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entitled 'Saving Our Future Requires Tough Choices Today' which was 
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United States Government Accountability Office: 

Saving Our Future requires Tough Choices Today: 

Fiscal Wake-up Tour-Union League Club: Chicago, IL: 
August 24, 2006: 

The Honorable David M. Walker: Comptroller General of the United 
States: 

The Case for Change: 

The federal government is on a "burning platform," and the status quo 
way of doing business is unacceptable for a variety of reasons, 
including: 

Past fiscal trends and significant long-range challenges: 

Rising public expectations for demonstrable results and enhanced 
responsiveness: 

Selected trends and challenges having no boundaries: 

Additional resource demands due to Iraq, Afghanistan, incremental 
homeland security needs, and recent natural disasters in the United 
States: 

Numerous government performance/accountability and high risk 
challenges: 

Outdated federal organizational structures, policies, and practices: 

Fiscal Year 2004 and 2005 Deficits and Net Operating Costs: 

Number is parentheses means Dollars in billions 

On-Budget Deficit; 
Fiscal year 2004: (568); 
Fiscal year 2005: (494); 

Off-Budget Surplus*; 
Fiscal year 2004: 155; 
Fiscal year 2005: 175. 

Unified Deficit; 
Fiscal year 2004: (413); 
Fiscal year 2005: (318). 

Net Operating Cost; 
Fiscal year 2004: (616); 
Fiscal year 2005: (760). 

*Includes $151 billion in fiscal year 2004 and $173 billion in fiscal 
year 2005 in Social Security surpluses and $4 billion in fiscal year 
2004 and $2 billion in fiscal year 2005 in Postal Service surpluses. 

Sources: The Office of Management and Budget and the Department of the 
Treasury. 

[End of table] 

Estimated Fiscal Exposures (s trillions): 

Explicit liabilities: 
* Publicly held debt; 
* Military & civilian pensions & retiree health; 
* Other; 
2000: $6.9; 
2005: $9.9. 

Commitments and Contingencies: E.g., PBGC, undelivered orders; 
2000: 0.5; 
2005: 0.9. 

Implicit exposures;
2000: 13.0; 
2005: 35.6. 

Implicit exposures: Future Social Security benefits; 
2000: 3.8; 
2005: 5.7. 

Implicit exposures: Future Medicare Part A benefits; 
2000: 2.7; 
2005: 8.8. 

Implicit exposures: Future medicare Part B benefits; 
2000: 6.5; 
2005: 12.4. 

Implicit exposures: Future Medicare Part D benefits; 
2000: N/A; 
2005: 8.7. 

Source: U.S. government's consolidated financial statements (CFS). 

Note: Estimates for Social Security and Medicare are at present value 
as of January 1 of each year as reported in the CFS and all other data 
are as of September 30. 

[End of Table] 

How Big is Our Growing Fiscal Burden? 

Our total fiscal burden can be translated and compared as follows: 

Total Fiscal Exposures; 
$46.4 trillion. 

Total Household net worth[1]; 
$51.1 trillion. 

Total Household net worth: Burden/Net Worth ratio; 
91 percent. 

Burden[2]: Per person; 
$156,000. 

Burden: Per Full time worker; 
$375,000. 

Burden: Per household; 
$411,000. 

Income: Median Household income[3]; 
$44,389. 

Income: Disposable personal income per capita[4]; 
$30,431. 

Notes: (1) Federal Reserve Board, Flow of Funds Accounts, Table B.100, 
2005:Q3 (Dec. 8, 2005); (2) Burdens are calculated using total U.S. 
population as of 9/30/05, from the U.S. Census Bureau, full-time 
workers for 2004, reported by the Bureau of Economic Analysis, in NIPA 
table 6.5D (Aug. 4, 2005); and households for 2004, reported by the 
U.S. Census Bureau, in Income Poverty & Health Insurance Coverage in 
the US: 2004 (Aug. 2005); (3) U.S. Census Bureau, Income Poverty & 
Health Insurance Coverage in the US: 2004 (Aug. 2005); and (4) Bureau 
of Economic Analysis, Personal Income and Outlays: October 2005, table 
2, 2005:Q3, (Dec.1, 2005). 

Sources: GAO analysis. 

[End of table] 

Composition of Spending as a Share of GDP Under Baseline Extended: 

[See PDF for image] -graphic text: 

Line/Stacked Bar combo chart with 4 groups, 1 line (Revenue) and 4 bars 
per group. 

2005; 
Net interest: 1.5%; 
Social Security: 4.2%; 
Medicare & Medicaid: 3.9%; 
All other spending: 10.4%; 
Revenue: 19.5%. 

2015; 
Net interest: 1.5%; 
Social Security: 4.5%; 
Medicare & Medicaid: 5.3%; 
All other spending: 7.6%; 
Revenue: 19.6%. 

2030; 
Net interest: 2.1%; 
Social Security: 6.3%; 
Medicare & Medicaid: 8.3%; 
All other spending: 7.6%; 
Revenue: 19.6%. 

2040; 
Net interest: 4.7%; 
Social Security: 7%; 
Medicare & Medicaid: 10.3%; 
All other spending: 7.6%; 
Revenue: 19.6%. 

Notes: In addition to the expiration of tax cuts, revenue as a share of 
GDP increases through 2016 due to (1) real bracket creep, (2) more 
taxpayers becoming subject to the AMT, and (3) increased revenue from 
tax-deferred retirement accounts. After 2016, revenue as a share of GDP 
is held constant. 

Source: GAO's May 2006 analysis. 

[End of figure] 

Composition of Spending as a Share of GDP Assuming Discretionary 
Spending Grows with GDP after 2006 and All Expiring Tax Provisions are 
Extended: 

[See PDF for image] -graphic text: 

Line/Stacked Bar combo chart with 4 groups, 1 line (Revenue) and 4 bars 
per group. 

2005; 
Net interest: 1.2%; 
Social Security: 4.4%; 
Medicare & Medicaid: 3.8%; 
All other spending: 10.4%; 
Revenue: 17.4%. 

2015; 
Net interest: 2.8%; 
Social Security: 4.7%; 
Medicare & Medicaid: 5.2%; 
All other spending: 9.7%; 
Revenue: 17.4. 

2030; 
Net interest: 7.7%; 
Social Security: 6.7%; 
Medicare & Medicaid: 8%; 
All other spending: 9.7%; 
Revenue: 17.4%. 

2040; 
Net interest: 15.7%; 
Social Security: 7.9%; 
Medicare & Medicaid: 9.7%; 
All other spending: 9.7%; 
Revenue: 17.4%. 

Note: This includes certain tax provisions that expired at the end of 
2005, such as the increased AMT exemption amount. Source: GAO's May 
2006 analysis. 

[End of Figure] 

Growth in Spending for Social Security, Medicare, and Medicaid Expected 
to Outpace Economic Growth: 

[See PDF for image]  graphic text: 

Bar graph with four items. 

Growth in constant dollars 2005-2030. 

GDP: 72%; 
Social Security Spending: 147%; 
Medicaid Spending: 166%; 
Medicare Spending: 331%. 

Note: Social Security and Medicare projections based on the 
intermediate assumptions of the 2005 Trustees' Reports. Medicaid 
projections based on CBO's December 2003 long-term projections for 
federal spending on Medicaid under mid-range assumptions. 

Source: GAO analysis based on data from the Office of the Chief 
Actuary, Social Security Administration, Office of the Actuary, Centers 
for Medicare and Medicaid Services, and the Congressional Budget 
Office. 

[End of Figure] 

Social Security, Medicare, and Medicaid Spending as a Percent of GDP: 

[See PDF for image] - graphic text: 

Area graph with 81 Groups and 3 items per Group. 

Percent of GDP: 

Year: 2000; 
Social Security: 4.23%; 
Medicaid: 1.23%; 
Medicare: 2.29%. 

Year: 2001; 
Social Security: 4.33%; 
Medicaid: 1.32%; 
Medicare: 2.44%. 

Year: 2002; 
Social Security: 4.4%; 
Medicaid: 1.44%; 
Medicare: 2.53%. 

Year: 2003; 
Social Security: 4.35%; 
Medicaid: 1.5%; 
Medicare: 2.57%. 

Year: 2004; 
Social Security: 4.27%; 
Medicaid: 1.52%; 
Medicare: 2.63%. 

Year: 2005; 
Social Security: 4.26%; 
Medicaid: 1.51%; 
Medicare: 2.69%. 

Year: 2006; 
Social Security: 4.21%; 
Medicaid: 1.5%; 
Medicare: 3.33%. 

Year: 2007; 
Social Security: 4.19%; 
Medicaid: 1.52%; 
Medicare: 3.36%. 

Year: 2008; 
Social Security: 4.2%; 
Medicaid: 1.57%; 
Medicare: 3.41%. 

Year: 2009; 
Social Security: 4.24%; 
Medicaid: 1.62%; 
Medicare: 3.45%. 

Year: 2010; 
Social Security: 4.28%; 
Medicaid: 1.68%; 
Medicare: 3.5%. 

Year: 2011; 
Social Security: 4.34%; 
Medicaid: 1.74%; 
Medicare: 3.56%. 

Year: 2012; 
Social Security: 4.42%; 
Medicaid: 1.8%; 
Medicare: 3.67%. 

Year: 2013; 
Social Security: 4.51%; 
Medicaid: 1.87%; 
Medicare: 3.81%. 

Year: 2014; 
Social Security: 4.61%; 
Medicaid: 1.93%; 
Medicare: 3.96%. 

Year: 2015; 
Social Security: 4.71%; 
Medicaid: 1.95%; 
Medicare: 4.12%. 

Year: 2016; 
Social Security: 4.81%; 
Medicaid: 1.95%; 
Medicare: 4.29%. 

Year: 2017; 
Social Security: 4.92%; 
Medicaid: 1.95%; 
Medicare: 4.44%. 

Year: 2018; 
Social Security: 5.02%; 
Medicaid: 1.95%; 
Medicare: 4.61%. 

Year: 2019; 
Social Security: 5.13%; 
Medicaid: 1.95%; 
Medicare: 4.78%. 

Year: 2020; 
Social Security: 5.24%; 
Medicaid: 1.95%; 
Medicare: 4.96%. 

Year: 2021; 
Social Security: 5.35%; 
Medicaid: 1.99%; 
Medicare: 5.14%. 

Year: 2022; 
Social Security: 5.45%; 
Medicaid: 2.02%; 
Medicare: 5.33%. 

Year: 2023; 
Social Security: 5.55%; 
Medicaid: 2.06%; 
Medicare: 5.51%. 

Year: 2024; 
Social Security: 5.65%; 
Medicaid: 2.09%; 
Medicare: 5.71%. 

Year: 2025; 
Social Security: 5.75%; 
Medicaid: 2.13%; 
Medicare: 5.9%. 

Year: 2026; 
Social Security: 5.85%; 
Medicaid: 2.17%; 
Medicare: 6.08%. 

Year: 2027; 
Social Security: 5.93%; 
Medicaid: 2.2%; 
Medicare: 6.26%. 

Year: 2028; 
Social Security: 6.01%; 
Medicaid: 2.23%; 
Medicare: 6.43%. 

Year: 2029; 
Social Security: 6.08%; 
Medicaid: 2.27%; 
Medicare: 6.6%. 

Year: 2030; 
Social Security: 6.14%; 
Medicaid: 2.31%; 
Medicare: 6.77%. 

Year: 2031; 
Social Security: 6.19%; 
Medicaid: 2.35%; 
Medicare: 6.93%. 

Year: 2032; 
Social Security: 6.24%; 
Medicaid: 2.4%; 
Medicare: 7.08%. 

Year: 2033; 
Social Security: 6.27%; 
Medicaid: 2.45%; 
Medicare: 7.22%. 

Year: 2034; 
Social Security: 6.29%; 
Medicaid: 2.5%; 
Medicare: 7.37%. 

Year: 2035; 
Social Security: 6.31%; 
Medicaid: 2.55%; 
Medicare: 7.52%. 

Year: 2036; 
Social Security: 6.32%; 
Medicaid: 2.6%; 
Medicare: 7.67%. 

Year: 2037; 
Social Security: 6.33%; 
Medicaid: 2.65%; 
Medicare: 7.8%. 

Year: 2038; 
Social Security: 6.32%; 
Medicaid: 2.7%; 
Medicare: 7.92%. 

Year: 2039; 
Social Security: 6.32%; 
Medicaid: 2.75%; 
Medicare: 8.03%. 

Year: 2040; 
Social Security: 6.31%; 
Medicaid: 2.8%; 
Medicare: 8.14%. 

Year: 2041; 
Social Security: 6.3%; 
Medicaid: 2.85%; 
Medicare: 8.25%. 

Year: 2042; 
Social Security: 6.29%; 
Medicaid: 2.9%; 
Medicare: 8.36%. 

Year: 2043; 
Social Security: 6.28%; 
Medicaid: 2.95%; 
Medicare: 8.46%. 

Year: 2044; 
Social Security: 6.27%; 
Medicaid: 3%; 
Medicare: 8.58%. 

Year: 2045; 
Social Security: 6.26%; 
Medicaid: 3.05%; 
Medicare: 8.7%. 

Year: 2046; 
Social Security: 6.26%; 
Medicaid: 3.1%; 
Medicare: 8.82%. 

Year: 2047; 
Social Security: 6.25%; 
Medicaid: 3.14%; 
Medicare: 8.93%. 

Year: 2048; 
Social Security: 6.25%; 
Medicaid: 3.19%; 
Medicare: 9.03%. 

Year: 2049; 
Social Security: 6.24%; 
Medicaid: 3.23%; 
Medicare: 9.14%. 

Year: 2050; 
Social Security: 6.24%; 
Medicaid: 3.27%; 
Medicare: 9.25%. 

Year: 2051; 
Social Security: 6.24%; 
Medicaid: 3.31%; 
Medicare: 9.36%. 

Year: 2052; 
Social Security: 6.24%; 
Medicaid: 3.35%; 
Medicare: 9.47%. 

Year: 2053; 
Social Security: 6.24%; 
Medicaid: 3.39%; 
Medicare: 9.59%. 

Year: 2054; 
Social Security: 6.25%; 
Medicaid: 3.44%; 
Medicare: 9.71%. 

Year: 2055; 
Social Security: 6.25%; 
Medicaid: 3.48%; 
Medicare: 9.84%. 

Year: 2056; 
Social Security: 6.26%; 
Medicaid: 3.52%; 
Medicare: 9.98%. 

Year: 2057; 
Social Security: 6.27%; 
Medicaid: 3.57%; 
Medicare: 10.12%. 

Year: 2058; 
Social Security: 6.27%; 
Medicaid: 3.61%; 
Medicare: 10.26%. 

Year: 2059; 
Social Security: 6.28%; 
Medicaid: 3.66%; 
Medicare: 10.4%. 

Year: 2060; 
Social Security: 6.29%; 
Medicaid: 3.7%; 
Medicare: 10.55%. 

Year: 2061; 
Social Security: 6.29%; 
Medicaid: 3.75%; 
Medicare: 10.7%. 

Year: 2062; 
Social Security: 6.3%; 
Medicaid: 3.8%; 
Medicare: 10.84%. 

Year: 2063; 
Social Security: 6.31%; 
Medicaid: 3.84%; 
Medicare: 10.99%. 

Year: 2064; 
Social Security: 6.32%; 
Medicaid: 3.89%; 
Medicare: 11.14%. 

Year: 2065; 
Social Security: 6.33%; 
Medicaid: 3.94%; 
Medicare: 11.3%. 

Year: 2066; 
Social Security: 6.34%; 
Medicaid: 3.99%; 
Medicare: 11.47%. 

Year: 2067; 
Social Security: 6.35%; 
Medicaid: 4.04%; 
Medicare: 11.64%. 

Year: 2068; 
Social Security: 6.35%; 
Medicaid: 4.09%; 
Medicare: 11.81%. 

Year: 2069; 
Social Security: 6.36%; 
Medicaid: 4.14%; 
Medicare: 11.96%. 

Year: 2070; 
Social Security: 6.36%; 
Medicaid: 4.19%; 
Medicare: 12.12%. 

Year: 2071; 
Social Security: 6.37%; 
Medicaid: 4.25%; 
Medicare: 12.28%. 

Year: 2072; 
Social Security: 6.37%; 
Medicaid: 4.3%; 
Medicare: 12.44%. 

Year: 2073; 
Social Security: 6.37%; 
Medicaid: 4.35%; 
Medicare: 12.6%. 

Year: 2074; 
Social Security: 6.38%; 
Medicaid: 4.41%; 
Medicare: 12.75%. 

Year: 2075; 
Social Security: 6.38%; 
Medicaid: 4.46%; 
Medicare: 12.92%. 

Year: 2076; 
Social Security: 6.38%; 
Medicaid: 4.52%; 
Medicare: 13.08%. 

Year: 2077; 
Social Security: 6.39%; 
Medicaid: 4.57%; 
Medicare: 13.25%. 

Year: 2078; 
Social Security: 6.39%; 
Medicaid: 4.63%; 
Medicare: 13.41%. 

Year: 2079; 
Social Security: 6.39%; 
Medicaid: 4.69%; 
Medicare: 13.58%. 

Year: 2080; 
Social Security: 6.39%; 
Medicaid: 4.75%; 
Medicare: 13.75%.

Source: GAO analysis based on data from the Office of the Chief 
Actuary, Social Security Administration, Office of the Actuary, Centers 
for Medicare and Medicaid Services, and the Congressional Budget 
Office. 

Note: Social Security and Medicare projections based on the 
intermediate assumptions of the 2006 Trustees' Reports. Medicaid 
projections based on CBO's January 2006 short-term Medicaid estimates 
and CBO's December 2005 long-term Medicaid projections under mid-range 
assumptions. 

[End of Figure] 

Debt per Capita Could Exceed GDP Per Capita by 2030 Assuming 
Discretionary Spending Grows with GDP after 2006 and All Expiring Tax 
Provisions are Extended: 

Bar Graph. 

Per Capita 2005 dollars. 

2005; 
Debt per capita: 15,254; 
GDP per capita: 40,838. 

2030; 
Debt per Capita: 85,920; 
GDP per Capita: 56,607. 

2040; 
Debt per Capita: 170,150; 
GDP per Capita: 56,827. 

Source: GAO's January 2006 analysis. 

[End of Figure] 

Measured on an Outlay Equivalent Basis, Tax Expenditures Exceeded 
Discretionary Spending for Most Years in the Last Decade: 

[See PDF for image]  graphic text: 

Line graph with three lines with 24 items each. 

Dollars in billions (in constant 2004 dollars). 

Fiscal year: 1981; 
Mandatory spending: $687.6; 
Discretionary spending: $571.7; 
Sum of tax expenditure outlay equivalent estimates: $501.2. 

Fiscal year: 1982; 
Mandatory spending: $729.5; 
Discretionary spending: $566.5; 
Sum of tax expenditure outlay equivalent estimates: $544.1. 

Fiscal year: 1983; 
Mandatory spending: $757.3; 
Discretionary spending: $588.0; 
Sum of tax expenditure outlay equivalent estimates: $598.8. 

Fiscal year: 1984; 
Mandatory spending: $758.3; 
Discretionary spending: $609.0; 
Sum of tax expenditure outlay equivalent estimates: $618.3. 

Fiscal year: 1985; 
Mandatory spending: $824.9; 
Discretionary spending: $646.4; 
Sum of tax expenditure outlay equivalent estimates: $676.7. 

Fiscal year: 1986; 
Mandatory spending: $838.5; 
Discretionary spending: $666.2; 
Sum of tax expenditure outlay equivalent estimates: $728.6. 

Fiscal year: 1987; 
Mandatory spending: $829.0; 
Discretionary spending: $657.7; 
Sum of tax expenditure outlay equivalent estimates: $702.7. 

Fiscal year: 1988; 
Mandatory spending: $861.3; 
Discretionary spending: $666.6; 
Sum of tax expenditure outlay equivalent estimates: $524.7. 

Fiscal year: 1989; 
Mandatory spending: $905.1; 
Discretionary spending: $675.4; 
Sum of tax expenditure outlay equivalent estimates: $549.2. 

Fiscal year: 1990; 
Mandatory spending: $1,002.6; 
Discretionary spending: $667.0; 
Sum of tax expenditure outlay equivalent estimates: $534.6. 

Fiscal year: 1991; 
Mandatory spending: $1,015.7; 
Discretionary spending: $684.8; 
Sum of tax expenditure outlay equivalent estimates: $532.8. 

Fiscal year: 1992; 
Mandatory spending: $1,062.0; 
Discretionary spending: $668.6; 
Sum of tax expenditure outlay equivalent estimates: $551.2. 

Fiscal year: 1993; 
Mandatory spending: $1,065.7; 
Discretionary spending: $660.7; 
Sum of tax expenditure outlay equivalent estimates: $561.7. 

Fiscal year: 1994; 
Mandatory spending: $1,103.6; 
Discretionary spending: $649.2; 
Sum of tax expenditure outlay equivalent estimates: $600.3. 

Fiscal year: 1995; 
Mandatory spending: $1,140.3; 
Discretionary spending: $639.9; 
Sum of tax expenditure outlay equivalent estimates: $622.3. 

Fiscal year: 1996; 
Mandatory spending: $1,184.2; 
Discretionary spending: $613.8; 
Sum of tax expenditure outlay equivalent estimates: $620.0. 

Fiscal year: 1997; 
Mandatory spending: $1,193.6; 
Discretionary spending: $619.7; 
Sum of tax expenditure outlay equivalent estimates: $650.2. 

Fiscal year: 1998; 
Mandatory spending: $1,231.3; 
Discretionary spending: $617.7; 
Sum of tax expenditure outlay equivalent estimates: $738.7. 

Fiscal year: 1999; 
Mandatory spending: $1,247.8; 
Discretionary spending: $631.7; 
Sum of tax expenditure outlay equivalent estimates: $785.5. 

Fiscal year: 2000; 
Mandatory spending: $1,271.1; 
Discretionary spending: $665.5; 
Sum of tax expenditure outlay equivalent estimates: $825.0. 

Fiscal year: 2001; 
Mandatory spending: $1,283.5; 
Discretionary spending: $686.7; 
Sum of tax expenditure outlay equivalent estimates: $908.1. 

Fiscal year: 2002; 
Mandatory spending: $1,325.5; 
Discretionary spending: $762.4; 
Sum of tax expenditure outlay equivalent estimates: $944.2. 

Fiscal year: 2003; 
Mandatory spending: $1,361.0; 
Discretionary spending: $841.8; 
Sum of tax expenditure outlay equivalent estimates: $883.5. 

Fiscal year: 2004; 
Mandatory spending: $1,396.8; 
Discretionary spending: $895.4; 
Sum of tax expenditure outlay equivalent estimates: $852.5. 

Note: Outlay-equivalent estimates represent the amount of budget 
outlays that would be required if the government were to provide 
taxpayers with the same after-tax income they receive through the tax 
expenditure. Outlay-equivalent estimates are useful to compare tax 
expenditures and other parts of the federal budget. Summing tax 
expenditure estimates does not take into account interactions between 
individual provisions. 

Source: GAO Analysis of OMB's Budget Reports on Tax Expenditures, 
Fiscal Years 1976-2006. 

Health Care Is the Nation's Top Tax Expenditure in Fiscal Year 2005: 

[See PDF for image] --graphic text: 

Bar chart with five items: 

Exclusion of employer contributions for insurance premiums and medical 
care: $118.4. 
Deductibility of mortgage interest on owner-occupied dwellings: $62.2. 
Exclusion of pension contributions and earnings: employer-sponsored 
401(K) plans: $50.6. 
Exclusion of pension contributions and earnings: employer-sponsored 
defined benefit plans: $41.8. 
Deductibility of nonbusiness state and local taxes (other than on owner-
occupied dwellings): $37.4. 

Note: `Tax expenditures" refers to the special tax provisions that are 
contained in the federal income taxes on individuals and corporations. 
OMB does not include forgone revenue from other federal taxes such as 
Social Security and Medicare payroll taxes. 

* If the payroll tax exclusion were also counted here, the total tax 
expenditure for employer contributions for health insurance premiums 
would be about 50 percent higher or $177.6 billion. 

** This is the revenue loss and does not include associated outlays of 
$14.6 billion. 

Source: Office of Management and Budget (OMB), Analytical Perspectives, 
Budget of the United States Government, Fiscal Year 2007.

Current Fiscal Policy Is Unsustainable: 

The "Status Quo" is Not an Option: 

* We face large and growing structural deficits largely due to known 
demographic trends and rising health care costs. 

* GAO's simulations show that balancing the budget in 2040 could 
require actions as large as: 

- Cutting total federal spending by 60 percent or: 

- Raising federal taxes to 2 times today's level: 

Faster Economic Growth Can Help, but It Cannot Solve the Problem: 

* Closing the current long-term fiscal gap based on reasonable 
assumptions would require real average annual economic growth in the 
double digit range every year for the next 75 years. 

* During the 1990s, the economy grew at an average 3.2 percent per 
year. 

* As a result, we cannot simply grow our way out of this problem. Tough 
choices will be required. 

The Way Forward: A Three-Pronged Approach: 

1. Strengthen Budget and Legislative Processes and Controls: 

2. Improve Financial Reporting and Performance Metrics: 

3. Fundamental Reexamination & Transformation for the 21St Century: 

Solutions Require Active Involvement from Both the Executive and 
Legislative Branches: 

The Way Forward: 
Strengthen Budget and Legislative Processes and Controls: 

Restore discretionary spending caps & PAYGO rules on both sides of the 
ledger: 

Develop mandatory spending triggers [with specific defaults], and other 
action-forcing provisions (e.g., sunsets) for both direct spending 
programs and tax preferences: 

Develop, impose & enforce modified rules for selected items (e.g., 
earmarks, emergency designations, and use of supplementals): 

Require present value cost estimates for any legislative debate on all 
major tax and spending bills, including entitlement programs. Cost 
estimates should usually assume no sunset: 

Extend accrual budgeting to insurance & federal employee pensions; 
develop techniques for extending to retiree health & environmental 
liabilities: 

Consider bi-annual budgeting: 

Consider expedited line item rescissions from the President that would 
only require a majority vote to override the proposed rescission(s): 

The Way Forward: 
Improve Financial Reporting and Performance Metrics: 

Improve transparency & completeness of President's budget proposal: 

* Return to 10-year estimates in budget both for current policies and 
programs and for policy proposals: 

* Include in the budget estimates of long-term cost of policy proposals 
& impact on total fiscal exposures. 

* Improve transparency of tax expenditures: 

Consider requiring President's budget to specify a path to on-budget 
balance within 10-year window or explain the selection of an 
alternative deadline: 

Require annual OMB report on existing fiscal exposures (liabilities, 
obligations, explicit & implied commitments): 

Require periodic fiscal sustainability reporting, as has been done in 
some other countries (e.g., New Zealand, Australia): 

Require enhanced financial statement presentation and preparation of 
summary annual report that is both useful and used: 

Develop key national (outcome-based) indicators to chart the nation's 
position, progress, and position relative to the other major industrial 
countries: 

The Way Forward: Fundamental Reexamination & Transformation: 

Restructure existing entitlement programs: 

Reexamine and restructure the base of all other spending: 

Review & revise existing tax policy, including tax preferences & 
enforcement programs: 

Expand scrutiny of all proposed new programs, policies, or activities: 

Strengthen internal agency structures & processes: 

Strengthen and systematize Congressional oversight processes: 

Key National Indicators: 

What: A portfolio of economic, social, and environmental outcome-based 
measures that could be used to help assess the nation's and other 
governmental jurisdictions' position and progress: 

Who: Many countries and several states, regions, and localities have 
already undertaken related initiatives (e.g., Australia, New Zealand, 
Canada, United Kingdom, Oregon, Silicon Valley (California) and 
Boston): 

Why: Development of such a portfolio of indicators could have a number 
of possible benefits, including: 

* Serving as a framework for related strategic planning efforts 

* Enhancing performance and accountability reporting: 

* Informing public policy decisions, including much needed baseline 
reviews of existing government policies, programs, functions, and 
activities: 

* Facilitating public education and debate as well as an informed 
electorate: 

Way Forward: Consortium of key players housed by the National Academies 
domestically and related efforts by the OECD and others 
internationally: 

Key National Indicators: Where the United States Ranks: 

The United States may be the only superpower, but compared to most 
other OECD countries on selected key economic, social, and 
environmental indicators, on average, the U.S. ranks: 

16 0UT OF 28: 

OECD Categories for Key Indicators (2006 OECD Factbook): 

* Population/Migration; 
* Energy; 
* Environment; 
* Quality of Life;  
* Macroeconomic Trends; 
* Labor Market; 
* Education; 
* Economic Globalization;  
* Prices; 
* Science & Tech; 
* Public Finance. 

Moving the Debate Forward: 

The Sooner We Get Started, the Better: 

* The miracle of compounding is currently working against us:  

* Less change would be needed, and there would be more time to make 
adjustments: 

* Our demographic changes will serve to make reform more difficult over 
time: 

Need Public Education, Discussion, and Debate: 

* The role of government in the 21St Century: 

* Which programs and policies should be changed and how: 

* How government should be financed: 

These Challenges Go Beyond Numbers and Dollars- It's About: 

Values and People: 

Learning from the Past and Others while Preparing for Future: 

* Roman Republic: 

* British Empire: 

* New Zealand vs. Argentina:  

Key Leadership Attributes Needed for These Challenging and Changing 
Times: 

* Courage: 
* Integrity: 
* Creativity: 
* Stewardship: 

Cartoon from the Washington Post: 

A man and a Woman putting leaves over a giant hole with spikes at the 
bottom labeled "The Deficit", while two kids observe from far away. 

The adults say, " ...Now we cover it with sticks and leaves so they 
won't notice it until it's too late."  

The children observe and hear this and reply, " Somehow you don't 
expect parents to behave like that." 

Toles copyright 2006 The Washington Post. 

Reprinted with permission of Universal Press Syndicate. All rights 
reserved. 

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