Washington, D.C. (May 08, 2023)—The U.S. Government Accountability Office (GAO) today issued its seventh annual report on the nation’s fiscal health, highlighting both short-term and long-term risks. The report calls for prompt action by the Congress and the Administration to raise the debt ceiling and avoid the catastrophic effects of defaulting on the nation’s debts. The report also sounds the alarm on the nation’s long-term fiscal outlook and urges an action plan to get the federal government off its currently unsustainable fiscal path.
Significant fiscal risks stem from delays in raising or suspending the debt limit—the legal limit on the total amount of money that the federal government is authorized to borrow to meet its existing legal obligations. These delays could create disruptions to financial markets and force the U.S. economy into a financial crisis.
“Failure to timely raise the nation’s debt ceiling will have dire economic and reputational consequences. Congress and the Administration need to act now to prevent default on the nation’s debts.” said Gene L. Dodaro, Comptroller General of the United States and head of GAO.
This year’s report also shows the critical state of the nation’s fiscal condition and the need to make changes to spending and revenue policies. The federal budget deficit in fiscal year 2022 was $1.4 trillion, a 50 percent decline from fiscal year 2021, but still the fourth largest in U.S. history. This decline is attributable to higher tax revenue and lower pandemic-related federal spending.
Large annual budget deficits drive debt growth, as the government borrows to finance spending that exceeds revenue. Projections by the Office of Management and Budget and the Department of the Treasury, the Congressional Budget Office, and GAO show that debt held by the public would reach its historical high of 106 percent of GDP by 2029 and continue to grow to more than 219 percent of GDP—more than twice the size of the economy—by 2051. Independent analyses by these agencies all emphasize that current fiscal policy is unsustainable over the long term.
Interest on the debt also increased this year and is projected to rise in the long term, which will lead to borrowing costs making up a larger share of total spending as overall debt increases. GAO projects that net interest spending will grow from about 8 percent of total spending in fiscal year 2022 to about 26 percent in fiscal year 2051. That percentage could be even higher if interest rates rise more than expected.
GAO urges the Congress to create a fiscal plan to guide difficult decisions to help pivot to a long-term sustainable fiscal policy. “Developing a carefully considered long-term fiscal plan to support policymakers in making the difficult decisions is needed to get the federal government on a more viable fiscal path,” said Dodaro.
GAO has identified several components of an effective fiscal plan. Such a plan could include an assessment of drivers of deficits—both spending and revenue—and alternative approaches to the debt limit. For example, the debt limit could be set as part of the budget resolution or Treasury could be given the authority to propose a change in the debt limit that would take effect absent congressional disapproval.
For more information, contact Chuck Young, Managing Director of GAO Public Affairs, at email@example.com or 202-512-4800.
The Government Accountability Office, known as the investigative arm of Congress, is an independent, nonpartisan agency that exists to support Congress in meeting its constitutional responsibilities. GAO also works to improve the performance of the federal government and ensure its accountability to the American people. The agency examines the use of public funds; evaluates federal programs and policies; and provides analyses, recommendations, and other assistance to help Congress make informed oversight, policy, and funding decisions. GAO provides Congress with timely information that is objective, fact-based, nonideological, fair, and balanced. GAO’s commitment to good government is reflected in its core values of accountability, integrity, and reliability.