A Critical Challenge Facing Our Nation
GAO-07-362SP, Jan 31, 2007
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The U.S. government is the largest, most diverse, most complex, and arguably the most important entity on earth today. The United States is also a great nation. It has much to be proud of and much to be thankful for. However, our nation is not well positioned to meet the challenges and capitalize on the opportunities of the 21st Century. We are also failing to properly discharge one of our biggest stewardship responsibilities to our children, grandchildren, and generations of unborn Americans: fiscal responsibility. The purpose of this publication is to assist both the Congress and American citizens in understanding and evaluating the federal government's current financial condition and long-term fiscal outlook.
The federal government's financial condition and fiscal outlook are worse than many may understand. Despite an increase in revenues in fiscal year 2006 of about $255 billion, the federal government reported that its costs exceeded its revenues by $450 billion (i.e., net operating cost) and that its cash outlays exceeded its cash receipts by $248 billion (i.e., unified budget deficit). Further, as of September 30, 2006, the U.S. government reported that it owed (i.e., liabilities) more than it owned (i.e., assets) by almost $9 trillion. In addition, the present value of the federal government's major reported long-term "fiscal exposures"--liabilities (e.g., debt), contingencies (e.g., insurance), and social insurance and other commitments and promises (e.g., Social Security, Medicare)--rose from $20 trillion to about $50 trillion in the last 6 years. The federal government faces large and growing structural deficits in the future due primarily to known demographic trends and rising health care costs. These structural deficits--which are virtually certain given the design of our current programs and policies--will mean escalating and ultimately unsustainable federal deficits and debt levels. Based on various measures--and using reasonable assumptions--the federal government's current fiscal policy is unsustainable. Continuing on this imprudent and unsustainable path will gradually erode, if not suddenly damage, our economy, our standard of living, and ultimately our domestic tranquility and national security.