The Government Accountability Office said in a recent report that the federal government is on an unsustainable long term fiscal path.
GAO looked at two different scenarios in doing its analysis, and neither one produced a sustainable outcome.
One scenario was the Baseline Extended simulation which reflects a number of fiscal policy changes contained in current law that are projected to sharply reduce spending and raise revenue from their current levels beginning in 2013.
The second scenario was the Alternative simulation under which historical trends and past policy preferences are assumed to continue and in which revenue is lower and spending is higher than in the Baseline Extended simulation.
In both GAO simulations spending for the major health and retirement programs will increase in coming decades, putting greater pressure on the rest of the federal budget. For the first few decades this spending is driven largely by the aging of the population. The oldest members of the baby-boom generation are already eligible for Social Security retirement benefits and for Medicare, and the number of baby boomers turning 65 is projected to grow in coming years from an average of about 7,600 per day in 2011 to more than 11,000 per day in 2029.
According to GAO, if the federal government continues on the current path 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. An individual or business operating under such circumstances would be in bankruptcy; GAO is sending a clear warning to the government that it’s heading in that direction.
The full report is available on the GAO web site.