July 2000 Update of GAO's Long-Term Fiscal Simulations
AIMD-00-272R: Published: Jul 26, 2000. Publicly Released: Jul 26, 2000.
- Full Report:
Pursuant to a congressional request, GAO updated its long-term economic model using the latest economic and budget assumptions from the Congressional Budget Office (CBO).
GAO noted that: (1) the continued strength of the U.S. economy and the significant improvement in the budget projections released by CBO this month compared to those released in January are reflected in GAO's updated long-term simulations; (2) saving the Social Security surplus--a fiscal path receiving widespread endorsement--produces unified budget surpluses for almost 20 years and eliminates the publicly held debt by 2015; (3) under this scenario, deficits emerge again in 2019--just as the Social Security and Medicare programs are being strained by the retiring baby boom generation; (4) saving both Social Security and Medicare Part A surpluses extends surpluses for one additional year; (5) deficits under the Save the Social Security Surplus scenario emerge sooner than in the comparable simulations modelled under the January baseline; (6) the larger on-budget surpluses in the new CBO forecast mean that the actions required under this simulation to eliminate those surpluses are correspondingly greater; (7) since this path assumes that those actions remain in place, a larger spending and revenue imbalance materializes sooner as entitlement spending pressures grow; (8) if all future unified surpluses were saved, deficits would not emerge until the second half of the century; (9) GAO's model implicitly assumes that once debt held by the public is retired in 2009, unified surpluses will continue to be saved; (10) these surpluses accumulate as assets of the government that would have to be invested; (11) again, the plausibility of this scenario is open to question, particularly at the asset levels implied by the model; (12) the level of public savings resulting from saving the Social Security surpluses will not by itself be sufficient to promote the budgetary flexibility needed to accommodate both the projected growth in Social Security and health entitlements as well as other important national priorities; and (13) if only the Social Security surpluses are saved and no changes are made in the nation's health and retirement programs, gross domestic product per capita growth slows and eventually turns negative, resulting in a lower standard of living.