About the Long-Term Federal Fiscal Model
Note: Data are from GAO's Spring 2013 simulation based on the Trustees' assumptions for Social Security and Medicare.
A simulation is a hypothetical—a “what if?” GAO runs two simulations of the federal budget that illustrate the potential implications of different policy choices. Each simulation represents a bundle of budgetary and policy assumptions carried far out into the future. The simulations are not intended as predictions about the future. Rather, they can facilitate comparisons of the potential long-term budgetary consequences of alternative fiscal policy paths.
Our "Baseline Extended" simulation follows the Congressional Budget Office's (CBO) baseline estimates for the first 10 years and then simply holds revenue and spending other than large entitlement programs constant as a share of gross domestic product (GDP). Under the "Alternative" simulation, changes are made to the assumptions to reflect historical trends and preferences.
The chart above shows that if the federal government continues on the current path, as assumed in the Alternative simulation, and borrows from the public to finance the growing imbalance between revenue and spending, by 2040 more than half of all federal revenue will go to net interest payments.