value: 1.92% of GDP, which is 16.0% of 2019 spending. Social Security value: 5.19% of GDP, which is 43.3% of 2019 spending. 2020: Total value: 12.35% of GDP. Medicare value: 5.08% of GDP, which is 41.1% of 2020 spending. Medicaid value: 1.95% of GDP, which is 15.8% of 2020 spending. Social Security value: 5.32% of GDP, which is 43.1% of 2020 spending. 2021: Total value: 12.69% of GDP. Medicare value: 5.26% of GDP, which is 41.4% of 2021 spending. Medicaid value: 1.99% of GDP, which is 15.7% of 2021 spending. Social Security value: 5.44% of GDP, which is 42.9% of 2021 spending. 2022: Total value: 13.02% of GDP. Medicare value: 5.45% of GDP, which is 41.9% of 2022 spending. Medicaid value: 2.02% of GDP, which is 15.5% of 2022 spending. Social Security value: 5.55% of GDP, which is 42.6% of 2022 spending. 2023: Total value: 13.37% of GDP. Medicare value: 5.64% of GDP, which is 42.2% of 2023 spending. Medicaid value: 2.06% of GDP, which is 15.4% of 2023 spending. Social Security value: 5.67% of GDP, which is 42.4% of 2023 spending. 2024: Total value: 13.71% of GDP. Medicare value: 5.84% of GDP, which is 42.6% of 2024 spending. Medicaid value: 2.09% of GDP, which is 15.2% of 2024 spending. Social Security value: 5.78% of GDP, which is 42.2% of 2024 spending. 2025: Total value: 14.06% of GDP. Medicare value: 6.04% of GDP, which is 43.0% of 2025 spending. Medicaid value: 2.13% of GDP, which is 15.1% of 2025 spending. Social Security value: 5.89% of GDP, which is 41.9% of 2025 spending. 2026: Total value: 14.38% of GDP. Medicare value: 6.22% of GDP, which is 43.3% of 2026 spending. Medicaid value: 2.17% of GDP, which is 15.1% of 2026 spending. Social Security value: 5.99% of GDP, which is 41.7% of 2026 spending. 2027: Total value: 14.68% of GDP. Medicare value: 6.4% of GDP, which is 43.6% of 2027 spending. Medicaid value: 2.2% of GDP, which is 15.0% of 2027 spending. Social Security value: 6.08% of GDP, which is 41.4% of 2027 spending. 2028: Total value: 14.98% of GDP. Medicare value: 6.58% of GDP, which is 43.9% of 2028 spending. Medicaid value: 2.23% of GDP, which is 14.9% of 2028 spending. Social Security value: 6.17% of GDP, which is 41.2% of 2028 spending. 2029: Total value: 15.28% of GDP. Medicare value: 6.77% of GDP, which is 44.3% of 2029 spending. Medicaid value: 2.27% of GDP, which is 14.9% of 2029 spending. Social Security value: 6.24% of GDP, which is 40.8% of 2029 spending. 2030: Total value: 15.57% of GDP. Medicare value: 6.95% of GDP, which is 44.6% of 2030 spending. Medicaid value: 2.31% of GDP, which is 14.8% of 2030 spending. Social Security value: 6.31% of GDP, which is 40.5% of 2030 spending. 2031: Total value: 15.83% of GDP. Medicare value: 7.11% of GDP, which is 44.9% of 2031 spending. Medicaid value: 2.35% of GDP, which is 14.8% of 2031 spending. Social Security value: 6.37% of GDP, which is 40.2% of 2031 spending. 2032: Total value: 16.08% of GDP. Medicare value: 7.26% of GDP, which is 45.1% of 2032 spending. Medicaid value: 2.4% of GDP, which is 14.9% of 2032 spending. Social Security value: 6.42% of GDP, which is 39.9% of 2032 spending. 2033: Total value: 16.33% of GDP. Medicare value: 7.42% of GDP, which is 45.4% of 2033 spending. Medicaid value: 2.45% of GDP, which is 15.0% of 2033 spending. Social Security value: 6.46% of GDP, which is 39.6% of 2033 spending. 2034: Total value: 16.58% of GDP. Medicare value: 7.58% of GDP, which is 45.7% of 2034 spending. Medicaid value: 2.5% of GDP, which is 15.1% of 2034 spending. Social Security value: 6.5% of GDP, which is 39.2% of 2034 spending. 2035: Total value: 16.82% of GDP. Medicare value: 7.75% of GDP, which is 46.1% of 2035 spending. Medicaid value: 2.55% of GDP, which is 15.2% of 2035 spending. Social Security value: 6.52% of GDP, which is 38.8% of 2035 spending. 2036: Total value: 17.04% of GDP. Medicare value: 7.9% of GDP, which is 46.4% of 2036 spending. Medicaid value: 2.6% of GDP, which is 15.3% of 2036 spending. Social Security value: 6.54% of GDP, which is 38.4% of 2036 spending. 2037: Total value: 17.24% of GDP. Medicare value: 8.04% of GDP, which is 46.6% of 2037 spending. Medicaid value: 2.65% of GDP, which is 15.4% of 2037 spending. Social Security value: 6.55% of GDP, which is 38.0% of 2037 spending. 2038: Total value: 17.42% of GDP. Medicare value: 8.17% of GDP, which is 46.9% of 2038 spending. Medicaid value: 2.7% of GDP, which is 15.5% of 2038 spending. Social Security value: 6.55% of GDP, which is 37.6% of 2038 spending. 2039: Total value: 17.59% of GDP. Medicare value: 8.29% of GDP, which is 47.1% of 2039 spending. Medicaid value: 2.75% of GDP, which is 15.6% of 2039 spending. Social Security value: 6.55% of GDP, which is 37.2% of 2039 spending. 2040: Total value: 17.75% of GDP. Medicare value: 8.41% of GDP, which is 47.4% of 2040 spending. Medicaid value: 2.8% of GDP, which is 15.8% of 2040 spending. Social Security value: 6.54% of GDP, which is 36.8% of 2040 spending. 2041: Total value: 17.91% of GDP. Medicare value: 8.53% of GDP, which is 47.6% of 2041 spending. Medicaid value: 2.85% of GDP, which is 15.9% of 2041 spending. Social Security value: 6.53% of GDP, which is 36.5% of 2041 spending. 2042: Total value: 18.07% of GDP. Medicare value: 8.64% of GDP, which is 47.8% of 2042 spending. Medicaid value: 2.9% of GDP, which is 16.0% of 2042 spending. Social Security value: 6.53% of GDP, which is 36.1% of 2042 spending. 2043: Total value: 18.23% of GDP. Medicare value: 8.76% of GDP, which is 48.1% of 2043 spending. Medicaid value: 2.95% of GDP, which is 16.2% of 2043 spending. Social Security value: 6.52% of GDP, which is 35.8% of 2043 spending. 2044: Total value: 18.39% of GDP. Medicare value: 8.88% of GDP, which is 48.3% of 2044 spending. Medicaid value: 3% of GDP, which is 16.3% of 2044 spending. Social Security value: 6.51% of GDP, which is 35.4% of 2044 spending. 2045: Total value: 18.55% of GDP. Medicare value: 9% of GDP, which is 48.5% of 2045 spending. Medicaid value: 3.05% of GDP, which is 16.4% of 2045 spending. Social Security value: 6.5% of GDP, which is 35.0% of 2045 spending. 2046: Total value: 18.71% of GDP. Medicare value: 9.12% of GDP, which is 48.7% of 2046 spending. Medicaid value: 3.1% of GDP, which is 16.6% of 2046 spending. Social Security value: 6.49% of GDP, which is 34.7% of 2046 spending. 2047: Total value: 18.86% of GDP. Medicare value: 9.23% of GDP, which is 48.9% of 2047 spending. Medicaid value: 3.14% of GDP, which is 16.6% of 2047 spending. Social Security value: 6.49% of GDP, which is 34.4% of 2047 spending. 2048: Total value: 19% of GDP. Medicare value: 9.33% of GDP, which is 49.1% of 2048 spending. Medicaid value: 3.19% of GDP, which is 16.8% of 2048 spending. Social Security value: 6.48% of GDP, which is 34.1% of 2048 spending. 2049: Total value: 19.15% of GDP. Medicare value: 9.44% of GDP, which is 49.3% of 2049 spending. Medicaid value: 3.23% of GDP, which is 16.9% of 2049 spending. Social Security value: 6.48% of GDP, which is 33.8% of 2049 spending. 2050: Total value: 19.3% of GDP. Medicare value: 9.56% of GDP, which is 49.5% of 2050 spending. Medicaid value: 3.27% of GDP, which is 16.9% of 2050 spending. Social Security value: 6.47% of GDP, which is 33.5% of 2050 spending. 2051: Total value: 19.45% of GDP. Medicare value: 9.67% of GDP, which is 49.7% of 2051 spending. Medicaid value: 3.31% of GDP, which is 17.0% of 2051 spending. Social Security value: 6.47% of GDP, which is 33.3% of 2051 spending. 2052: Total value: 19.61% of GDP. Medicare value: 9.78% of GDP, which is 49.9% of 2052 spending. Medicaid value: 3.35% of GDP, which is 17.1% of 2052 spending. Social Security value: 6.48% of GDP, which is 33.0% of 2052 spending. 2053: Total value: 19.77% of GDP. Medicare value: 9.9% of GDP, which is 50.1% of 2053 spending. Medicaid value: 3.39% of GDP, which is 17.1% of 2053 spending. Social Security value: 6.48% of GDP, which is 32.8% of 2053 spending. 2054: Total value: 19.96% of GDP. Medicare value: 10.03% of GDP, which is 50.3% of 2054 spending. Medicaid value: 3.44% of GDP, which is 17.2% of 2054 spending. Social Security value: 6.49% of GDP, which is 32.5% of 2054 spending. 2055: Total value: 20.13% of GDP. Medicare value: 10.16% of GDP, which is 50.5% of 2055 spending. Medicaid value: 3.48% of GDP, which is 17.3% of 2055 spending. Social Security value: 6.49% of GDP, which is 32.2% of 2055 spending. 2056: Total value: 20.32% of GDP. Medicare value: 10.3% of GDP, which is 50.7% of 2056 spending. Medicaid value: 3.52% of GDP, which is 17.3% of 2056 spending. Social Security value: 6.5% of GDP, which is 32.0% of 2056 spending. 2057: Total value: 20.52% of GDP. Medicare value: 10.44% of GDP, which is 50.9% of 2057 spending. Medicaid value: 3.57% of GDP, which is 17.4% of 2057 spending. Social Security value: 6.51% of GDP, which is 31.7% of 2057 spending. 2058: Total value: 20.72% of GDP. Medicare value: 10.59% of GDP, which is 51.1% of 2058 spending. Medicaid value: 3.61% of GDP, which is 17.4% of 2058 spending. Social Security value: 6.52% of GDP, which is 31.5% of 2058 spending. 2059: Total value: 20.92% of GDP. Medicare value: 10.74% of GDP, which is 51.3% of 2059 spending. Medicaid value: 3.66% of GDP, which is 17.5% of 2059 spending. Social Security value: 6.52% of GDP, which is 31.2% of 2059 spending. 2060: Total value: 21.12% of GDP. Medicare value: 10.89% of GDP, which is 51.6% of 2060 spending. Medicaid value: 3.7% of GDP, which is 17.5% of 2060 spending. Social Security value: 6.53% of GDP, which is 30.9% of 2060 spending. 2061: Total value: 21.33% of GDP. Medicare value: 11.04% of GDP, which is 51.8% of 2061 spending. Medicaid value: 3.75% of GDP, which is 17.6% of 2061 spending. Social Security value: 6.54% of GDP, which is 30.7% of 2061 spending. 2062: Total value: 21.54% of GDP. Medicare value: 11.19% of GDP, which is 51.9% of 2062 spending. Medicaid value: 3.8% of GDP, which is 17.6% of 2062 spending. Social Security value: 6.55% of GDP, which is 30.4% of 2062 spending. 2063: Total value: 21.74% of GDP. Medicare value: 11.34% of GDP, which is 52.2% of 2063 spending. Medicaid value: 3.84% of GDP, which is 17.7% of 2063 spending. Social Security value: 6.56% of GDP, which is 30.2% of 2063 spending. 2064: Total value: 21.96% of GDP. Medicare value: 11.51% of GDP, which is 52.4% of 2064 spending. Medicaid value: 3.89% of GDP, which is 17.7% of 2064 spending. Social Security value: 6.56% of GDP, which is 29.9% of 2064 spending. 2065: Total value: 22.19% of GDP. Medicare value: 11.68% of GDP, which is 52.6% of 2065 spending. Medicaid value: 3.94% of GDP, which is 17.8% of 2065 spending. Social Security value: 6.57% of GDP, which is 29.6% of 2065 spending. 2066: Total value: 22.43% of GDP. Medicare value: 11.86% of GDP, which is 52.9% of 2066 spending. Medicaid value: 3.99% of GDP, which is 17.8% of 2066 spending. Social Security value: 6.58% of GDP, which is 29.3% of 2066 spending. 2067: Total value: 22.66% of GDP. Medicare value: 12.03% of GDP, which is 53.1% of 2067 spending. Medicaid value: 4.04% of GDP, which is 17.8% of 2067 spending. Social Security value: 6.59% of GDP, which is 29.1% of 2067 spending. 2068: Total value: 22.87% of GDP. Medicare value: 12.19% of GDP, which is 53.3% of 2068 spending. Medicaid value: 4.09% of GDP, which is 17.9% of 2068 spending. Social Security value: 6.59% of GDP, which is 28.8% of 2068 spending. 2069: Total value: 23.08% of GDP. Medicare value: 12.35% of GDP, which is 53.5% of 2069 spending. Medicaid value: 4.14% of GDP, which is 17.9% of 2069 spending. Social Security value: 6.59% of GDP, which is 28.6% of 2069 spending. 2070: Total value: 23.3% of GDP. Medicare value: 12.51% of GDP, which is 53.7% of 2070 spending. Medicaid value: 4.19% of GDP, which is 18.0% of 2070 spending. Social Security value: 6.6% of GDP, which is 28.3% of 2070 spending. 2071: Total value: 23.53% of GDP. Medicare value: 12.68% of GDP, which is 53.9% of 2071 spending. Medicaid value: 4.25% of GDP, which is 18.1% of 2071 spending. Social Security value: 6.6% of GDP, which is 28.0% of 2071 spending. 2072: Total value: 23.74% of GDP. Medicare value: 12.84% of GDP, which is 54.1% of 2072 spending. Medicaid value: 4.3% of GDP, which is 18.1% of 2072 spending. Social Security value: 6.6% of GDP, which is 27.8% of 2072 spending. 2073: Total value: 23.97% of GDP. Medicare value: 13.01% of GDP, which is 54.3% of 2073 spending. Medicaid value: 4.35% of GDP, which is 18.1% of 2073 spending. Social Security value: 6.61% of GDP, which is 27.6% of 2073 spending. 2074: Total value: 24.19% of GDP. Medicare value: 13.17% of GDP, which is 54.4% of 2074 spending. Medicaid value: 4.41% of GDP, which is 18.2% of 2074 spending. Social Security value: 6.61% of GDP, which is 27.3% of 2074 spending. 2075: Total value: 24.41% of GDP. Medicare value: 13.34% of GDP, which is 54.6% of 2075 spending. Medicaid value: 4.46% of GDP, which is 18.3% of 2075 spending. Social Security value: 6.61% of GDP, which is 27.1% of 2075 spending. 2076: Total value: 24.639% of GDP. Medicare value: 13.509% of GDP, which is 54.8% of 2076 spending. Medicaid value: 4.52% of GDP, which is 18.3% of 2076 spending. Social Security value: 6.61% of GDP, which is 26.8% of 2076 spending. 2077: Total value: 24.869% of GDP. Medicare value: 13.679% of GDP, which is 55.0% of 2077 spending. Medicaid value: 4.57% of GDP, which is 18.4% of 2077 spending. Social Security value: 6.62% of GDP, which is 26.6% of 2077 spending. 2078: Total value: 25.1% of GDP. Medicare value: 13.85% of GDP, which is 55.2% of 2078 spending. Medicaid value: 4.63% of GDP, which is 18.4% of 2078 spending. Social Security value: 6.62% of GDP, which is 26.4% of 2078 spending. 2079: Total value: 25.16% of GDP. Medicare value: 13.85% of GDP, which is 55.0% of 2079 spending. Medicaid value: 4.69% of GDP, which is 18.6% of 2079 spending. Social Security value: 6.62% of GDP, which is 26.3% of 2079 spending. 2080: Total value: 25.23% of GDP. Medicare value: 13.85% of GDP, which is 54.9% of 2080 spending. Medicaid value: 4.75% of GDP, which is 18.8% of 2080 spending. Social Security value: 6.63% of GDP, which is 26.3% of 2080 spending. 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. 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] 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 3.2 percent per year. * As a result, we cannot simply grow our way out of this problem. Tough choices will be required. Is this Only the Federal Government's Problem? NO...Bad News Flows DOWNHILL!: Selected State Fiscal Challenges: States have many of their own fiscal challenges, including: * Unsustainable Medicaid cost increases: * Unfunded liabilities of state retirement systems (e.g. pensions and health): * Education funding squeezed by competing demands: * Infrastructure maintenance and expansion needs given unparalleled sprawl and congestion: * Emergency preparedness response and recovery needs (e.g. natural disaster, terrorist incident, pandemic flu): The Way Forward: Three Pronged Approach: Re-impose Budget Controls: * Discretionary spending caps: * PAYGO rules on both sides of the ledger: * Mandatory spending triggers: Improve Accounting and Reporting and Metrics: * Enhanced financial statement presentation: * Automatic present value disclosures for legislative debate on major tax and spending bills: * 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: 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: Twelve Reexamination Areas: MISSION AREAS: * Defense: * Education & Employment: * Financial Regulation & Housing: * Health Care: * Homeland Security: * International Affairs: * Natural Resources, Energy & Environment: * Retirement & Disability: * Science & Technology: * Transportation: CROSSCUTTING AREAS: * Improving Governance: * Reexamining the Tax System: 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] 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: Values: People: [End of Slide Presentation]