WASHINGTON (MNI) – Below is the text of the U.S. Government
Accountability Office summary Monday of its update to the fiscal
outlook:
The federal government’s fiscal outlook has improved since GAO’s
last report, largely due to provisions in the Budget Control Act of
2011. This Act requires at least $2.1 trillion in deficit reduction from
2012-2021. Nevertheless, GAO’s simulations continue to underscore the
need to address the longer-term outlook as soon as possible while still
recognizing the current weakness in the economy. Rising health care
costs and the aging of the U.S. population continue to create budgetary
pressure. The oldest members of the baby-boom generation are already
eligible for early Social Security retirement benefits and become
eligible for Medicare this year. The Social Security program, which
historically ran large cash surpluses that helped reduce the need to
borrow from the public to finance other programs, is now projected to
pay more in benefits than it receives in tax income each year into the
future. Budgetary pressure will increase in coming decades as more
members of the baby-boom generation retire and become eligible for
federal health programs. The timing of the debt buildup varies depending
on the assumptions used: debt held by the public increases less rapidly
in the Baseline Extended simulation than under the Alternative
simulation. However, even with the improvement from the Budget Control
Act, debt held by the public under the Alternative simulation exceeds
the post-World War II high of 109 percent of GDP by 2027. The Budget
Control Act set limits on discretionary spending for fiscal years
2012-2021 and created the Joint Select Committee on Deficit Reduction.
Under the enacted discretionary spending limits, discretionary spending
as a share of the economy would be lower in 2021 than at any point in
the last 40 years. The Act also provides for an additional $1.2 trillion
in deficit reduction over the period–either through enactment of
recommendations made by the Joint Select Committee or through automatic
procedures that would reduce spending. Since the Joint Select Committee
may allocate the deficit reduction between changes in tax and spending
law as it deems appropriate, savings are applied to the total deficit in
the simulations shown in this report. The simulations also assume that
the savings as a share of GDP are maintained throughout the simulation
period. To do this would require a sustained commitment extending beyond
the time horizon and the goals specified in the Budget Control Act.
However, based on our simulations even this level of deficit reduction
is not sufficient to ensure sustainability.
** Market News International Washington Bureau: 202-371-2121 **
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