This is the accessible text file for CG Presentations number GAO-06- 1138CG entitled 'Saving our Future Requires Tough Choices Today' which was released on October 20, 2006. This text file was formatted by the U.S. Government Accountability Office (GAO) to be accessible to users with visual impairments, as part of a longer term project to improve GAO products' accessibility. Every attempt has been made to maintain the structural and data integrity of the original printed product. Accessibility features, such as text descriptions of tables, consecutively numbered footnotes placed at the end of the file, and the text of agency comment letters, are provided but may not exactly duplicate the presentation or format of the printed version. The portable document format (PDF) file is an exact electronic replica of the printed version. We welcome your feedback. Please E-mail your comments regarding the contents or accessibility features of this document to Webmaster@gao.gov. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. Because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately. United States Government Accountability Office: Saving Our Future requires Tough Choices Today: Fiscal Wake-up Tour: University of Texas: Austin, TX :S September 28, 2006: The Honorable David M. Walker: Comptroller General of the United States: Fiscal Year 2004 and 2005 Deficits and Net Operating Costs: 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 & 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: Medicare Part B benefits; 2000: $6.5; 2005: $12.4. Implicit exposures: Medicare Part D benefits; 2005: $8.7. Total; 2000: $20.4; 2005: $46.4. 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: $51.1 trillion; * Burden/Net worth ratio: 91 percent; Burden: Per person: $156,000; Per full-time worker: $375,000; Per Household: $411,000; Income: Median Household income: $44,389; Disposable personal income per capita: $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: 10.5%; Revenue: 17.5%. 2015; Net interest: 1.6%; Social Security: 4.6%; Medicare & Medicaid: 5.3%; All other spending: 8.5%; Revenue: 19.7%. 2030; Net interest: 2.6%; Social Security: 6.4%; Medicare & Medicaid: 8.3%; All other spending: 8.4%; Revenue: 19.8%. 2040; Net interest: 5.5%; Social Security: 6.9%; Medicare & Medicaid: 10.3%; All other spending: 8.4%; Revenue: 19.8%. 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 August 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: 1.5%; Social Security: 4.2%; Medicare & Medicaid: 3.9%; All other spending: 10.5%; Revenue: 17.5% 2015; Net interest: 2.4%; Social Security: 4.6%; Medicare & Medicaid: 5.3%; All other spending: 9.9%; Revenue: 17.5% 2030; Net interest: 6.9%; Social Security: 6.7%; Medicare & Medicaid: 8.3%; All other spending: 9.9%; Revenue: 17.6% 2040; Net interest: 13.7%; Social Security: 7.5%; Medicare & Medicaid: 10.3%; All other spending: 9.9%; Revenue: 17.6% Source: GAO's August 2006 analysis. [End of Figure] 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: 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: 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: On the Web: Web site: [Hyperlink, http://www.gao.gov/cghome.htm]: Contact: Paul Anderson, Managing Director, Public Affairs AndersonP1@gao.gov (202) 512-4800: U.S. Government Accountability Office 441 G Street NW, Room 7149 Washington, D.C. 20548: Copyright: This is a work of the U.S. government and is not subject to copyright protection in the United States. 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