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 on 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.