The Federal Government's Long-Term Fiscal Outlook: Fall 2009 Update

Since 1992, GAO has published long-term fiscal simulations of what might happen to federal deficits and debt levels under varying policy assumptions. We developed our long-term model in response to a bipartisan request from Members of Congress who were concerned about the long-term effects of fiscal policy. GAO runs two simulations: (1) "Baseline Extended" follows the Congressional Budget Office's (CBO) August baseline estimates for the first 10 years and then simply holds revenue and spending other than large entitlement programs constant as a share of gross domestic product (GDP). (2) The "Alternative" simulation is based on historical trends and policy preferences. Discretionary spending grows with GDP rather than inflation during the first 10 years, Medicare physician payment rates are not reduced as in CBO's baseline, all tax provisions are extended to 2019, and beginning with this update, the alternative minimum tax (AMT) exemption amount is indexed to inflation through 2019; revenues are then brought back to their historical level. This update incorporates the most recent projections from the Social Security and Medicare Trustees, and from CBO.