The Nation’s Long-Term Fiscal Outlook – GAO September 2008 Update
Highlights from the September 2008 GAO Report:
- The federal government faces large and growing structural deficits driven primarily by rising health care costs and known demographic trends.
- Our long-term simulations show that absent policy actions aimed at deficit reduction, the federal government faces unsustainable growth in debt. Such growth would inevitably result in declining GDP and future living standards. Even before such effects, these debt paths would likely result in rising inflation, higher interest rates, and the unwillingness of foreign investors to invest in a weakening American economy.
- Just 10 years from now in the simulation that is based on historical trends and recent policy preference 76 cents of every dollar of federal revenue will be spent on retirees and their health care providers, health care providers for the poor, and our bond holders. This leaves little room for other priorities, such as national defense and investment in infrastructure and alternative energy sources and threatens the government’s fiscal ability to respond to national emergencies, both natural and manmade.
- While the factors driving our near-term outlook can and have been quite volatile, the long-term fundamentals have not changed. Our population is still aging and health care costs are still rising faster than the economy. The oldest members of the baby-boom generation are now eligible for Social Security retirement benefits and will be eligible for Medicare benefits in less than 3 years. According to the Social Security Administration, nearly 80 million Americans will become eligible for Social Security retirement benefits over the next two decades—an average of more than 10,000 per day.
- …..the real driver of the long-term fiscal outlook is health care spending.
For the Full Report, The Nation’s Long-Term Fiscal Outlook – September 2008 Update
While David Walker was Comptroller General, he frequently made public presentations and this one encapsulates the current fiscal outlook in simple, easy to understand terms that is still relevant and timely.
What I believe is notable in the third bullet point where they’ve written “76 cents of every dollar of federal revenue will be spent on retirees and their health care providers, health care providers for the poor, and our bond holders. This leaves little room for other priorities, such as national defense and investment in infrastructure and alternative energy sources and threatens the government’s fiscal ability to respond to national emergencies, both natural and manmade”.
The US economy is about to undergo a restructuring the likes we have not seen since WWII. Given that current entitlement programs account for 37-39% of the federal budget, as this percentage increases well into the 70% area ask yourself, what type of programs or existing services will have to be eliminated in the near future? The solution will not be a quick two to three year fix it took us forty years to get us into this financial predicament. It will take time measured in decades to get us out.
The US owes $54 trillion in unfunded entitlement programs and debt, currently the income to the US treasury is approximating 2.5 trillion. Each of us must take it upon themselves to look after ourselves financially which tells us we need to take advantage of all opportunities which provide meaningful wealth accumulation and protection tools if we expect to be financially secure. This will require a new and increasing emphasis on tax smart planning and investing ensuring your money is working at least as hard as you are.
After all “It’s Your Money”