Domestic and Global Security Where are we? Three decades after the Cold War, an increasingly volatile world presents new types of security threats. What do we know? Domestically - Cyber threats are challenging public trust in institutions and governance. - Home-grown violent extremists remain an unpredictable terror threat. - Social media is allowing extremists to find each other and meet-and gives them a platform for violent ideas. Globally - Major powers (e.g., Russia, China, and the United States) increasingly have competing interests. - North Korea and Iran threaten regional and global order. - Cyberattacks may be used against the United States and its allies to counter military advantages. - The global threat from terrorism, including the Islamic State of Iraq and Syria (ISIS), will remain geographically diverse and multifaceted. MAP: Foreign countries and regions with an established ISIS presence (as of June 2017) Map showing countries and regions where ISIS is located in Africa, Eurasia, and the Middle East. Sources: GAO analysis of Department of State data; Map Resources (map). What are the implications? - New threats will affect how U.S. agencies and the military are organized and equipped to respond to them. - Protecting U.S. cyber assets complicates national security and defense planning. - Rebalancing, rebuilding, and recapitalizing the U.S. military and its assets will take leadership, time, planning, and money. --------------------- Fiscal Outlook and the Debt Where are we? The federal government is on a long-term unsustainable fiscal path. Debt held by the public was 76 percent of gross domestic product (GDP) at the end of FY17. This compares to an average of 45 percent of GDP since 1946. Source: 2017 Financial Report and GAO analysis of OMB data. Absent policy changes, the debt-to-GDP ratio is projected to surpass its historical high of 106 percent within 14-22 years. Source: GAO analysis of GAO, CBO, and the 2017 Financial Report data. Note: These projections do not reflect the effects of any legislation enacted after September 30, 2017. What do we know? In FY17, the federal deficit increased to $666 billion-up from $587 billion in FY16. - Federal receipts grew $48 billion due primarily to higher payroll and retirement receipts and individual income taxes. - But that was outweighed by a $127 billion increase in spending, driven by Social Security, Medicare, Medicaid, and interest on debt. Source: 2017 Financial Report. Federal spending on health care programs and interest on debt are the key drivers of long-term spending increases. LINE GRAPH: Percentage of GDP Data: Fiscal Year Net Interest Health Care Social Security All other spending 2017 1.41% 5.44% 4.91% 9.20% 2018 1.54% 5.52% 4.96% 8.70% 2019 1.75% 5.62% 5.08% 8.75% 2020 1.99% 5.76% 5.21% 8.67% 2021 2.19% 5.92% 5.34% 8.59% 2022 2.36% 6.06% 5.46% 8.54% 2023 2.53% 6.18% 5.57% 8.30% 2024 2.66% 6.31% 5.67% 8.32% 2025 2.78% 6.46% 5.78% 8.49% 2026 2.90% 6.60% 5.88% 8.68% 2027 3.02% 6.75% 5.98% 8.79% 2028 3.12% 6.86% 5.99% 8.94% 2029 3.23% 7.00% 6.00% 9.09% 2030 3.35% 7.11% 6.01% 9.24% 2031 3.48% 7.22% 6.03% 9.39% 2032 3.62% 7.33% 6.04% 9.53% 2033 3.77% 7.43% 6.05% 9.68% 2034 3.93% 7.53% 6.06% 9.68% 2035 4.10% 7.65% 6.09% 9.68% 2036 4.27% 7.75% 6.11% 9.68% 2037 4.46% 7.85% 6.12% 9.68% 2038 4.66% 7.95% 6.11% 9.68% 2039 4.87% 8.04% 6.10% 9.68% 2040 5.08% 8.12% 6.09% 9.68% 2041 5.30% 8.21% 6.07% 9.68% 2042 5.53% 8.28% 6.04% 9.68% 2043 5.76% 8.36% 6.02% 9.68% 2044 6.00% 8.43% 6.00% 9.68% 2045 6.24% 8.49% 5.98% 9.68% 2046 6.47% 8.55% 5.96% 9.68% Source: GAO. Note: GAO's simulations do not reflect the effects of any legislation enacted after September 30, 2017. What are the implications? The large and growing federal debt will: - reduce national savings and income in the long term - increase the government's interest costs - limit lawmakers' ability to respond to unforeseen events - make a fiscal crisis more likely The longer that action to address these fiscal challenges is delayed, the greater and more drastic the changes will have to be. Source: CBO. --------------------- Economics and Trade Where are we? National and global economies have experienced divergent growth since the financial crisis. What do we know? LINE GRAPH: Economies Have Experienced Divergent Growth since the Financial Crisis, with Faster Growth in Emerging Markets Country Group Name 2008 2009 2010 2011 2012 2013 2014 2015 2016 World 3.025 -0.094 5.448 4.194 3.492 3.338 3.418 3.196 3.081 Advanced economies 0.141 -3.41 3.107 1.696 1.209 1.232 1.881 2.08 1.573 Emerging market and developing economies 5.774 2.883 7.464 6.265 5.313 4.958 4.572 4.018 4.167 Source: International Monetary Fund. - Fiscal and monetary measures during the crisis left many countries with higher debt and lower interest rates. - Global economic growth has improved, especially in emerging markets. - International trade and technology have transformed the nature of work and consumption across the globe. - U.S. growth outpaced Europe and Japan, but with gains for only a portion of the population. - Key international trade agreements such as NAFTA haven't been updated in 25 years. - Domestic policies have not consistently or effectively addressed the needs of those adversely impacted by globalization and technological change. What are the implications? - Many outcomes are possible as the choices and priorities of governments and institutions lead the global community to pursue collaborative, inclusive growth while accounting for nationalistic interests. - Opportunities to reinforce international cooperation lie in finding areas of common interest and addressing the consequences of globalization and technological change. --------------------- Jobs and Education Where are we? Technological advances could change work, beyond any past experience. New technologies affect: - types of jobs that are available - specific job skills required Accelerated innovation may lead to - job creation - job loss These changes are straining - education systems - workforce systems What do we know? - 38 percent of employers report difficulty recruiting employees, due to candidates' lack of technical skills. - U.S. students lag behind their peers in science and math. - Many jobs require specialized training. Workers aged 55+ are expected to comprise 24.3 percent of the workforce by 2020. Bar chart: Percentage of U.S. labor force Year Labor force 55+ Projected labor force 55+ 1970 17.50% 1980 14.10% 1990 11.90% 2000 13.10% 2010 19.50% 2020 24.30% Source: Bureau of Labor Statistics What are the implications? Closer alignment between education and workforce systems could: - better prepare workers for the future - use financial resources efficiently Uncertainty about the impact of technological changes could: - slow implementation of new technology - drive some companies to relocate their operations to other countries as a result Failure to develop effective retraining efforts could result in: - challenges for special populations facing barriers to employment, such as older workers - increased division in income and employment opportunities --------------------- Demographics and Society Where are we? Demographics are shifting in ways that affect U.S. society and the economy. What do we know? Population - Between 1970 and 2013, the U.S. population grew 54%. - Between 2013 and 2050, the U.S. population is expected to grow about 26% (while the world population is expected to grow about 33%). Sources: U.S. Census and United Nations. Longevity The U.S. population is aging. In 2018, an average of about 10,200 people will turn 65 each day. The percentage of U.S. adults over age 65 was less than 10% in 1970 but is expected to be about 20% by 2030. Sources: U.S. Census and Social Security Administration. Diversity and income inequality U.S. society has become increasingly diverse, but median incomes vary by demographics. Median income By race White, not Hispanic 62,950 Black 36,898 Asian 77,166 Hispanic (any race) 45,148 By urban/rural Inside Metropolitan Statistical Area (MSA) 59,258 Inside principal cities 51,378 Outside principal cities 64,144 Outside MSA 44,657 By gender Men with earnings 51,212 Women with earnings 40,742 By educational attainment Not a high school graduate 25,315 High school graduate 35,615 Some college/Associate's degree 38,943 Bachelor's degree 65,482 Advanced degree 92,525 Source: U.S. Census Bureau, Current Population Survey, 2015 and 2016 Annual Social and Economic Supplements. What are the implications? These trends affect the nation's future economic performance and the basic fabric of society. They will pose challenges to: - federal programs such as Social Security and Medicare - public policies in areas such as health care, education, and income support -with major effects on government budgets at all levels: federal, state, and local. --------------------- Science and Technology Where are we? Five emerging technologies will potentially transform society. What do we know? 1. Genome Editing Genome editing: A technique used to make specific and intentional additions, deletions, or alterations to genetic material. It could: - prevent, treat, or cure medical conditions - create unintended and unforeseen genetic changes in the population 2. Artificial Intelligence and Automation Artificial intelligence (AI) could: - produce smarter machines that perform more sophisticated tasks - disrupt the job market by eliminating jobs and creating others with new skill requirements While its use is expected to grow, AI that is as intelligent as a human is not expected to occur in the next 20 years. 3. Quantum Information Science Quantum information science: uses the behavior of atoms or molecules to obtain and process information in ways that existing systems cannot. It could: - drastically improve information acquisition, processing, and transmission 4. Brain/Augmented Reality Brain-computer interfaces: systems that connect the human brain to an external device. Research is ongoing to create implantable versions that could, for example, compensate for vision loss or hearing impairment. Augmented reality: superimposing a digital image onto a view of the real world through a device, such as a smartphone camera. It is a new trend in entertainment, education, and health care. 5. Cryptocurrencies and Blockchain Cryptocurrencies: virtual currencies-digital representations of value that are not government-issued-that operate online and verify transactions using a public ledger called blockchain. Cryptocurrencies offer: - benefits such as anonymity and lower transaction costs - drawbacks such as making it harder to detect money laundering and other financial crimes Blockchain could: - reshape financial services - have more security vulnerabilities as quantum computing, an area of quantum information science, develops What are the implications? Continued debate, study, and evaluation are needed in the public sector to consider the potential implications: - economic - ethical - privacy - safety - security - societal --------------------- Government and Governance Where are we? The world is changing, and the government will need to develop new approaches and partnerships to get things done. What do we know? - The federal government increasingly relies on third parties to get its work done. - The government does not always have the right people, tools, and data in place to manage these partnerships. - Requirements for far-reaching programs, such as health care and transportation infrastructure, are constantly evolving. - As technology and the workforce change, the government struggles to keep up. - Public confidence in the federal government is at historic lows. - Initiatives such as the DATA Act and Performance.gov promise transparent information on federal spending and performance but face challenges in implementation. LINE GRAPH: Total Federal Outlays for Grants to State and Local Governments, FY 1980-2016 Fiscal year Federal grant outlays to state and local government- Inflation adjusted Medicaid federal grant outlays - Inflation Adjusted 1980 233 36 1981 220 39 1982 192 38 1983 193 40 1984 197 40 1985 206 44 1986 214 48 1987 202 51 1988 208 55 1989 212 60 1990 227 69 1991 250 85 1992 281 107 1993 299 117 1994 318 124 1995 333 132 1996 331 134 1997 334 136 1998 347 143 1999 373 150 2000 390 161 2001 424 172 2002 463 194 2003 500 207 2004 511 221 2005 521 221 2006 512 213 2007 509 219 2008 519 226 2009 598 279 2010 670 300 2011 655 297 2012 577 266 2013 569 277 2014 591 309 2015 632 354 2016 661 368 Source: GAO analysis of OMB data. What are the implications? Achieving national policy objectives in this interconnected environment will require - developing whole-of-government strategies - systematically managing risk - collaborating across boundaries and borders - building communication and civic engagement --------------------- Environment and Sustainability Where are we? Our environment is increasingly stressed, and solutions require balancing competing needs among society, economy, and natural resources. What do we know? - Agriculture, communities, and energy producers are increasingly competing for water. - Energy is critical to our economy, but some drivers of growth may adversely affect air and water quality and potentially change the climate. The federal government must balance competing priorities for the vast amount of resources it owns and manages, including: - >640 million acres of federal land - rights to minerals underlying >700 million acres - 1.7 billion acres of the Outer Continental Shelf PIE CHART: Total Reported U.S. Environmental Liability, FY 2016 % Dollars (in billions) Department of Energy 83 372 Department of Defense 14 63 Other Federal agencies 3 12 Total 447 Source: GAO analysis of the Financial Report of the U.S. Government, FY 2016. What are the implications? - Key stresses and interdependencies cut across agency missions and pose challenges that are larger than any one federal agency can manage. - Increasingly complex environmental and natural resource challenges emphasize the need for analysis of forward-looking policy options for Congress. For more information, see GAO-18-396SP at GAO.GOV. GAO