NCPA - National Center for Policy Analysis

GAO Says Long-Term Budget Outlook Even Bleaker

February 7, 2001

While budget projections for the next 10-year period look better, the long-term outlook looks worse, testified David M. Walker, Comptroller General of the United States, before the Senate Budget Committee yesterday.

Without a change in entitlement programs, says Walker, demographics will overwhelm the surplus and drive us back into escalating deficits and debt.

The GAO's long-term simulations, updated using the Congressional Budget Office's new budgetary estimates, show that spending for federal health and retirement programs will eventually overwhelm even today's projected surpluses -- even assuming no additional spending for defense, education, or a Medicare prescription drug benefit -- i.e., even if the entire unified surplus were saved.

Based on the recommendations of a technical panel advising the Medicare Trustees, the GAO assumes that Medicare costs per-beneficiary will grow at a rate one percentage point above per-capita gross domestic product (GDP) growth.

  • Even if all projected unified surpluses are saved and used for debt reduction, deficits reappear in 2042.
  • If only the Social Security surpluses are saved, unified deficits emerge in 2019.
  • With no changes in federal medical and retirement programs, by 2030 Social Security, Medicare and Medicaid will absorb more than three-quarters of total federal revenue.

Thus, absent changes in the structure of Social Security and Medicare, some time during the 2040s government would do nothing but mail checks to the elderly and their health care providers.

Source: David M. Walker (Comptroller General of the United States), "Long-Term Budget Issues: Moving from Balancing the Budget to Balancing Fiscal Risk, Testimony before the Senate Committee on the Budget." GAO-01-385T, February 6, 2001, Washington, D.C.

For GAO text


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