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1138CG entitled 'Saving our Future Requires Tough Choices Today' which 
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United States Government Accountability Office: 

Saving Our Future requires Tough Choices Today: 

Fiscal Wake-up Tour: 
University of Texas: 
Austin, TX :S
September 28, 2006: 

The Honorable David M. Walker: 
Comptroller General of the United States: 

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. 

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

[End of table] 

Estimated Fiscal Exposures (s 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. 

Source: U.S. government's consolidated financial statements (CFS). 

Note: Estimates for Social Security and Medicare are at present value 
as of January 1 of each year as reported in the CFS and all other data 
are as of September 30. 

[End of table]

How Big is Our Growing Fiscal Burden? 

Our total fiscal burden can be translated and compared as follows: 

Total Fiscal exposures: $46.4 trillion; 
Total Household net worth[1]: $51.1 trillion; 
* Burden/Net worth ratio: 91 percent; 

Burden[2]: 
Per person: $156,000; 
Per full-time worker: $375,000; 
Per Household: $411,000; 

Income: 
Median Household income[3]: $44,389; 
Disposable personal income per capita[4]: $30,431;

Notes: (1) Federal Reserve Board, Flow of Funds Accounts, Table B.100, 
2005:Q3 (Dec. 8, 2005); (2) Burdens are calculated using total U.S. 
population as of 9/30/05, from the U.S. Census Bureau, full-time 
workers for 2004, reported by the Bureau of Economic Analysis, in NIPA 
table 6.5D (Aug. 4, 2005); and households for 2004, reported by the 
U.S. Census Bureau, in Income Poverty & Health Insurance Coverage in 
the US: 2004 (Aug. 2005); (3) U.S. Census Bureau, Income Poverty & 
Health Insurance Coverage in the US: 2004 (Aug. 2005); and (4) Bureau 
of Economic Analysis, Personal Income and Outlays: October 2005, table 
2, 2005:Q3, (Dec.1, 2005). 

Sources: 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: 1.6%; 
Social Security: 4.6%; 
Medicare & Medicaid: 5.3%; 
All other spending: 8.5%; 
Revenue: 19.7%. 

2030; 
Net interest: 2.6%; 
Social Security: 6.4%; 
Medicare & Medicaid: 8.3%; 
All other spending: 8.4%; 
Revenue: 19.8%. 

2040; 
Net interest: 5.5%; 
Social Security: 6.9%; 
Medicare & Medicaid: 10.3%; 
All other spending: 8.4%; 
Revenue: 19.8%.

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 August 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: 2.4%; 
Social Security: 4.6%; 
Medicare & Medicaid: 5.3%; 
All other spending: 9.9%; 
Revenue: 17.5% 

2030; 
Net interest: 6.9%; 
Social Security: 6.7%; 
Medicare & Medicaid: 8.3%; 
All other spending: 9.9%; 
Revenue: 17.6% 

2040; 
Net interest: 13.7%; 
Social Security: 7.5%; 
Medicare & Medicaid: 10.3%; 
All other spending: 9.9%; 
Revenue: 17.6%

Source: GAO's August 2006 analysis. 

[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. 

The Way Forward: A Three-Pronged Approach: 

1. Strengthen Budget and Legislative Processes and Controls: 

2. Improve Financial Reporting and Performance Metrics: 

3. Fundamental Reexamination & Transformation for the 21St Century: 

Solutions Require Active Involvement from Both the Executive and 
Legislative Branches: 

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: 

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- It's About Values and 
People: 

On the Web: 

Web site: [Hyperlink, http://www.gao.gov/cghome.htm]: 

Contact: 

Paul Anderson, Managing Director, Public Affairs AndersonP1@gao.gov 
(202) 512-4800: 

U.S. Government Accountability Office 441 G Street NW, Room 7149 
Washington, D.C. 20548: 

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