From the U.S. Government Accountability Office, www.gao.gov Transcript for: America's Money Matters - Understanding the Nation's Long-Term Fiscal Health Description: A look at the nation's financial condition and future, and opportunities to improve it. (Updated from a 2019 video). Related GAO Work: GAO-21-275SP, The Nation's Fiscal Health: After Pandemic Recovery, Focus Needed on Achieving Long-Term Fiscal Sustainability [First Screen] America's Money Matters Understanding the Nation's Long-Term Fiscal Health [Woman on screen] [Narrator: ] Hi, I'm Kerstin, an analyst at the US Government Accountability Office. Politicians, talking heads, and analysts like me are always talking about how large the debt is and how the debt will be passed down to my generation, my kids' generation, and maybe even my grandkids' generation. The debt is part of the bigger picture of the federal government's current and future fiscal health. At GAO, we're continuously assessing the government's fiscal condition and evaluating ideas to improve it. Let's take a closer look at what's going on. [Number on screen: $21,000,000,000] Have you seen this number before? 21 trillion dollars. It's the amount of money that the federal government has borrowed from corporations, state and local governments, foreign governments, and individuals like you as of the end of fiscal year 2020. This is only a portion of the total debt, which includes money that the government borrows from itself and is around 26.9 trillion dollars. As you can see, it's a number that just keeps growing. [Bar chart showing spending and revenue] Each fiscal year if the government spends more money than it brings in that year, that's a deficit. The nation borrows money to cover that deficit, which increases the debt. [Line chart with two lines rising starting in 2009, and the lower one falling in 2017] You'd think that with revenues growing and deficits shrinking in the early 2000's, the nation would be in good shape. More recently, however, deficits have begun increasing and are projected to continue increasing in the future. Some big trends in federal spending have a lot to do with this. [Images of different types of programs that money is spent on] So how is the country spending its money? Congress sets federal spending in a couple ways: Programs such as Social Security, Medicare, and Medicaid are considered mandatory spending. For many of these programs Congress sets payments and benefit formulas in a program law, not in an annual spending law. If there are more people receiving Social Security, for example, the program costs more than it did last year. Programs such as defense, law enforcement, transportation, and national parks are considered discretionary spending. Congress chooses how much money to spend for these programs annually. The other component is the net interest the government pays each year on the trillions of dollars of debt it already has. As the debt continues to grow, interest payments will become a larger and larger part of federal spending, especially if interest rates stay the same or increase. The costs associated with mandatory spending programs will also continue to grow as our population ages and healthcare costs rise. [Images of security and other threats] As mandatory spending and interest on the debt grow, they can place pressure on spending in other important areas. We all expect to be protected from military threats and cyber threats, which are multiplying as we speak. And while public health emergencies and natural disasters are always unwelcome, when they happen people will be seeking federal assistance to recover. [Capitol dome, with dollar bills and clouds above it] These kinds of things are considered fiscal exposures to the government. Things that, when they happen, the government is expected to step in and provide funding to help. There are many more fiscal exposures than the ones I just mentioned, and they're very hard to plan for. [Line graph, showing an increasing line for debt] All of these are reasons why the country spends money faster than it comes in. [Timeline] According to the trend in our fiscal outlook, all of this is bad news for the nation's future. In our simulated policy situation, the debt will surpass its historical high in 2028, putting the squeeze on the federal budget. Without policy changes, critical Social Security and Medicare programs are projected to run short of funds to fully pay benefits within the next 10 years. [Image of badge, showing parts of the solution] Tackling trillions of dollars of debt and strengthening the nation's financial condition will likely require making changes to mandatory programs, discretionary spending, and revenue. If we wait to make these changes, they will only get bigger and require harder decisions. To make future changes less painful, there are a few things the government can do right away. [Images of people receiving money, and tax documents] For example, sometimes it makes payments to people by mistake. And the government doesn't collect all the taxes it's owed right now. [Images of documents] There's also not enough strong data and good financial information available across the government. In many cases, to help policymakers make important financial decisions, agencies need to take action to provide additional or better information on how much policies and programs cost. With some effort, the federal government can fix these things. [Image: $21,000,000,000] Establishing a long-term fiscal plan for returning to a sustainable fiscal path is critical. And by implementing the plan at the appropriate time policymakers can help ensure that we remain in a strong economic position to meet our security and social needs. It could also help preserve the flexibility to address future events, such as public health emergencies. [Image: GAO logo and dollar bills] Learn more at GAO.gov.