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. Current and Emerging Fiscal and Retirement Security Challenges: The Honorable David M. Walker: Comptroller General of the United States: American Benefits Council/MetLife Conference: Renaissance Mayflower Hotel: Washington, DC: January 14, 2005: GAO's Strategic Plan: [See PDF for image] - graphic text: Serving the Congress and the Nation: GAO's Strategic Plan Framework: Mission: GAO exists to support the Congress in meeting its constitutional responsibilities and to help improve the performance and ensure the accountability of the federal government for the benefit of the American people. Themes: * Long-term Fiscal Imbalance; * National Security; * Global interdependence; * Changing Economy; * Demographics; * Science and Technology; * Quality of Life; * Governance; Goals and Objectives: Provide Timely, Quality Service to the Congress and the Federal Government to Address Current and Emerging Challenges to the Well-Being and Financial Security of the American People related to: * Health care needs and financing; * Education and protection of children; * Work opportunities and worker protection; * Retirement income security; * Effective system of justice; * Viable communities; * Natural resources use and environmental protection; * Physical infrastructure; Respond to Changing Security Threats and the Challenges of Global Interdependence involving: * Emerging threats; * Military capabilities and readiness; * Advancement of U.S. interests; * Global market forces; Help Transform the Federal Government's Role and How It Does Business to Meet 21st Century Challenges by assessing: * Roles in achieving federal objectives; * Government transformation; * Key management challenges and program risks; * Fiscal position and financing of the government; Maximize the Value of GAO by Being a Model Federal Agency and a World- Class Professional Services Organization in the areas of: * Client and customer service; * Strategic leadership; * Institutional knowledge and experience; * Process improvement; * Employer of choice; Core Values: * Accountability; * Integrity; * Reliability; Source: GAO. GAO Strategic Plan 2004-2009. [End of strategic plan framework] Implications of Demographic Challenges: Fiscal challenges; Potential adverse effects on real economic growth; Potential adverse effects on overall living standards; Potential adverse effects on our long-term national security and competitiveness; The Aged as a Share of Total U.S. Population Continues to Grow: [See PDF for image] –graphic text: Line chart with one line and 131 items. Year: 1950; The aged as share of total population: 8.001%. Year: 1951; The aged as share of total population: 8.111%. Year: 1952; The aged as share of total population: 8.246%. Year: 1953; The aged as share of total population: 8.385%. Year: 1954; The aged as share of total population: 8.522%. Year: 1955; The aged as share of total population: 8.637%. Year: 1956; The aged as share of total population: 8.708%. Year: 1957; The aged as share of total population: 8.786%. Year: 1958; The aged as share of total population: 8.894%. Year: 1959; The aged as share of total population: 9%. Year: 1960; The aged as share of total population: 9.085%. Year: 1961; The aged as share of total population: 9.153%. Year: 1962; The aged as share of total population: 9.211%. Year: 1963; The aged as share of total population: 9.256%. Year: 1964; The aged as share of total population: 9.301%. Year: 1965; The aged as share of total population: 9.358%. Year: 1966; The aged as share of total population: 9.415%. Year: 1967; The aged as share of total population: 9.484%. Year: 1968; The aged as share of total population: 9.56%. Year: 1969; The aged as share of total population: 9.644%. Year: 1970; The aged as share of total population: 9.742%. Year: 1971; The aged as share of total population: 9.847%. Year: 1972; The aged as share of total population: 9.958%. Year: 1973; The aged as share of total population: 10.082%. Year: 1974; The aged as share of total population: 10.221%. Year: 1975; The aged as share of total population: 10.376%. Year: 1976; The aged as share of total population: 10.539%. Year: 1977; The aged as share of total population: 10.702%. Year: 1978; The aged as share of total population: 10.86%. Year: 1979; The aged as share of total population: 11.013%. Year: 1980; The aged as share of total population: 11.153%. Year: 1981; The aged as share of total population: 11.28%. Year: 1982; The aged as share of total population: 11.422%. Year: 1983; The aged as share of total population: 11.554%. Year: 1984; The aged as share of total population: 11.673%. Year: 1985; The aged as share of total population: 11.802%. Year: 1986; The aged as share of total population: 11.951%. Year: 1987; The aged as share of total population: 12.085%. Year: 1988; The aged as share of total population: 12.187%. Year: 1989; The aged as share of total population: 12.281%. Year: 1990; The aged as share of total population: 12.36%. Year: 1991; The aged as share of total population: 12.419%. Year: 1992; The aged as share of total population: 12.477%. Year: 1993; The aged as share of total population: 12.511%. Year: 1994; The aged as share of total population: 12.518%. Year: 1995; The aged as share of total population: 12.517%. Year: 1996; The aged as share of total population: 12.496%. Year: 1997; The aged as share of total population: 12.451%. Year: 1998; The aged as share of total population: 12.387%. Year: 1999; The aged as share of total population: 12.323%. Year: 2000; The aged as share of total population: 12.288%. Year: 2001; The aged as share of total population: 12.258%. Year: 2002; The aged as share of total population: 12.212%. Year: 2003; The aged as share of total population: 12.179%. Year: 2004; The aged as share of total population: 12.166%. Year: 2005; The aged as share of total population: 12.168%. Year: 2006; The aged as share of total population: 12.198%. Year: 2007; The aged as share of total population: 12.275%. Year: 2008; The aged as share of total population: 12.388%. Year: 2009; The aged as share of total population: 12.511%. Year: 2010; The aged as share of total population: 12.648%. Year: 2011; The aged as share of total population: 12.841%. Year: 2012; The aged as share of total population: 13.11%. Year: 2013; The aged as share of total population: 13.417%. Year: 2014; The aged as share of total population: 13.731%. Year: 2015; The aged as share of total population: 14.045%. Year: 2016; The aged as share of total population: 14.357%. Year: 2017; The aged as share of total population: 14.684%. Year: 2018; The aged as share of total population: 15.04%. Year: 2019; The aged as share of total population: 15.423%. Year: 2020; The aged as share of total population: 15.819%. Year: 2021; The aged as share of total population: 16.215%. Year: 2022; The aged as share of total population: 16.615%. Year: 2023; The aged as share of total population: 17.023%. Year: 2024; The aged as share of total population: 17.432%. Year: 2025; The aged as share of total population: 17.837%. Year: 2026; The aged as share of total population: 18.216%. Year: 2027; The aged as share of total population: 18.566%. Year: 2028; The aged as share of total population: 18.902%. Year: 2029; The aged as share of total population: 19.221%. Year: 2030; The aged as share of total population: 19.494%. Year: 2031; The aged as share of total population: 19.697%. Year: 2032; The aged as share of total population: 19.854%. Year: 2033; The aged as share of total population: 20.003%. Year: 2034; The aged as share of total population: 20.167%. Year: 2035; The aged as share of total population: 20.338%. Year: 2036; The aged as share of total population: 20.477%. Year: 2037; The aged as share of total population: 20.564%. Year: 2038; The aged as share of total population: 20.609%. Year: 2039; The aged as share of total population: 20.629%. Year: 2040; The aged as share of total population: 20.638%. Year: 2041; The aged as share of total population: 20.637%. Year: 2042; The aged as share of total population: 20.638%. Year: 2043; The aged as share of total population: 20.657%. Year: 2044; The aged as share of total population: 20.702%. Year: 2045; The aged as share of total population: 20.766%. Year: 2046; The aged as share of total population: 20.827%. Year: 2047; The aged as share of total population: 20.873%. Year: 2048; The aged as share of total population: 20.913%. Year: 2049; The aged as share of total population: 20.953%. Year: 2050; The aged as share of total population: 20.996%. Year: 2051; The aged as share of total population: 21.043%. Year: 2052; The aged as share of total population: 21.095%. Year: 2053; The aged as share of total population: 21.164%. Year: 2054; The aged as share of total population: 21.255%. Year: 2055; The aged as share of total population: 21.367%. Year: 2056; The aged as share of total population: 21.483%. Year: 2057; The aged as share of total population: 21.593%. Year: 2058; The aged as share of total population: 21.695%. Year: 2059; The aged as share of total population: 21.786%. Year: 2060; The aged as share of total population: 21.868%. Year: 2061; The aged as share of total population: 21.938%. Year: 2062; The aged as share of total population: 21.999%. Year: 2063; The aged as share of total population: 22.063%. Year: 2064; The aged as share of total population: 22.138%. Year: 2065; The aged as share of total population: 22.233%. Year: 2066; The aged as share of total population: 22.351%. Year: 2067; The aged as share of total population: 22.439%. Year: 2068; The aged as share of total population: 22.491%. Year: 2069; The aged as share of total population: 22.544%. Year: 2070; The aged as share of total population: 22.595%. Year: 2071; The aged as share of total population: 22.645%. Year: 2072; The aged as share of total population: 22.694%. Year: 2073; The aged as share of total population: 22.744%. Year: 2074; The aged as share of total population: 22.796%. Year: 2075; The aged as share of total population: 22.849%. Year: 2076; The aged as share of total population: 22.903%. Year: 2077; The aged as share of total population: 22.959%. Year: 2078; The aged as share of total population: 23.015%. Year: 2079; The aged as share of total population: 23.073%. Year: 2080; The aged as share of total population: 23.131%. Source: Office of the Chief Actuary, Social Security Administration. Note: Projections based on the intermediate assumptions of the 2004 Trustees’ Reports. [End of figure] U.S. Elderly Dependency Ratio Expected to Continue to Increase: [See PDF for image] –graphic text: Line chart with one line and five items. Year: 1950; Elderly Dependency Ratio (in percent): 13%. Year: 1980; Elderly Dependency Ratio (in percent): 17%. Year: 2000; Elderly Dependency Ratio (in percent): 19%. Year: 2030; Elderly Dependency Ratio (in percent): 33%. Year: 2050; Elderly Dependency Ratio (in percent): 35%. Source: Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat, World Population Prospects: 2000 Revision and World Urbanization Prospects: 2001 Revision. Data for 2030 - 2050 are projected. [End of figure] U.S. Labor Force Growth Will Continue to Decline: [See PDF for image] –graphic text: Line chart with one line and 111 items. Year: 1970; Percentage change (5-year moving average): 2.38%. Year: 1971; Percentage change (5-year moving average): 2.56%. Year: 1972; Percentage change (5-year moving average): 2.64%. Year: 1973; Percentage change (5-year moving average): 2.52%. Year: 1974; Percentage change (5-year moving average): 2.64%. Year: 1975; Percentage change (5-year moving average): 2.6%. Year: 1976; Percentage change (5-year moving average): 2.72%. Year: 1977; Percentage change (5-year moving average): 2.68%. Year: 1978; Percentage change (5-year moving average): 2.66%. Year: 1979; Percentage change (5-year moving average): 2.48%. Year: 1980; Percentage change (5-year moving average): 2.18%. Year: 1981; Percentage change (5-year moving average): 1.76%. Year: 1982; Percentage change (5-year moving average): 1.58%. Year: 1983; Percentage change (5-year moving average): 1.54%. Year: 1984; Percentage change (5-year moving average): 1.64%. Year: 1985; Percentage change (5-year moving average): 1.7%. Year: 1986; Percentage change (5-year moving average): 1.76%. Year: 1987; Percentage change (5-year moving average): 1.76%. Year: 1988; Percentage change (5-year moving average): 1.74%. Year: 1989; Percentage change (5-year moving average): 1.4%. Year: 1990; Percentage change (5-year moving average): 1.34%. Year: 1991; Percentage change (5-year moving average): 1.2%. Year: 1992; Percentage change (5-year moving average): 1.12%. Year: 1993; Percentage change (5-year moving average): 1%. Year: 1994; Percentage change (5-year moving average): 1.16%. Year: 1995; Percentage change (5-year moving average): 1.24%. Year: 1996; Percentage change (5-year moving average): 1.28%. Year: 1997; Percentage change (5-year moving average): 1.24%. Year: 1998; Percentage change (5-year moving average): 1.5%. Year: 1999; Percentage change (5-year moving average): 1.42%. Year: 2000; Percentage change (5-year moving average): 1.22%. Year: 2001; Percentage change (5-year moving average): 1.26%. Year: 2002; Percentage change (5-year moving average): 1.28%. Year: 2003; Percentage change (5-year moving average): 1.14%. Year: 2004; Percentage change (5-year moving average): 1.24%. Year: 2005; Percentage change (5-year moving average): 1.3%. Year: 2006; Percentage change (5-year moving average): 1.26%. Year: 2007; Percentage change (5-year moving average): 1.18%. Year: 2008; Percentage change (5-year moving average): 1.02%. Year: 2009; Percentage change (5-year moving average): 0.92%. Year: 2010; Percentage change (5-year moving average): 0.82%. Year: 2011; Percentage change (5-year moving average): 0.74%. Year: 2012; Percentage change (5-year moving average): 0.66%. Year: 2013; Percentage change (5-year moving average): 0.6%. Year: 2014; Percentage change (5-year moving average): 0.52%. Year: 2015; Percentage change (5-year moving average): 0.48%. Year: 2016; Percentage change (5-year moving average): 0.44%. Year: 2017; Percentage change (5-year moving average): 0.42%. Year: 2018; Percentage change (5-year moving average): 0.38%. Year: 2019; Percentage change (5-year moving average): 0.36%. Year: 2020; Percentage change (5-year moving average): 0.34%. Year: 2021; Percentage change (5-year moving average): 0.3%. Year: 2022; Percentage change (5-year moving average): 0.26%. Year: 2023; Percentage change (5-year moving average): 0.24%. Year: 2024; Percentage change (5-year moving average): 0.22%. Year: 2025; Percentage change (5-year moving average): 0.2%. Year: 2026; Percentage change (5-year moving average): 0.2%. Year: 2027; Percentage change (5-year moving average): 0.2%. Year: 2028; Percentage change (5-year moving average): 0.2%. Year: 2029; Percentage change (5-year moving average): 0.22%. Year: 2030; Percentage change (5-year moving average): 0.24%. Year: 2031; Percentage change (5-year moving average): 0.26%. Year: 2032; Percentage change (5-year moving average): 0.28%. Year: 2033; Percentage change (5-year moving average): 0.3%. Year: 2034; Percentage change (5-year moving average): 0.3%. Year: 2035; Percentage change (5-year moving average): 0.3%. Year: 2036; Percentage change (5-year moving average): 0.3%. Year: 2037; Percentage change (5-year moving average): 0.3%. Year: 2038; Percentage change (5-year moving average): 0.3%. Year: 2039; Percentage change (5-year moving average): 0.3%. Year: 2040; Percentage change (5-year moving average): 0.3%. Year: 2041; Percentage change (5-year moving average): 0.3%. Year: 2042; Percentage change (5-year moving average): 0.3%. Year: 2043; Percentage change (5-year moving average): 0.3%. Year: 2044; Percentage change (5-year moving average): 0.3%. Year: 2045; Percentage change (5-year moving average): 0.3%. Year: 2046; Percentage change (5-year moving average): 0.28%. Year: 2047; Percentage change (5-year moving average): 0.26%. Year: 2048; Percentage change (5-year moving average): 0.24%. Year: 2049; Percentage change (5-year moving average): 0.22%. Year: 2050; Percentage change (5-year moving average): 0.2%. Year: 2051; Percentage change (5-year moving average): 0.2%. Year: 2052; Percentage change (5-year moving average): 0.2%. Year: 2053; Percentage change (5-year moving average): 0.2%. Year: 2054; Percentage change (5-year moving average): 0.2%. Year: 2055; Percentage change (5-year moving average): 0.2%. Year: 2056; Percentage change (5-year moving average): 0.2%. Year: 2057; Percentage change (5-year moving average): 0.2%. Year: 2058; Percentage change (5-year moving average): 0.2%. Year: 2059; Percentage change (5-year moving average): 0.2%. Year: 2060; Percentage change (5-year moving average): 0.2%. Year: 2061; Percentage change (5-year moving average): 0.2%. Year: 2062; Percentage change (5-year moving average): 0.2%. Year: 2063; Percentage change (5-year moving average): 0.2%. Year: 2064; Percentage change (5-year moving average): 0.2%. Year: 2065; Percentage change (5-year moving average): 0.2%. Year: 2066; Percentage change (5-year moving average): 0.2%. Year: 2067; Percentage change (5-year moving average): 0.2%. Year: 2068; Percentage change (5-year moving average): 0.2%. Year: 2069; Percentage change (5-year moving average): 0.2%. Year: 2070; Percentage change (5-year moving average): 0.2%. Year: 2071; Percentage change (5-year moving average): 0.2%. Year: 2072; Percentage change (5-year moving average): 0.2%. Year: 2073; Percentage change (5-year moving average): 0.2%. Year: 2074; Percentage change (5-year moving average): 0.2%. Year: 2075; Percentage change (5-year moving average): 0.2%. Year: 2076; Percentage change (5-year moving average): 0.2%. Year: 2077; Percentage change (5-year moving average): 0.2%. Year: 2078; Percentage change (5-year moving average): 0.2%. Year: 2079; Percentage change (5-year moving average): 0.2%. Year: 2080; Percentage change (5-year moving average): 0.2%. Note: Percentage change is calculated as a centered 5-yr moving average of projections based on the intermediate assumptions of the 2004 Trustees Reports. Source: GAO analysis of data from the Office of the Chief Actuary, Social Security Administration. [End of figure] Composition of Federal Spending: [See PDF for image] - graphic text 3 pie charts with 5 items each. 1964: Defense: 46.0%. Social Security: 14.0%. Medicare & Medicaid: 0%. Net interest: 7.0%. All other spending: 33.0%. 1984: Defense: 27.0%. Social Security: 21.0%. Medicare & Medicaid: 9.0%. Net interest: 13.0%. All other spending: 30.0%. 2004*: Defense: 20.0%. Social Security: 21.0%. Medicare & Medicaid: 20.0%. Net interest: 7.0%. All other spending: 33.0%. * Current services estimate. Note: Numbers may not add to 100 percent due to rounding. Source: Budget of the United States Government, Fiscal Year 2005 (February 2004) and Budget of the United States Government, Fiscal Year 2005, Mid-session Review (July 2004), 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. 1964: Discretionary: 67%; Mandatory: 26%; Net Interest: 7%. 1984: Discretionary: 45%; Mandatory: 42%; Net Interest: 13%. 2004*: Discretionary: 39%; Mandatory: 54%; Net Interest: 7%. * Current services estimate. Note: Numbers may not add to 100 percent due to rounding. Source: Budget of the United States Government, Fiscal Year 2005 (February 2004) and Budget of the United States Government, Fiscal Year 2005, Mid-session Review (July 2004), Office of Management and Budget. [End of figure] Fiscal Year 2004 Deficit Numbers: On-Budget Deficit; -$567 Billion; -4.9% of GDP. Off-Budget Surplus; $155 Billion; 1.3% of GDP. Unified Deficit; -$412 Billion; -3.6% of GDP. * Includes the $151 billion Social Security surplus and a $4 billion surplus for the Postal Service. [End of table] Selected Fiscal Exposures: Sources and Examples 2004[A]: Type: Explicit liabilities; Example (dollars in billions): Publicly held debt ($4,297); Type: Explicit liabilities; Example (dollars in billions): Military and civilian pension and post- retirement health ($3,059). Type: Explicit liabilities; Example (dollars in billions): Veterans benefits payable ($925). Type: Explicit liabilities; Example (dollars in billions): Environmental and disposal liabilities ($249). Type: Explicit liabilities; Example (dollars in billions): Loan guarantees ($43). Type: Explicit financial commitments; Example (dollars in billions): Undelivered orders ($597). Type: Explicit financial commitments; Example (dollars in billions): Long-term leases ($39). Type: Financial contingencies; Example (dollars in billions): Unadjudicated claims ($4). Type: Financial contingencies; Example (dollars in billions): Pension Benefit Guaranty Corporation ($96). Type: Financial contingencies; Example (dollars in billions): Other national insurance programs ($1). Type: Financial contingencies; Example (dollars in billions): Government corporations e.g., Ginnie Mae. Type: Exposures implied by current policies or the public's expectations about the role of government; Example (dollars in billions): Debt held by government accounts ($3,071)[B]. Type: Exposures implied by current policies or the public's expectations about the role of government; Example (dollars in billions): Future Social Security benefit payments ($3,699)[C]. Type: Exposures implied by current policies or the public's expectations about the role of government; Example (dollars in billions): Future Medicare Part A benefit payments ($8,236)[C]. Type: Exposures implied by current policies or the public's expectations about the role of government; Example (dollars in billions): Future Medicare Part B benefit payments ($11,416)[C]. Type: Exposures implied by current policies or the public's expectations about the role of government; Example (dollars in billions): Future Medicare Part D benefit payments ($8,119) [C]. Type: Exposures implied by current policies or the public's expectations about the role of government; Example (dollars in billions): Life cycle cost including deferred and future maintenance and operating costs (amount unknown). Type: Exposures implied by current policies or the public's expectations about the role of government; Example (dollars in billions): Government Sponsored Enterprises e.g., Fannie Mae and Freddie Mac. [A] All figures are for end of fiscal year 2004, except Social Security and Medicare estimates, which are as of January 1, 2004. [B] This amount includes $809 billion held by military and civilian pension funds that would offset the explicit liabilities reported by those funds. [C] Figures for Social Security and Medicare are net of debt held by the trust funds ($1,531 billion for Social Security, $256 billion for Medicare Part A, and $24 billion for Medicare Part B) and represent net present value estimates over a 75-year period. Over an infinite horizon, the estimate for Social Security would be $10.4 trillion, $21.8 trillion for Medicare Part A, $23.2 trillion for Medicare Part B, and $16.5 trillion for Medicare Part D. Source: GAO analysis of data from the Department of the Treasury, the Office of the Chief Actuary, Social Security Administration, and the Office of the Actuary, Centers for Medicare and Medicaid Services. Updated 12/17/04. [End of table] Another Way to Think About These Numbers: * Debt held by the public—$4.3T; * Trust fund debt—$3.1T; * Gross debt—$7.4T; * Gross debt per person—about $25,000; * If we add everything on the previous slide that is not included in gross debt, the burden rises to more than $145,000 per person or more than $350,000 per full-time worker. Alternatively, it amounts to a total unfunded burden of more than $43 trillion in current dollars, which is about 19 times the current annual federal budget or about 4 times the current annual GDP. 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. 2003; All other spending; Percent of GDP: 10.3%; Medicare & Medicaid; Percent of GDP: 3.8%; Social Security; Percent of GDP: 4.4%; Net interest; Percent of GDP: 1.4%; Revenue; Percent of GDP: 16.4%. 2015; All other spending; Percent of GDP: 8.5%; Medicare & Medicaid; Percent of GDP: 5.4%; Social Security; Percent of GDP: 4.8%; Net interest; Percent of GDP: 1.8%; Revenue; Percent of GDP: 19.8%. 2030; All other spending; Percent of GDP: 8.5%; Medicare & Medicaid; Percent of GDP: 8.1%; Social Security; Percent of GDP: 6.7%; Net interest; Percent of GDP: 3.3%; Revenue; Percent of GDP: 19.8%. 2040; All other spending; Percent of GDP: 8.5%; Medicare & Medicaid; Percent of GDP: 9.9%; Social Security; Percent of GDP: 7.4%; Net interest; Percent of GDP: 6.8%; Revenue; Percent of GDP: 19.8%. Notes: In addition to the expiration of tax cuts, revenue as a share of GDP increases through 2014 due to (1) real bracket creep, (2) more taxpayers becoming subject to the AMT, and (3) increased revenue from tax-deferred retirement accounts. After 2014, revenue as a share of GDP is held constant. Budgetary effects due to passage of the Working Families Tax Relief Act of 2004 are not reflected in this simulation. Source: GAO’s September 2004 analysis. [End of figure] Composition of Spending as a Share of GDP Assuming Discretionary Spending Grows with GDP After 2004 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. 2003; All other spending; Percent of GDP: 10.3%; Medicare & Medicaid; Percent of GDP: 3.8%; Social Security; Percent of GDP: 4.4%; Net interest; Percent of GDP: 1.4%; Revenue; Percent of GDP: 16.4%. 2015; All other spending; Percent of GDP: 9.8%; Medicare & Medicaid; Percent of GDP: 5.4%; Social Security; Percent of GDP: 4.9%; Net interest; Percent of GDP: 3%; Revenue; Percent of GDP: 17.4%. 2030; All other spending; Percent of GDP: 9.8%; Medicare & Medicaid; Percent of GDP: 8.1%; Social Security; Percent of GDP: 7.1%; Net interest; Percent of GDP: 8.5%; Revenue; Percent of GDP: 17.4%. 2040; All other spending; Percent of GDP: 9.8%; Medicare & Medicaid; Percent of GDP: 9.9%; Social Security; Percent of GDP: 8.6%; Net interest; Percent of GDP: 17.8%; Revenue; Percent of GDP: 17.4%. Notes: Although expiring tax provisions are extended, revenue as a share of GDP increases through 2014 due to (1) real bracket creep, (2) more taxpayers becoming subject to the AMT, and (3) increased revenue from tax-deferred retirement accounts. After 2014, revenue as a share of GDP is held constant. Source: GAO’s September 2004 analysis. [End of figure] Social Security and Medicare’s Hospital Insurance Trust Funds Face Cash Deficits: [See PDF for image] –graphic text: Stacked bar chart with 2 items. Billions of 2004 dollars: Year: 2000; Medicare HI cash flow: $26.31; Social Security cash flow: $95.75. Year: 2001; Medicare HI cash flow: $18.06; Social Security cash flow: $94.70. Year: 2002; Medicare HI cash flow: $11.91; Social Security cash flow: $88.01. Year: 2003; Medicare HI cash flow: $6.14; Social Security cash flow: $68.72. Year: 2004; Medicare HI cash flow: -$7.25; Social Security cash flow: $64.40. Medicare HI cash deficit: 2004. Year: 2005; Medicare HI cash flow: -$7.20; Social Security cash flow: $86.40. Year: 2006; Medicare HI cash flow: -$9.25; Social Security cash flow: $93.10. Year: 2007; Medicare HI cash flow: -$10.23; Social Security cash flow: $98.00. Year: 2008; Medicare HI cash flow: -$11.18; Social Security cash flow: $99.10. Year: 2009; Medicare HI cash flow: -$12.78; Social Security cash flow: $92.50. Year: 2010; Medicare HI cash flow: -$14.81; Social Security cash flow: $88.50. Year: 2011; Medicare HI cash flow: -$16.35; Social Security cash flow: $84.30. Year: 2012; Medicare HI cash flow: -$18.59; Social Security cash flow: $74.20. Year: 2013; Medicare HI cash flow: -$22.53; Social Security cash flow: $61.90. Year: 2014; Medicare HI cash flow: -$25.79; Social Security cash flow: $49.40. Year: 2015; Medicare HI cash flow: -$31.01; Social Security cash flow: $35.00. Year: 2016; Medicare HI cash flow: -$36.70; Social Security cash flow: $19.00. Year: 2017; Medicare HI cash flow: -$43.13; Social Security cash flow: $1.70. Year: 2018; Medicare HI cash flow: -$50.37; Social Security cash flow: -$16.20. Social Security cash deficit: 2018. Year: 2019; Medicare HI cash flow: -$58.59; Social Security cash flow: -$35.90. Year: 2020; Medicare HI cash flow: -$67.30; Social Security cash flow: -$56.30. Year: 2021; Medicare HI cash flow: -$77.09; Social Security cash flow: -$77.10. Year: 2022; Medicare HI cash flow: -$87.64; Social Security cash flow: -$97.80. Year: 2023; Medicare HI cash flow: -$99.15; Social Security cash flow: -$119.10. Year: 2024; Medicare HI cash flow: -$111.45; Social Security cash flow: -$140.10. Year: 2025; Medicare HI cash flow: -$124.49; Social Security cash flow: -$161.30. Year: 2026; Medicare HI cash flow: -$137.93; Social Security cash flow: -$182.00. Year: 2027; Medicare HI cash flow: -$151.64; Social Security cash flow: -$202.00. Year: 2028; Medicare HI cash flow: -$165.94; Social Security cash flow: -$221.20. Year: 2029; Medicare HI cash flow: -$182.61; Social Security cash flow: -$238.90. Year: 2030; Medicare HI cash flow: -$199.45; Social Security cash flow: -$255.80. Year: 2031; Medicare HI cash flow: -$216.12; Social Security cash flow: -$272.20. Year: 2032; Medicare HI cash flow: -$233.12; Social Security cash flow: -$287.70. Year: 2033; Medicare HI cash flow: -$250.96; Social Security cash flow: -$301.60. Year: 2034; Medicare HI cash flow: -$269.80; Social Security cash flow: -$314.10. Year: 2035; Medicare HI cash flow: -$289.29; Social Security cash flow: -$325.20. Year: 2036; Medicare HI cash flow: -$308.47; Social Security cash flow: -$335.10. Year: 2037; Medicare HI cash flow: -$327.27; Social Security cash flow: -$343.80. Year: 2038; Medicare HI cash flow: -$346.18; Social Security cash flow: -$351.20. Year: 2039; Medicare HI cash flow: -$365.42; Social Security cash flow: -$357.80. Year: 2040; Medicare HI cash flow: -$384.94; Social Security cash flow: -$364.00. Source: GAO analysis based on the intermediate assumptions of The 2004 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and the Federal Disability Insurance Trust Funds and The 2004 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. The above excludes Medicare Part B and the newly enacted Medicare Part D benefit. [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 2004 Trustees’ Reports. Medicaid projections based on CBO’s January 2004 short-term Medicaid estimates and CBO’s December 2003 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] 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 about 60 percent or - Raising taxes to about 2.5 times today's level. Faster Economic Growth Can Help, but It Cannot Solve the Problem: * Closing the current long-term fiscal gap based on responsible 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 Sooner We Get Started, the Better: * Less change would be needed, and there would be more time to make adjustments. * The miracle of compounding would work with us rather than against us. * Our demographic changes will serve to make reform more difficult over time. The Way Forward: * Implement new accounting and reporting approaches and new budget control mechanisms for considering the impact of spending and tax policies and decisions over the long term. * Develop new metrics for measuring the impact of policies and decisions over the long term (e.g., key national indicators to measure our Nation’s position and progress over time and in relation to other countries). * Reexamine the base—question existing programs, policies and activities. Key Elements for Economic Security in Retirement: * Adequate retirement income: – Social Security; – Pensions; – Savings; – Earnings from continued employment (e.g., part-time). * Affordable health care: – Medicare; – Retiree health care; * Long-term care (a hybrid). * Major Players: – Employers; – Government; – Individuals; – Family; – Community. Social Security Reform Elements: Reform proposals should be evaluated as packages that strike a balance among individual reform elements and important interactive effects, including consideration of both funded and promised benefit levels. Comprehensive proposals can be evaluated against three basic criteria: * Financing sustainable solvency; * Balancing adequacy and equity in the benefits structure; * Implementing and administering reforms. Private Pension System Faces Variety of Challenges: In total, only about half the private labor force covered by pensions. Defined Benefit System: * Long term decline in number of plans, active participants; * Recent large plan terminations by bankrupt sponsors threaten solvency of the Pension Benefit Guaranty Corporation, the federal agency that insures benefits; * Stock market and interest rate declines reduced overall plan funding levels; * Demographics and industry restructuring (steel, airlines) have contributed to both plan and corporate weakness. Total Underfunding in Single-Employer Program Plans, 1980-2004*: [See PDF for image] –graphic text: Bar graph with 25 items. Billions of Dollars: Year: 1980; Total Underfunding in Single-Employer Program Plans: $29.50. Year: 1981; Total Underfunding in Single-Employer Program Plans: $25.00. Year: 1982; Total Underfunding in Single-Employer Program Plans: $36.40. Year: 1983; Total Underfunding in Single-Employer Program Plans: $14.50. Year: 1984; Total Underfunding in Single-Employer Program Plans: $20.10. Year: 1985; Total Underfunding in Single-Employer Program Plans: $22.70. Year: 1986; Total Underfunding in Single-Employer Program Plans: $27.60. Year: 1987; Total Underfunding in Single-Employer Program Plans: $28.20. Year: 1988; Total Underfunding in Single-Employer Program Plans: $34.10. Year: 1989; Total Underfunding in Single-Employer Program Plans: $49.70. Year: 1990; Total Underfunding in Single-Employer Program Plans: $55.00. Year: 1991; Total Underfunding in Single-Employer Program Plans: $74.00. Year: 1992; Total Underfunding in Single-Employer Program Plans: $84.20. Year: 1993; Total Underfunding in Single-Employer Program Plans: $109.30. Year: 1994; Total Underfunding in Single-Employer Program Plans: $61.70. Year: 1995; Total Underfunding in Single-Employer Program Plans: $94.50. Year: 1996; Total Underfunding in Single-Employer Program Plans: $99.60. Year: 1997; Total Underfunding in Single-Employer Program Plans: $87.80. Year: 1998; Total Underfunding in Single-Employer Program Plans: $104.70. Year: 1999; Total Underfunding in Single-Employer Program Plans: $22.80. Year: 2000; Total Underfunding in Single-Employer Program Plans: $39.40. Year: 2001; Total Underfunding in Single-Employer Program Plans: $163.90. Year: 2002; Total Underfunding in Single-Employer Program Plans: $400.00. Year: 2003; Total Underfunding in Single-Employer Program Plans: $452.00. Year: 2004; Total Underfunding in Single-Employer Program Plans: $450.00. Source: PBGC. *Note: 2004 data is an estimate as of September 30, 2004. [End of figure] Defined Benefit Plan Weaknesses Have Serious Implications for National Retirement Policy: Current Issue: * Protect the benefits of workers affected by terminated plans; * Address PBGC financial exposure; * Improve funding of DB plans generally. Broader Issue: what is role of DB plans in ensuring retirement security? * Revitalized DB system vs. smoother transition to all DC world; * Impact of Social Security reform on the private DB and DC system and personal savings arrangements. Defined Contribution Pension Plans Also Face Challenges: Increasingly widespread DC plans also pose problems for retirement security: * Lack of reliable information and adequate education for many participants; * Emphasis on lump sum features; * Many covered workers do not participate; * Investment risk is borne by individuals; * High fees may reduce returns. – Many U.S. Workers Have Low Levels of Savings: U.S. continues to have a low personal saving rate. Hard to know exactly but it appears that many workers are not saving enough for retirement: * For example, participation in individual retirement accounts (IRA’s) not widespread, with less than 3 percent of tax filers reporting contributions to IRAs in 2001. U.S. Personal Saving Rate Fell from 10.8 Percent in 1984 to 1.8 percent in 2001 and 1.4 percent in 2003: [See PDF for image] –graphic text: Line graph with one line and 44 items. Year: 1960; U.S. personal saving as percent of disposable personal income: $7.30. Year: 1961; U.S. personal saving as percent of disposable personal income: $8.40. Year: 1962; U.S. personal saving as percent of disposable personal income: $8.30. Year: 1963; U.S. personal saving as percent of disposable personal income: $7.80. Year: 1964; U.S. personal saving as percent of disposable personal income: $8.80. Year: 1965; U.S. personal saving as percent of disposable personal income: $8.60. Year: 1966; U.S. personal saving as percent of disposable personal income: $8.30. Year: 1967; U.S. personal saving as percent of disposable personal income: $9.50. Year: 1968; U.S. personal saving as percent of disposable personal income: $8.40. Year: 1969; U.S. personal saving as percent of disposable personal income: $7.80. Year: 1970; U.S. personal saving as percent of disposable personal income: $9.40. Year: 1971; U.S. personal saving as percent of disposable personal income: $10.10. Year: 1972; U.S. personal saving as percent of disposable personal income: $8.90. Year: 1973; U.S. personal saving as percent of disposable personal income: $10.50. Year: 1974; U.S. personal saving as percent of disposable personal income: $10.60. Year: 1975; U.S. personal saving as percent of disposable personal income: $10.60. Year: 1976; U.S. personal saving as percent of disposable personal income: $9.40. Year: 1977; U.S. personal saving as percent of disposable personal income: $8.70. Year: 1978; U.S. personal saving as percent of disposable personal income: $8.90. Year: 1979; U.S. personal saving as percent of disposable personal income: $8.90. Year: 1980; U.S. personal saving as percent of disposable personal income: $10.00. Year: 1981; U.S. personal saving as percent of disposable personal income: $10.90. Year: 1982; U.S. personal saving as percent of disposable personal income: $11.20. Year: 1983; U.S. personal saving as percent of disposable personal income: $9.00. Year: 1984; U.S. personal saving as percent of disposable personal income: $10.80. Year: 1985; U.S. personal saving as percent of disposable personal income: $9.00. Year: 1986; U.S. personal saving as percent of disposable personal income: $8.20. Year: 1987; U.S. personal saving as percent of disposable personal income: $7.00. Year: 1988; U.S. personal saving as percent of disposable personal income: $7.30. Year: 1989; U.S. personal saving as percent of disposable personal income: $7.10. Year: 1990; U.S. personal saving as percent of disposable personal income: $7.00. Year: 1991; U.S. personal saving as percent of disposable personal income: $7.30. Year: 1992; U.S. personal saving as percent of disposable personal income: $7.70. Year: 1993; U.S. personal saving as percent of disposable personal income: $5.80. Year: 1994; U.S. personal saving as percent of disposable personal income: $4.80. Year: 1995; U.S. personal saving as percent of disposable personal income: $4.60. Year: 1996; U.S. personal saving as percent of disposable personal income: $4.00. Year: 1997; U.S. personal saving as percent of disposable personal income: $3.60. Year: 1998; U.S. personal saving as percent of disposable personal income: $4.30. Year: 1999; U.S. personal saving as percent of disposable personal income: $2.40. Year: 2000; U.S. personal saving as percent of disposable personal income: $2.30. Year: 2001; U.S. personal saving as percent of disposable personal income: $1.80. Year: 2002; U.S. personal saving as percent of disposable personal income: $2.00. Year: 2003; U.S. personal saving as percent of disposable personal income: $1.40. Source: Bureau of Economic Analysis, Department of Commerce. [End of figure] Rising Health Care Costs Have Many Implications: Direct Implications: * Increased spending by federal, state and local governments; * Increased competitive pressures on American business; * Increased financial and family implications for individuals; * Increased cost and practice implications for providers. Indirect Implications: * Slower workforce growth; * Additional off-shoring pressures; * Additional part-time versus full-time workers; * Slower cash-wage growth; * Reduced pension coverage and benefits; * Slower individual income tax growth. Evaluating Health Care System Reforms: Cost, access, and quality challenges—together with obstacles to achieving efficiency—argue for fundamental system reform. A comprehensive review and reassessment of the overall health care system raises the following questions: * What are societal needs versus individual wants in our health care system? * Who—among individuals, employers, and governments—should be responsible for paying for health care? * Where can we find our most acute access, cost, and quality challenges? (e.g., What regions show patterns of underuse or overuse of medical services?) * How much of health care costs can government, employers, and individuals afford and sustain over time? * When are we going to get started, as the challenge gets bigger everyday and any delay compounds the problems? Health Care System Reform Elements: Incentives, Transparency, and Accountability: Align incentives for providers and consumers to make prudent choices about health insurance coverage and prudent decisions about the use of medical services, Foster transparency with respect to the value and costs of care, and Ensure accountability from health plans and providers to meet standards for appropriate use and quality. Selected 21st Century Questions: How should Social Security be reformed to make it both solvent and sustainable while better aligning it with 21st Century economic, demographic and fiscal realities? What changes should be made to existing pension laws in order to enhance the retirement income security of workers and help assure the financial integrity of the Pension Benefit Guaranty Corporation? How should federal programs and policies be revised to encourage people to work longer and to facilitate phased retirement approaches? How should our overall health care system be reformed to make it more successful and sustainable over time (e.g., focusing on certain defined needs versus unlimited wants; addressing the division of responsibilities between levels of government, employers, and individuals; and facilitating individual choice, cost control and quality improvement)? Which tax incentives and preferences need to be reconsidered given their costs and effects, failure to achieve goals intended by Congress, or their unintended consequences? For example, can adequate health care coverage be achieved at less cost and greater distributional equity through a fundamental redesign of the current health tax preferences, or through their elimination and the use of other means to provide for coverage?