The GAO is out with its latest look at America’s fiscal health, and it’s really, really ugly.
Weaknesses in the economy and financial markets–and the government’s response to them–have contributed to near-term increases in federal deficits, which reached a record level in fiscal year 2009. While a lot of attention has been given to the recent fiscal deterioration, the federal government faces even larger fiscal challenges that will persist long after the return of financial stability and economic growth. GAO’s simulations continue to show escalating levels of debt that illustrate that the long-term fiscal outlook remains unsustainable. In little over 10 years, debt held by the public as a per cent of GDP under our Alternative simulation is projected to exceed the historical high reached in the aftermath of World War II and grow at a steady rate thereafter. These fiscal challenges are driven by health care cost growth and demographic trends. Absent reform, Social Security, Medicare, and Medicaid will account for a growing share of the economy in coming years. The longer action to deal with the nation’s long-term fiscal outlook is delayed, the larger the changes will need to be, increasing the likelihood that they will be disruptive and destabilizing.
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