Congressional Auditor Says Dept Burden is Spiraling Out-of-Control

Michael Roston
Published: Monday February 26, 2007


Congress's auditor warned in a monthly update released last Friday that the latest data on America's fiscal outlook shows "a federal debt burden that ultimately spirals out of control."

The January update was based on new data supplied to the Government Accountability Office by the Congressional Budget Office, and identified spiraling national health care costs as the main culprit for the country's budgetary woes. The report also challenged a key assumption about the nation's fiscal future made by President George W. Bush in his release of the 2008 budget.

Using a pair of different simulations of government outlays, the GAO bluntly states that "the Nation's long-term fiscal future is 'at risk.'" It considers different futures in which discretionary spending grows more quickly or slowly, and in which tax cuts are renewed or allowed to expire.

The "bleak" outlook seen by the government's chief auditor results from "primarily spending on the large federal entitlement programs (i.e., Social Security, Medicare, Medicaid)." Growing expenditures on health care are expected to account for the largest share of deficit-raising spending that will present a challenge "not just to the federal budget but to American business and our society as a whole."

While there are other discretionary expenditures, like those on national defense and homeland security, GAO warns that "the growth in Social Security, Medicare, Medicaid, and interest on debt held by the public dwarfs the growth in all other types of spending."

But the congressional agency does not see the path forward as hopeless. Noting instead that things that are unsustainable "will not be sustained," it offers up the possibility that "the sooner appropriate actions are taken, the sooner the miracle of compounding will begin to work for the federal budget rather than against it." Waiting, however, to take serious action to repair the budgetary balance could have results that are "disruptive and destabilizing."

Still, the GAO makes the challenge sound daunting. It explains that, "closing the fiscal gap would require spending cuts or tax increases equal to 3.6 percent of the entire economy each year over the next 75 years, or a total of $26 trillion in present value terms."

Alternatively, they explain that "if we were to invest enough today to pay off these amounts over the next 75 years, the sums needed would amount to about $87,000 to $182,000 per person, or about $208,000 to $435,000 for each full-time worker."

The GAO also challenged a key message offered by the president when he rolled out his Fiscal Year 2008 budget earlier in the year.

"The projected fiscal gap is so great that it is unrealistic to expect we will grow our way out of the problem," the GAO wrote.

President Bush had said in a Feb. 6 address that "low taxes means economic vitality, which means more tax revenues. And so the fundamental question is, what do you need to do to keep the economy growing, in order to make sure the tax revenues keep coming in to the Treasury?"

He answered his own question, remarking that "step one to balancing the budget is to keep taxes low. As a matter of fact, not only do I think we ought not to raise them, I think we ought to make every tax cut we passed permanent."

The GAO's full update on the fiscal outlook can be accessed at its website.


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