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340CG entitled 'U.S. Financial Condition and Fiscal Future Briefing' 
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United States Government Accountability Office: 
GAO: 

U.S. Financial: 
Condition and Fiscal Future Briefing

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

The Center for Governmental Accounting Education and Research’s Annual 
Conference: 
Rutgers University: 
November 30, 2007: 

GAO-08-340CG: 

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; 

* 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* Outdated federal organizational structures, policies, and practices; 

* Rising public expectations for demonstrable results and enhanced 
responsiveness. 

Composition of Federal Spending: 

[See PDF for image] 

There are three pie charts, containing the following compositions of 
spending by category: 

Year: 1966;
Defense: 43%;
Social Security: 15%; 
Medicare and Medicaid: 1%; 
Net Interest: 7%; 
All Other: 34%. 

Year: 1986;
Defense: 28%;
Social Security: 20%; 
Medicare and Medicaid: 10%; 
Net Interest: 14%; 
All Other: 29%. 

Year: 2006;
Defense: 20%;
Social Security: 21%; 
Medicare and Medicaid: 19%; 
Net Interest: 9%; 
All Other: 32%. 

Source: Office of Management and Budget and the Department of the 
Treasury. 

Note: Numbers may not add to 100 percent due to rounding. 

[End of figure] 

Federal Spending for Mandatory and Discretionary Programs: 

[See PDF for image] 

There are three pie charts, containing the following compositions of 
spending by category: 

Year: 1966;
Discretionary: 67%; 
Mandatory: 26%; 
Net Interest: 7%. 

Year: 1986;
Discretionary: 44%; 
Mandatory: 42%; 
Net Interest: 14%. 

Year: 2006;
Discretionary: 38%; 
Mandatory: 53%; 
Net Interest: 9%. 

Source: Office of Management and Budget. 

[End of figure] 

Table: Fiscal Year 2005 and 2006 Deficits and Net Operating Costs: 

On-Budget Deficit, Fiscal Year 2005 ($ Billion): (494); 
On-Budget Deficit, Fiscal Year 2006 ($ Billion): (434); 

Unified Deficit[a], Fiscal Year 2005 ($ Billion): (318); 
Unified Deficit[a], Fiscal Year 2006 ($ Billion): (248); 

Net Operating Cost[b], Fiscal Year 2005 ($ Billion): (760); 
Net Operating Cost[b], Fiscal Year 2006 ($ Billion): (450); 

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

[a] Includes $173 billion in Social Security surpluses for fiscal year 
2005 and $185 billion for fiscal year 2006; $2 billion in Postal 
Service surpluses for fiscal year 2005 and $1 billion for fiscal year 
2006. 

[b] Fiscal year 2005 and 2006 net operating cost figures reflect 
significant but opposite changes in certain actuarial costs. For 
example, changes in interest rates and other assumptions used to 
estimate future veterans’ compensation benefits increased net operating 
cost by $228 billion in 2005 and reduced net operating cost by $167 
billion in 2006. Therefore, the net operating costs for fiscal years 
2005 and 2006, exclusive of the effect of these actuarial cost 
fluctuations, were ($532) billion and ($617) billion, respectively. 

[End of table] 

Table: Major Fiscal Exposures ($ trillions): 

Explicit liabilities (Publicly held debt, Military & civilian pensions 
& retiree health, Other): 
2000: $6.9; 
2006: $10.4; 
Percent increase: 52. 

Commitments & contingencies (e.g., PBGC, undelivered orders): 
2000: 0.5; 
2006: 1.3
Percent increase: 140. 

Implicit exposures, 2000: 13.0; 
Implicit exposures, 2006: 38.8; 
Implicit exposures, Percent increase: 197; 
Future Social Security benefits, 2000: 3.8; 
Future Social Security benefits, 2006: 6.4; 
Future Social Security benefits, Percent increase: [Empty]; 
Future Medicare Part A benefits, 2000: 2.7; 
Future Medicare Part A benefits, 2006: 11.3; 
Future Medicare Part A benefits, Percent increase: [Empty]; 
Future Medicare Part B benefits, 2000: 6.5; 
Future Medicare Part B benefits, 2006: 13.1; 
Future Medicare Part B benefits, Percent increase: [Empty]; 
Future Medicare Part D benefits, 2000: 0; 
Future Medicare Part D benefits, 2006: 7.9; 
Future Medicare Part D benefits, Percent increase: [Empty]; 
Total, 2000: $20.4; 
Total, 2006: $50.5; 
Percent increase: 147. 

Source: 2000 and 2006 Financial Report of the United States 
Government. 

Note: Totals and percent increases may not add due to rounding. 
Estimates for Social Security and Medicare are at present value as of 
January 1 of each year and all other data are as of September 30. 

[End of table] 

Table: How Big is Our Growing Fiscal Burden? 

This fiscal burden can be translated and compared as follows: 

Total major fiscal exposures: $50.5 trillion; Total household net 
worth[1]: $53.3 trillion; Burden/Net worth ratio: 95 percent. 

Burden[2]: 
Per person: $170,000; 
Per full-time worker: $400,000; 
Per household: $440,000. 

Income: 
Median household income[3]: $46,326; 
Disposable personal income per capita[4]: $31,519. 

Source: GAO analysis. 

Notes: (1) Federal Reserve Board, Flow of Funds Accounts, Table B.100, 
2006:Q2 (Sept. 19, 2006); (2) Burdens are calculated using estimated 
total U.S. population as of 9/30/06, from the U.S. Census Bureau; full-
time workers reported by the Bureau of Economic Analysis, in NIPA table 
6.5D (Aug. 2, 2006); and households reported by the U.S. Census Bureau, 
in Income, Poverty, and Health Insurance Coverage in the United States: 
2005(Aug. 2006); (3) U.S. Census Bureau, Income, Poverty, and Health 
Insurance Coverage in the United States: 2005(Aug. 2006); and (4) 
Bureau of Economic Analysis, Personal Income and Outlays: October 2006, 
table 2, (Nov. 30, 2006). 

[End of table] 

Potential Fiscal Outcomes Under Baseline Extended (January 2001); 
Revenues and Composition of Spending as a Share of GDP: 

[See PDF for image] 

This is a line/stacked bar graph with one line (revenue) and four 
stacked bars containing four spending items (Net interest, Social 
Security, Medicare and Medicaid, and All other spending). The vertical 
axis represents Percent of GDP and the horizontal axis represents 
fiscal years 2005, 2015[a], 2030[a], and 2040[a]. 

The following data is depicted:

Fiscal year 2005: 
Net interest: 0.8%; 
Social Security: 4.3%; 
Medicare & Medicaid: 3.7%; 
All other spending: 7.994%; 
Revenue: 20.3%.

Fiscal year 2015: 
Net interest: 0%; 
Social Security: 5.1%; 
Medicare & Medicaid: 4.9%; 
All other spending: 5.574%; 
Revenue: 20.4%.

Fiscal year 2030: 
Net interest: 0%; 
Social Security: 6.6%; 
Medicare & Medicaid: 9.4%; 
All other spending: 3.991%; 
Revenue: 20.4%.

Fiscal year 2040: 
Net interest: 0%; 
Social Security: 6.7%; 
Medicare & Medicaid: 9%; 
All other spending: 4.361%; 
Revenue: 20.4%.

Source: GAO’s January 2001 analysis. 

[a] All other spending is net of offsetting interest receipts. 

[End of graph]

Potential Fiscal Outcomes Under Alternative Simulation; Revenues and 
Composition of Spending as a Share of GDP: 

[See PDF for image] 

This is a line/stacked bar graph with one line (revenue) and four 
stacked bars containing four spending items (Net interest, Social 
Security, Medicare and Medicaid, and All other spending). The vertical 
axis represents Percent of GDP and the horizontal axis represents 
fiscal years 2006, 2015, 2030, and 2040. 

The following data is depicted: 

Fiscal year 2006: 
Net interest: 1.7%; 
Social Security: 4.2%; 
Medicare & Medicaid: 3.9%; 
All other spending: 10.6%; 
Revenue: 18.4%. 

Fiscal year 2015: 
Net interest: 2.3%; 
Social Security: 4.8%; 
Medicare & Medicaid: 5.7%; 
All other spending: 9.6%; 
Revenue: 18%. 

Fiscal year 2030: 
Net interest: 5.8%; 
Social Security: 6.6%; 
Medicare & Medicaid: 8.8%; 
All other spending: 9.6%; 
Revenue: 18.6%. 

Fiscal year 2040: 
Net interest: 11.6%; 
Social Security: 7.2%; 
Medicare & Medicaid: 10.8%; 
All other spending: 9.6%; 
Revenue: 18.6%. 

Source: GAO’s August 2007 analysis. 

Notes: AMT exemption amount is retained at the 2006 level through 2017 
and expiring tax provisions are extended. After 2017, revenue as a 
share of GDP returns to its historical level of 18.3 percent of GDP 
plus expected revenues from deferred taxes, i.e. taxes on withdrawals 
from retirement accounts. Medicare spending is based on the Trustees 
April 2007 projections adjusted for the Centers for Medicare and 
Medicaid Services alternative assumption that physician payments are 
not reduced as specified under current law. 

[End of graph] 

Federal Tax Expenditures Exceeded Discretionary Spending for Half of 
the Last Decade: 

[See PDF for image] 

This is a line graph with three lines (Mandatory spending; Sum of tax 
expenditure revenue loss estimates; and Discretionary spending). The 
vertical axis represents Dollars in billions (in real 2005 dollars) and 
the horizontal axis represents fiscal years 1982 through 2005. The 
following data is depicted: 

Fiscal year: 1982;	
Mandatory spending: 601.6;	
Sum of tax expenditure revenue loss estimates: 463.3;
Discretionary Spending: 585.8.

Fiscal year: 1983;
Mandatory spending: 628.5;	
Sum of tax expenditure revenue loss estimates: 499.6;	
Discretionary Spending: 608. 

Fiscal year: 1984; 
Mandatory spending: 599.6;	
Sum of tax expenditure revenue loss estimates: 529.7;
Discretionary Spending: 629.7.

Fiscal year: 1985; 
Mandatory spending: 644.8;	
Sum of tax expenditure revenue loss estimates: 568.7; 
Discretionary Spending: 668.4.

Fiscal year: 1986; 
Mandatory spending: 653.4;	
Sum of tax expenditure revenue loss estimates: 618.8; 
Discretionary Spending: 688.9.

Fiscal year: 1987; 
Mandatory spending: 645;	
Sum of tax expenditure revenue loss estimates: 577.1; 
Discretionary Spending: 680.1.

Fiscal year: 1988; 
Mandatory spending: 665.3;	
Sum of tax expenditure revenue loss estimates: 448.1; 
Discretionary Spending: 689.3.

Fiscal year: 1989; 
Mandatory spending: 694.4;	
Sum of tax expenditure revenue loss estimates: 474.5; 
Discretionary Spending: 698.4. 

Fiscal year: 1990; 
Mandatory spending: 782.8;	
Sum of tax expenditure revenue loss estimates: 480.1; 
Discretionary Spending: 689.6.

Fiscal year: 1991; 
Mandatory spending: 792.1;	
Sum of tax expenditure revenue loss estimates: 472;	 
Discretionary Spending: 708.1.

Fiscal year: 1992; 
Mandatory spending: 839.9;	
Sum of tax expenditure revenue loss estimates: 488.2; 
Discretionary Spending: 691.4.

Fiscal year: 1993; 
Mandatory spending: 850.3;	
Sum of tax expenditure revenue loss estimates: 494.8; 
Discretionary Spending: 683.1.

Fiscal year: 1994; 
Mandatory spending: 889.7;	
Sum of tax expenditure revenue loss estimates: 520.2; 
Discretionary Spending: 671.2.

Fiscal year: 1995; 
Mandatory spending: 897.2;	
Sum of tax expenditure revenue loss estimates: 538.8;
Discretionary Spending: 661.6. 

Fiscal year: 1996; 
Mandatory spending: 937.4;	
Sum of tax expenditure revenue loss estimates: 541.7; 
Discretionary Spending: 634.6.

Fiscal year: 1997; 
Mandatory spending: 948.6;	
Sum of tax expenditure revenue loss estimates: 565.7;
Discretionary Spending: 640.7.

Fiscal year: 1998; 
Mandatory spending: 994.4;	
Sum of tax expenditure revenue loss estimates: 640.1;
Discretionary Spending: 638.7.

Fiscal year: 1999; 
Mandatory spending: 1028.1;	
Sum of tax expenditure revenue loss estimates: 688.6; 
Discretionary Spending: 653.2. 

Fiscal year: 2000; 
Mandatory spending: 1064.9;	
Sum of tax expenditure revenue loss estimates: 720.1; 
Discretionary Spending: 688.1.

Fiscal year: 2001; 
Mandatory spending: 1101.9;	
Sum of tax expenditure revenue loss estimates: 780.9;
Discretionary Spending: 710.	

Fiscal year: 2002; 
Mandatory spending: 1186.6;	
Sum of tax expenditure revenue loss estimates: 808.8;
Discretionary Spending: 787.9. 

Fiscal year: 2003; 
Mandatory spending: 1243.2;	
Sum of tax expenditure revenue loss estimates: 775.9;
Discretionary Spending: 868.5.

Fiscal year: 2004; 
Mandatory spending: 1271.4;	
Sum of tax expenditure revenue loss estimates: 748.2;
Discretionary Spending: 920.2.

Fiscal year: 2005; 
Mandatory spending: 1319.8; 
Sum of tax expenditure revenue loss estimates: 775.7;
Discretionary Spending: 968.5. 

Source: GAO analysis of OMB budget reports on tax expenditures, fiscal 
years 1976-2007. 

Note: Summing tax expenditure estimates does not take into account 
interactions between individual provisions. Outlays associated with 
refundable tax credits are included in mandatory spending. 

[End of graph] 

Revenue Loss Estimates for the Largest Tax Expenditures Reported for 
Fiscal Year 2006: 

[See PDF for image] - graphic text. 

This is a bar graph with the vertical axis representing Revenue loss 
estimates (dollars in billions) and the horizontal axis depicting bars 
indicating the amount of expenditures in six categories. 

Revenue loss estimate, Exclusion of employer contributions for medical 
insurance premiums and medical care: 187.5 (Treasury estimated income 
tax revenue losses: 125; Approximate payroll tax revenue losses: 
62.5[A]; 
Revenue loss estimate, Deductability of mortgage interest on owner-
occupied homes: 68.3; 
Revenue loss estimate, Net exclusion of pension contributions and 
earnings: defined benefit plans: 49[A]; 
Revenue loss estimate, Capital gains except agriculture, timber, iron 
ore, and coal): 48.6; 
Revenue loss estimate, Deductability of nonbusiness states and local 
taxes other than on owner-occupied homes: 43.1; 
Revenue loss estimate, Net exclusion of pension contributions and 
earnings: 401(k) plans: 40.8[A]. 

Source: GAO analysis of OMB, Analytical Perspectives, Budget of the 
United States Government, Fiscal Year 2008. 

[A] The value of employer-provided health insurance is excluded from 
Medicare and Social Security payroll taxes. Some researchers have 
estimated that payroll tax revenue losses amounted to more than half of 
the income tax revenue losses in 2004, and we use this estimate for 
2006. The research we are aware of dealt only with health care, 
therefore the 50 percent figure may not apply to other items that are 
excluded from otherwise applicable income and payroll taxes. 

[End of graph] 

State and Local Governments Face Increasing Fiscal Challenges: 

[See PDF for image] 

This is a line graph with two lines (Operating Surplus/Deficit Measure 
and Net-lending/Net-borrowing). The vertical axis represents Percent of 
GDP from -6 to +2 and the horizontal axis represents fiscal years 1980 
through 2050. The following data is depicted: 

1980: 
Operating Surplus/Deficit Measure: 0.35873454; 
Net-lending/Net-borrowing: -0.236601541. 

1981: 
Operating Surplus/Deficit Measure: 0.34624089; 
Net-lending/Net-borrowing: -0.169415676. 
 
1982: 
Operating Surplus/Deficit Measure: 0.363124424; 
Net-lending/Net-borrowing: -0.387096774. 

1983: 
Operating Surplus/Deficit Measure: 0.774990811; 
Net-lending/Net-borrowing: -0.138547233. 

1984: 
Operating Surplus/Deficit Measure: 0.8152395; 
Net-lending/Net-borrowing: 0.223736398. 

1985: 
Operating Surplus/Deficit Measure: 0.810172263; 
Net-lending/Net-borrowing: 0.035542497. 

1986: 
Operating Surplus/Deficit Measure: 0.820186878; 
Net-lending/Net-borrowing: -0.103074303. 

1987: 
Operating Surplus/Deficit Measure: 0.348462918; 
Net-lending/Net-borrowing: -0.346028062. 

1988: 
Operating Surplus/Deficit Measure: 0.415329754; 
Net-lending/Net-borrowing: -0.289980015. 

1989: 
Operating Surplus/Deficit Measure: 0.461047699; 
Net-lending/Net-borrowing: -0.302676683. 
	
1990: 
Operating Surplus/Deficit Measure: 0.12076304; 
Net-lending/Net-borrowing: -0.649652772. 

1991: 
Operating Surplus/Deficit Measure: -0.002324922; 
Net-lending/Net-borrowing: -0.823896329. 

1992: 
Operating Surplus/Deficit Measure: 0.105991132; 
Net-lending/Net-borrowing: -0.675323856. 	
	
1993: 
Operating Surplus/Deficit Measure: 0.17518701; 
Net-lending/Net-borrowing: -0.573797579. 

1994: 
Operating Surplus/Deficit Measure: 0.15154266; 
Net-lending/Net-borrowing: -0.429852097. 

1995: 
Operating Surplus/Deficit Measure: 0.226784; 
Net-lending/Net-borrowing: -0.446084594. 
	
1996: 
Operating Surplus/Deficit Measure: 0.382430375; 
Net-lending/Net-borrowing: -0.292955008. 

1997: 
Operating Surplus/Deficit Measure: 0.540310442; 
Net-lending/Net-borrowing: -0.225184543. 

1998: 
Operating Surplus/Deficit Measure: 0.711478221; 
Net-lending/Net-borrowing: -0.113181662. 

1999: 
Operating Surplus/Deficit Measure: 0.528375987; 
Net-lending/Net-borrowing: -0.240602477. 

2000: 
Operating Surplus/Deficit Measure: 0.51757156; 
Net-lending/Net-borrowing: -0.309666904. 

2001: 
Operating Surplus/Deficit Measure: 0.213052923; 
Net-lending/Net-borrowing: -0.800750395. 

2002: 
Operating Surplus/Deficit Measure: -0.212758845; 
Net-lending/Net-borrowing: -1.20443952. 

2003: 
Operating Surplus/Deficit Measure: -0.034231078; 
Net-lending/Net-borrowing: -1.04098241. 

2004: 
Operating Surplus/Deficit Measure: 0.03822412; 
Net-lending/Net-borrowing: -0.899039488. 

2005: 
Operating Surplus/Deficit Measure: 0.262769152; 
Net-lending/Net-borrowing: -0.762696896. 

2006: 
Operating Surplus/Deficit Measure: 0.21944499; 
Net-lending/Net-borrowing: -0.788126765. 

2007: 
Operating Surplus/Deficit Measure: 0.412715768; 
Net-lending/Net-borrowing: -0.638191188. 

2008: 
Operating Surplus/Deficit Measure: 0.345168264; 
Net-lending/Net-borrowing: -0.630180116. 

2009: 
Operating Surplus/Deficit Measure: 0.333020741; 
Net-lending/Net-borrowing: -0.603351831. 

2010: 
Operating Surplus/Deficit Measure: 0.302656141; 
Net-lending/Net-borrowing: -0.605141837. 

2011: 
Operating Surplus/Deficit Measure: 0.257109542; 
Net-lending/Net-borrowing: -0.630946404. 

2012: 
Operating Surplus/Deficit Measure: 0.206218592; 
Net-lending/Net-borrowing: -0.658720463. 

2013: 
Operating Surplus/Deficit Measure: 0.16406332; 
Net-lending/Net-borrowing: -0.681176041. 

2014: 
Operating Surplus/Deficit Measure: 0.119677687; 
Net-lending/Net-borrowing: -0.707576964. 

2015: 
Operating Surplus/Deficit Measure: 0.076206951; 
Net-lending/Net-borrowing: -0.734940534. 

2016: 
Operating Surplus/Deficit Measure: 0.026942361; 
Net-lending/Net-borrowing: -0.769406462. 

2017: 
Operating Surplus/Deficit Measure: -0.032335263; 
Net-lending/Net-borrowing: -0.814653671. 

2018: 
Operating Surplus/Deficit Measure: -0.109446599; 
Net-lending/Net-borrowing: -0.878965311. 

2019: 
Operating Surplus/Deficit Measure: -0.19227354; 
Net-lending/Net-borrowing: -0.950160744. 

2020: 
Operating Surplus/Deficit Measure: -0.28349272; 
Net-lending/Net-borrowing: -1.030954125. 

2021: 
Operating Surplus/Deficit Measure: -0.386388384; 
Net-lending/Net-borrowing: -1.123450085. 

2022: 
Operating Surplus/Deficit Measure: -0.483216203; 
Net-lending/Net-borrowing: -1.211277239. 

2023: 
Operating Surplus/Deficit Measure: -0.557423995; 
Net-lending/Net-borrowing: -1.275859781. 

2024: 
Operating Surplus/Deficit Measure: -0.667104614; 
Net-lending/Net-borrowing: -1.376919803. 

2025: 
Operating Surplus/Deficit Measure: -0.781500085; 
Net-lending/Net-borrowing: -1.482014441. 

2026: 
Operating Surplus/Deficit Measure: -0.866176187; 
Net-lending/Net-borrowing: -1.558258502. 

2027: 
Operating Surplus/Deficit Measure: -0.971014018; 
Net-lending/Net-borrowing: -1.654401786. 

2028: 
Operating Surplus/Deficit Measure: -1.059403133; 
Net-lending/Net-borrowing: -1.733838263. 

2029: 
Operating Surplus/Deficit Measure: -1.167739726; 
Net-lending/Net-borrowing: -1.833479877. 

2030: 
Operating Surplus/Deficit Measure: -1.259948277; 
Net-lending/Net-borrowing: -1.916759702. 

2031: 
Operating Surplus/Deficit Measure: -1.372065386; 
Net-lending/Net-borrowing: -2.020169149. 

2032: 
Operating Surplus/Deficit Measure: -1.467520327; 
Net-lending/Net-borrowing: -2.107108096. 

2033: 
Operating Surplus/Deficit Measure: -1.596865114. 
Net-lending/Net-borrowing: -2.227702996. 

2034: 
Operating Surplus/Deficit Measure: -1.728257684; 
Net-lending/Net-borrowing: -2.350527637. 

2035: 
Operating Surplus/Deficit Measure: -1.829728717; 
Net-lending/Net-borrowing: -2.443203659. 

2036: 
Operating Surplus/Deficit Measure: -1.964429157. 
Net-lending/Net-borrowing: -2.569286091. 

2037: 
Operating Surplus/Deficit Measure: -2.100986709; 
Net-lending/Net-borrowing: -2.697381312. 

2038: 
Operating Surplus/Deficit Measure: -2.205225568; 
Net-lending/Net-borrowing: -2.7928813. 

2039: 
Operating Surplus/Deficit Measure: -2.325201615; 
Net-lending/Net-borrowing: -2.904115765. 

2040: 
Operating Surplus/Deficit Measure: -2.430489372; 
Net-lending/Net-borrowing: -3.00097328. 

2041: 
Operating Surplus/Deficit Measure: -2.569712106; 
Net-lending/Net-borrowing: -3.131648373. 

2042: 
Operating Surplus/Deficit Measure: -2.709424661; 
Net-lending/Net-borrowing: -3.262966376. 

2043: 
Operating Surplus/Deficit Measure: -2.818508477; 
Net-lending/Net-borrowing: -3.363795891. 

2044: 
Operating Surplus/Deficit Measure: -2.947568546; 
Net-lending/Net-borrowing: -3.484450067. 

2045: 
Operating Surplus/Deficit Measure: -3.058317306; 
Net-lending/Net-borrowing: -3.58693672. 

2046: 
Operating Surplus/Deficit Measure: -3.188512473; 
Net-lending/Net-borrowing: -3.709010629.

2047: 
Operating Surplus/Deficit Measure: -3.300350183; 
Net-lending/Net-borrowing: -3.812861884. 

2048: 
Operating Surplus/Deficit Measure: -3.432143889; 
Net-lending/Net-borrowing: -3.936539309. 

2049: 
Operating Surplus/Deficit Measure: -3.545556545; 
Net-lending/Net-borrowing: -4.041974237. 

2050: 
Operating Surplus/Deficit Measure: -3.686995315; 
Net-lending/Net-borrowing: -4.175627129. 

Sources: Historical data from National Income and Product Accounts. 
Historical data from 1980–2006, GAO projections from 2007–2050 using 
many CBO projections and assumptions, particularly for next 10 years. 

[End of graph] 

Overall, the Net International Position of the U.S. is Negative: 

[See PDF for image] 

This figure is a multiple line graph. The vertical axis of the graph 
represents dollars in millions from -5 to 20. The horizontal axis of 
the graph represents year from 1989 through 2005. The following data is 
depicted: 

1989:	
Foreign owned assets in the US: 2,330,374;
US owned assets abroad: 2,070,868;
Net: -259,506. 

1990:	
Foreign owned assets in the US: 2,424,325;
US owned assets abroad: 2,178,978;
Net: -245,347. 

1991:	
Foreign owned assets in the US: 2,595,715;	
US owned assets abroad: 2,286,456;
Net: -309,259.	

1992:	
Foreign owned assets in the US: 2,762,894;	
US owned assets abroad: 2,331,696;	
Net: -431,198.	

1993:	
Foreign owned assets in the US: 3,060,604;	
US owned assets abroad: 2,753,648;	
Net: -306,956.	

1994:
Foreign owned assets in the US: 3,310,515;	
US owned assets abroad: 2,987,118;
Net: -323,397. 
	
1995:	
Foreign owned assets in the US: 3,944,734;
US owned assets abroad: 3,486,272;	
Net: -458,462.	

1996:	
Foreign owned assets in the US: 4,527,362;	
US owned assets abroad: 4,032,307;	
Net: -495,055.	

1997:	
Foreign owned assets in the US: 5,388,588;	
US owned assets abroad: 4,567,906;	
Net: -820,682.	

1998:	
Foreign owned assets in the US: 5,990,904;	
US owned assets abroad: 5,095,546;	
Net: -895,358.	

1999:	
Foreign owned assets in the US: 6,740,631;	
US owned assets abroad: 5,974,394;	
Net: -766,237.	

2000:	
Foreign owned assets in the US: 7,619,981;
US owned assets abroad: 6,238,785;	
Net: -1,381,196.

2001:	
Foreign owned assets in the US: 8,228,111;	
US owned assets abroad: 6,308,681;	
Net: -1,919,430.

2002:	
Foreign owned assets in the US: 8,740,256;
US owned assets abroad: 6,652,248;	
Net: -2,088,008.

2003:	
Foreign owned assets in the US: 9,783,855;	
US owned assets abroad: 7,643,494;	
Net: -2,140,361.

2004:	
Foreign owned assets in the US: 11,551,490;	
US owned assets abroad: 9,257,096;
Net: -2,294,394.

2005:	
Foreign owned assets in the US: 13,814,695;	
US owned assets abroad: 11,576,336; 
Net: -2,238,359.

2006:
Foreign owned assets in the US: 16,294,619;	
US owned assets abroad: 13,754,990; 	
Net: -2,539,629.

Source: Bureau of Economic Analysis. 

[End of figure] 

Foreign Ownership Share of Federal Debt Held by the Public Has 
Increased: 

[See PDF for image] - graphic text. 

There are two pie charts, containing the following compositions of 
federal debt by category: 

1996: Total Debt held by the public: $3.73 trillion:
Domestic investors and state and local governments: 62%;
Foreign and international investors: 28%; 
Federal Reserve: 10%. 

2006: Total Debt held by the public: $4.87 trillion:
Domestic investors and state and local governments: 40%;
Foreign and international investors: 44%; 
Federal Reserve: 16%. 

Source: Department of the Treasury. 

[End of graph]

U.S. Trade and Current Account Balances as Percent of GDP, 1960-2006: 

[See PDF for image] 

This figure is a multiple line graph depicting U.S. Trade and Current 
Account Balances as Percent of GDP, 1960-2006. The vertical axis of the 
graph represents percent of GDP from -7 to 2. The horizontal axis of 
the graph represents years from 1960 through 2006. The following data 
is depicted: 

Year: 1960; 
Balance of trade (goods and services): 0.7; 
Balance on current account: 0.5. 

Year: 1961; 
Balance of trade (goods and services): 0.8; 
Balance on current account: 0.7.

Year: 1962; 
Balance of trade (goods and services): 0.6; 
Balance on current account: 0.6. 

Year: 1963; 
Balance of trade (goods and services): 0.7; 
Balance on current account: 0.7.

Year: 1964: 
Balance of trade (goods and services): 0.9; 
Balance on current account: 1. 

Year: 1965; 
Balance of trade (goods and services): 0.6; 
Balance on current account: 0.8. 

Year: 1966; 
Balance of trade (goods and services): 0.4; 
Balance on current account: 0.4. 

Year: 1967; 
Balance of trade (goods and services): 0.3; 
Balance on current account: 0.3. 

Year: 1968; 
Balance of trade (goods and services): 0; 
Balance on current account: 0.1. 

Year: 1969; 
Balance of trade (goods and services): o; 
Balance on current account: 0. 

Year: 1970; 
Balance of trade (goods and services): 0.2; 
Balance on current account: 0.2.

Year: 1971; 
Balance of trade (goods and services): -0.1; 
Balance on current account: -0.1. 

Year: 1972; 
Balance of trade (goods and services): -0.4; 
Balance on current account: -0.5. 

Year: 1973; 
Balance of trade (goods and services): 0.1; 
Balance on current account: 0.5. 

Year: 1974: 
Balance of trade (goods and services): -0.3; 
Balance on current account: 0.1; 

Year: 1975; 
Balance of trade (goods and services): 0.8; 
Balance on current account: 1.1. 

Year: 1976; 
Balance of trade (goods and services): -0.3; 
Balance on current account: 0.2. 

Year: 1977; 
Balance of trade (goods and services): -1.3; 
Balance on current account: -0.7. 

Year: 1978; 
Balance of trade (goods and services): -1.3; 
Balance on current account: -0.7.

Year: 1979; 
Balance of trade (goods and services): -1; 
Balance on current account: 0. 

Year: 1980; 
Balance of trade (goods and services): -0.7; 
Balance on current account: 0.1. 

Year: 1981; 
Balance of trade (goods and services): -0.5; 
Balance on current account: 0.2. 

Year: 1982; 
Balance of trade (goods and services): -0.7; 
Balance on current account: -0.2.

Year: 1983; 
Balance of trade (goods and services): -1.6; 
Balance on current account: -1.1. 

Year: 1984; 
Balance of trade (goods and services): -2.8; 
Balance on current account: -2.4. 

Year: 1985; 
Balance of trade (goods and services): -2.9; 
Balance on current account: -2.8. 

Year: 1986; 
Balance of trade (goods and services): -3.1; 
Balance on current account: -3.3. 

Year: 1987; 
Balance of trade (goods and services): -3.2; 
Balance on current account: -3.4. 

Year: 1988; 
Balance of trade (goods and services): -2.2; 
Balance on current account: -2.4. 

Year: 1989; 
Balance of trade (goods and services): -1.7; 
Balance on current account: -1.8. 

Year: 1990: 
Balance of trade (goods and services): -1.4; 
Balance on current account: -1.4. 

Year: 1991: 
Balance of trade (goods and services): -0.5; 
Balance on current account: 0. 

Year: 1992; 
Balance of trade (goods and services): -0.6; 
Balance on current account: -0.8. 

Year: 1993; 
Balance of trade (goods and services): -1.1; 
Balance on current account: -1.3. 

Year: 1994; 
Balance of trade (goods and services): -1.4; 
Balance on current account: -1.7. 

Year: 1995; 
Balance of trade (goods and services): -1.3; 
Balance on current account: -1.5. 

Year: 1996; 
Balance of trade (goods and services): -1.3;
Balance on current account: -1.6. 

Year: 1997; 
Balance of trade (goods and services): -1.3;
Balance on current account: -1.7. 

Year: 1998; 
Balance of trade (goods and services): -1.9; 
Balance on current account: -2.5. 

Year: 1999: 
Balance of trade (goods and services): -2.9; 
Balance on current account: -3.3. 

Year: 2000; 
Balance of trade (goods and services): -3.9; 
Balance on current account: -4.3. 

Year: 2001; 
Balance of trade (goods and services): -3.6; 
Balance on current account: -3.8. 

Year: 2002; 
Balance of trade (goods and services): -4; 
Balance on current account: -4.4. 

Year: 2003; 
Balance of trade (goods and services): -4.5; 
Balance on current account: -4.8. 

Year: 2004; 
Balance of trade (goods and services): -5.2; 
Balance on current account: -5.5.

Year: 2005; 
Balance of trade (goods and services): -5.7; 
Balance on current account: -6.1. 

Year: 2006; 
Balance of trade (goods and services): -5.7; 
Balance on current account: -6.2.

Source: GAO based on U.S. Dept. of Commerce, Bureau of Economic 
Analysis, International Transactions Accounts Data. 

Note: the Current Account Balance includes the trade balance, the 
balance on income (e.g. interest, dividends etc.) and net unilateral 
transfers. 

[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. Improve Financial Reporting, Public Education, and Performance 
Metrics. 
2. Strengthen Budget and Legislative Processes and Controls. 3. 
Fundamentally Reexamine & Transform for the Twenty-first Century (i.e., 
entitlement programs, other spending, and tax policy). 

Solutions Require Active Involvement from both the Executive and 
Legislative Branches. 

The Way Forward: Improve Financial Reporting, Public Education, 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 & explain a fiscal 
goal and a path to that goal within 10-year window—or justify an 
alternative deadline; 

* Require annual OMB report on existing fiscal exposures [liabilities, 
obligations, explicit & implied commitments]; 

* Require enhanced financial statement presentation to address fiscal 
sustainability and intergenerational equity issues; 

* Prepare and distribute a summary annual report that is both useful 
and used; 

* Increase information on long-range fiscal sustainability issues in 
Congressional Budget Resolution & Budget Process; 

* Develop key national (outcome-based) indicators (e.g. economic, 
security, social, environmental) to chart the nation’s posture, 
progress, and position relative to the other major industrial 
countries. 

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

* Restore discretionary spending caps & PAYGO rules on both spending 
and tax 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 long-term cost estimates (e.g. present value) 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 biennial 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: Fundamentally Reexamine & Transform: 

* Restructure existing entitlement programs; 

* Reexamine and restructure the base of all other spending; 

* Review & revise existing tax policy, including tax preferences and 
enforcement programs; 

* Expand scrutiny of all proposed new programs, policies, or 
activities; 

* Reengineer internal agency structures and processes, including more 
emphasis on long-term planning, integrating federal activities, and 
partnering with others both domestically and internationally; 

* Strengthen and systematize Congressional oversight processes; 

* Increase transparency associated with government contracts and other 
selected items; 

* Consider a capable, credible, bi-partisan budget, entitlement, and 
tax reform commission. 

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 out of 28. 

OECD Categories for Key Indicators (2006 OECD Factbook): 

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

Source: 2006 OECD Factbook. 

Table: GAO's High-Risk List 2007: 

Addressing Challenges in Broad-based Transformations: 

* Strategic Human Capital Management[a]: Year Designated: 2001;
* Managing Federal Real Property[a]: Year Designated: 2001;
* Protecting the Federal Government’s Information Systems and the 
* Nations’ Critical Infrastructures: Year Designated: 1997;
* Implementing and Transforming the Department of Homeland Security: 
Year Designated: 2003;
* Establishing Appropriate and Effective Information-Sharing Mechanisms 
to Improve Homeland Security: Year Designated: 2005;
* DOD Approach to Business Transformation[a]: Year Designated: 2005;
- DOD Business Systems Modernization: Year Designated: 1995;
- DOD Personnel Security Clearance Program; Year Designated: 2005;
- DOD Support Infrastructure Management; Year Designated: 1997;
- DOD Financial Management; Year Designated: 1995;
- DOD Supply Chain Management; Year Designated: 1990;
- DOD Weapon Systems Acquisition; Year Designated: 1990;
* FAA Air Traffic Control Modernization; Year Designated: 1995;
* Financing the Nation’s Transportation System[a] (New); Year 
Designated: 2007; 
* Ensuring the Effective Protection of Technologies Critical to U.S. 
National Security Interests[a] (New): Year Designated: 2007; 
* Transforming Federal Oversight of Food Safety[a] (New): Year 
Designated: 2007; 

Managing Federal Contracting More Effectively: 

* DOD Contract Management: Year Designated: 1992;
* DOE Contract Management: Year Designated: 1990;
* NASA Contract Management: Year Designated: 1990;
* Management of Interagency Contracting: Year Designated: 2005; 

Assessing the Efficiency and Effectiveness of Tax Law Administration: 

* Enforcement of Tax Laws[a]: Year Designated: 1990;
* IRS Business Systems Modernization: Year Designated: 1995; 

Modernizing and Safeguarding Insurance and Benefit Programs: 

* Modernizing Federal Disability Programs[a]: Year Designated: 2003;
* Pension Benefit Guaranty Corporation Single-Employer Pension 
Insurance Program: Year Designated: 2003;
* Medicare Program[a]: Year Designated: 1990;
* Medicaid Program[a]: Year Designated: 2003;
* National Flood Insurance Program[a]: Year Designated: 2006. 

[a] Legislation is likely to be necessary, as a supplement to actions 
by the executive branch, in order to effectively address this high-risk 
area. 

Source: GAO. 

[End of table] 

Key Oversight Areas for the 110th Congress: 

Examples of targets for near-term oversight: 

* Reducing the tax gap; 

* Addressing governmentwide acquisition and contracting issues; 

* Transforming the business operations of the Departments of Defense. 

Examples of policies and programs that are in need of fundamental 
reform and re-engineering: 

* Reviewing U.S. and coalition efforts to stabilize and rebuild Iraq 
and Afghanistan; 

* Ensuring a strategic and integrated approach to prepare for, respond 
to, recover, and rebuild from catastrophic events; 

* Reforming the tax code. 

Examples of governance issues that should be addressed to help ensure 
an economical, efficient, ethical, and equitable federal government 
capable of responding to the various challenges and capitalizing on 
related opportunities in the 21st century: 

* Reviewing the need for various budget controls and legislative 
process revisions in light of current deficits and our long-range 
fiscal imbalance; 

* Pursuing the development of key national indicators; 

* Reviewing the impact and effectiveness of various management reforms. 

Selected Sustainability Challenges: 

* Fiscal Deficits and Debt Burdens; 

* Defense, Including Iraq, and Homeland Security Strategies; 

* Social Insurance Commitments; 

* Health Care Quality, Access, and Costs; 

* K-12 Education System; 

* Energy, Environment, and Resource Protection; 

* Tax Gaps and Policies; 

* Immigration Policies; 

* Infrastructure Needs. 

Twenty-first Century Challenges Report: 

* Provides background, framework, and questions to assist in 
reexamining the base; 

* Covers entitlements & other mandatory spending, discretionary 
spending, and tax policies and programs; 

* Based on GAO’s work for the Congress; 

Source: GAO. 

Twelve Reexamination Area: 

Mission Areas:
* Defense; 
* Education & Employment;
* Financial Regulation & Housing;
* Health Care;
* Homeland Security;
* International Affairs;
* Natural Resources, Energy & Environment;
* Retirement & Disability;
* Science & Technology;
* Transportation. 

Crosscutting Areas: 

* Improving Governance; 
* Reexamining the Tax System. 

Generic Reexamination Criteria and Sample Questions: 

Relevance of purpose and the federal role: 
* Why did the federal government initiate this program and what was the 
government trying to accomplish? 

* Have there been significant changes in the country or the world that 
relate to the reason for initiating it? 

Measuring success: 
* Are there outcome-based measures? If not, why? 

* If there are outcome-based measures, how successful is it based on 
these measures? 

Targeting benefits: 

* Is it well targeted to those with the greatest needs and the least 
capacity to meet those needs? 

Affordability and cost effectiveness: 

* Is it using the most cost-effective or net beneficial approaches when 
compared to other tools and program designs? 

Best practices: 
* Is the responsible entity employing prevailing best practices to 
discharge its responsibilities and achieve its mission? 

Illustrative Twenty-first Century Questions: Health Care: 

* How can we make our current Medicare and Medicaid programs 
sustainable? For example, should the eligibility requirements (e.g., 
age, income requirements) for these programs be modified? 

* How can we perform a systematic reexamination of our current health 
care system? For example, could public and private entities work 
jointly to establish formal reexamination processes that would (1) 
define and update as needed a minimum core of essential health care 
services, (2) ensure that all Americans have access to the defined 
minimum core services, (3) allocate responsibility for financing these 
services among such entities as government, employers, and individuals, 
and (4) provide the opportunity for individuals to obtain additional 
services at their discretion and cost?

Growth in Health Care Spending: Health Care Spending as a Percentage of 
GDP: 

[See PDF for image] 

This is a bar graph of the percent of health care spending as a 
percentage of GDP with the vertical axis representing percent from 0 to 
25 and the horizontal axis representing years 1975, 1985, 1995, 2005, 
and 2015. 

Year: 1975;
Health care spending: 8.1. 

Year: 1985;
Health care spending: 10.4. 

Year: 1995;
Health care spending: 13.7. 

Year: 2005;
Health care spending: 16.0. 

Year: 2015;
Health care spending: 19.2. 

Source: The Centers for Medicare & Medicaid Services, Office of the 
Actuary. 

Note: The figure for 2015 is projected. 

[End of graph] 

Growth in Health Care Spending: Health Care Spending as a Percentage of 
GDP: Cumulative Growth in Real Health Care Spending Per Capita and Real 
GDP Per Capita, 1960-2005: 

[See PDF for image] 

This is a line graph with two lines (Real health care spending per 
capita and Real GDP per capita) with the vertical axis representing 
percentage from 0 to 800 and the horizontal axis representing years 
1960 through 2005. The Real health care spending per capita line 
indicates an average annual growth rate of 4.9%, and the Real GDP per 
capita line indicates an annual growth rate of 2.3%. The following data 
is depicted: 

Year: 2000; 
Health care spending per capita: 0; 
CPI-Medical: 0;	
GDP per capita: 0; 
CPI-Urban consumers: 0. 

Year: 2001; 
Health care spending per capita: 7.47; 
CPI-Medical: 4.6; 
GDP per capita: 2.08; 
CPI-Urban consumers: 2.85. 

Year: 2002; 
Health care spending per capita: 16.05; 
CPI-Medical: 9.51; 
GDP per capita: 4.5; 
CPI-Urban consumers: 4.47. 

Year: 2003; 
Health care spending per capita: 24.26; 
CPI-Medical: 13.92; 
GDP per capita: 8.32; 
CPI-Urban consumers: 6.85. 

Year: 2004; 
Health care spending per capita: 31.98; 
CPI-Medical: 18.9; 
GDP per capita: 14.64; 
CPI-Urban consumers: 9.7. 

Year: 2005; 
Health care spending per capita: 39.81; 
CPI-Medical: 23.93; 
GDP per capita: 20.77; 
CPI-Urban consumers: 13.41. 

Source: Bureau of Labor Statistics, The Centers for Medicare & Medicaid 
Services, Office of the Actuary, and the Bureau of Economic Analysis. 

Note: The most current data available on health care spending per 
capita are for 2005. 

[End of figure] 

Growth in Health Care Spending: Cumulative Growth in Health Care 
Spending Per Capita, Medical Inflation, GDP, and General Inflation, 
2000-2005: 

[See PDF for image] 

This is a line graph with four lines depicted (Cumulative Growth in 
Health Care Spending Per Capita, Medical Inflation, GDP, and General 
Inflation) with the vertical axis representing cumulative percent from 
0 to 50 and the horizontal axis representing years 2000 through 2005. 
The following data is depicted: 

Year: 2000; 
Health care spending per capita: 0; 
CPI-Medical: 0; 
GDP: 0; 
CPI-Urban consumers: 0. 

Year: 2001; 
Health care spending per capita: 7.47; 
CPI-Medical: 4.6; 
GDP: 3.17; 
CPI-Urban consumers: 2.85. 

Year: 2002; 
Health care spending per capita: 16.05; 
CPI-Medical: 9.51; 
GDP: 6.65; 
CPI-Urban consumers: 4.47. 

Year: 2003; 
Health care spending per capita: 24.26; 
CPI-Medical: 13.92; 
GDP: 11.65; 
CPI-Urban consumers: 6.85. 

Year: 2004; 
Health care spending per capita: 31.98; 
CPI-Medical: 18.9; 
GDP: 19.31; 
CPI-Urban consumers: 9.7. 

Year: 2005; 
Health care spending per capita: 39.81; 
CPI-Medical: 23.92; 
GDP: 26.88; 
CPI-Urban consumers: 13.41. 

Source: Bureau of Labor Statistics, The Centers for Medicare & Medicaid 
Services, Office of the Actuary, and the Bureau of Economic Analysis. 

[End of figure] 

Growth in Health Care Spending: U.S Compared to Other OECD Countries, 
2005: 

[See PDF for image] 

This figure is a plotted point graph depicting Growth in Health Care 
Spending: U.S Compared to Other OECD Countries, 2005. The vertical axis 
of the graph represents percent of GDP spent on health care. The 
horizontal axis of the graph represents health care spending per capita 
(USD $PPP). The following data is depicted: 

There are twenty-nine plotted points on the graph, with the following 
six specifically depicted: 

Country: Turkey; 
Percent of GDP spent on health care: 7.6% and $586. 

Country: South Korea; 
Percent of GDP spent on health care: 6.0% and $1,318. 

Country: Switzerland; 
Percent of GDP spent on health care: 11.6% and $4,177. 

Country: Norway; 
Percent of GDP spent on health care: 9.1% and $4,364. 

Country: Luxembourg; 
Percent of GDP spent on health care: 7.9% and $5,563. 

Country: United States; 
Percent of GDP spent on health care: 15.3% and $6,401. 

Source: OECD Health Data, 2007. 

Notes: All of the data on per capita spending and GDP have been 
translated into U.S. dollar equivalents, with exchange rates based on 
purchasing power parities (PPPs) of the national currencies. Data for 
Australia, Hungary, Japan, and the Netherlands are for 2004. 

[End of graph] 

Number of Non-elderly Uninsured Americans, 1999-2005: 

[See PDF for image] 

This figure is a vertical bar graph depicting the number of non-elderly 
uninsured Americans, 1999-2005. The vertical axis of the graph 
represents population in millions from 0 to 50. The horizontal axis of 
the graph represents years 1999 through 2005. The following data is 
depicted: 

Number of Non-elderly Uninsured Americans: 
1999: 39.0 million; 
2000: 38.4 million; 
2001: 40.9 million; 
2002: 43.3 million; 
2003: 44.6 million; 
2004: 45.5 million; 
2005: 46.1 million. 

Sources: GAO and Urban Institute and Kaiser Commission on Medicaid and 
the Uninsured analyses. 

Notes: Figures for 1999-2000 are from Urban Institute and Kaiser Commission 
on Medicaid and the Uninsured. The figures for 2001-2005 are from GAO analyses 
of the Bureau of the Labor Statistics and the Bureau of the Census Current 
Population Survey, Annual Social and Economic Supplement. 

[End of graph] 

Where the United States Ranks on Selected Health Outcome Indicators: 

Outcome: Life expectancy at birth (U.S. = 77.8 years in 2004); 
Rank: 23 out of 30 in 2004. 

Outcome: Infant Mortality (U.S. = 6.8 deaths in 2004); 
Rank: 26 out of 30 in 2004. 

Outcome: Potential Years of Life Lost( U.S. = 5,066 in 2002); 
Rank: 23 out of 26 in 2002. 

Source: OECD Health Data 2006 and 2007. 

Notes: Data are the most recent available for all countries. Life 
expectancy at birth for the total population is estimated by the OECD 
Secretariat for all countries, as the unweighted average of the life 
expectancy of men and women. Infant mortality is measured as the number 
of deaths per 1,000 live births. Potential years of life lost (PYLL) is 
the sum of the years of life lost prior to age 70, given current age-
specific death rates (e.g., a death at 5 years of age is counted as 65 
years of PYLL). 

[End of table] 

Key Dates Highlight Long Term Challenges of the Medicare Program: 

Date: 2007; 
Event: Medicare Part A outlays exceed cash income. 

Date: 2007; 
Event: Estimated trigger date for “Medicare funding warning.” 

Date: 2013; 
Event: Projected date that annual “general revenue funding” for Part B 
will exceed 45 percent of total Medicare outlays. 

Date: 2019; 
Part A trust fund exhausted, annual income sufficient to pay about 80% 
of promised Part A benefits. 

Source: 2007 Annual Report of The Boards of Trustees of The Federal 
Hospital Insurance and Federal Supplementary Medical Insurance Trust 
Funds(Washington, DC, April 2007). 

[End of table] 

Issues to Consider in Examining Our Health Care System: 

The public needs to be educated about the differences between wants, 
needs, affordability, and sustainability at both the individual and 
aggregate level. 

Ideally, health care reform proposals will: 

* Align Incentives for providers and consumers to make prudent 
decisions about the use of medical services; 

* Foster Transparency with respect to the value and costs of care, and; 

* Ensure Accountability from insurers and providers to meet standards 
for appropriate use and quality; 

Ultimately, we need to address four key dimensions: access, cost, 
quality,and personal responsibility. 

Selected Potential Health Care Reform Approaches: 

Reform Approach: Revise the government’s payment systems and leverage 
its purchasing authority to foster value-based purchasing for health 
care products and services; 
Short-term action: [check];
Long-term action: [Empty]. 

Reform Approach: Consider additional flexibility for states to serve as 
models for possible health care reforms; 
Short-term action: [check];
Long-term action: [Empty]. 

Reform Approach: Consider limiting direct advertising and allowing 
limited importation of prescription drugs; 
Short-term action: [check];
Long-term action: [Empty]. 

Reform Approach: Foster more transparency in connection with health 
care costs and outcomes; 
Short-term action: [check];
Long-term action: [Empty]. 

Reform Approach: Create incentives that encourage physicians to utilize 
prescription drugs and other health care products and services 
economically and efficiently. 
Short-term action: [check];
Long-term action: [Empty]. 

Reform Approach: Foster the use of information technology to increase 
consistency, transparency, and accountability in health care; 
Short-term action: [check];
Long-term action: [Empty]. 

Reform Approach: Encourage case management approaches for people with 
chronic and expensive conditions to improve the quality and efficiency 
of care delivered and avoid inappropriate care. 
Short-term action: [check];
Long-term action: [Empty]. 

Reform Approach: Reexamine the design and operational structure of the 
nation’s health care entitlement programs—Medicare and Medicaid, 
including exploring more income-related approaches; 
Short-term action: [check];
Long-term action: [check]. 

Reform Approach: Revise certain federal tax preferences for health care 
to encourage more efficient use of health care products and services; 
Short-term action: [check];
Long-term action: [check]. 

Reform Approach: Foster more preventative care and wellness services 
and capabilities, including fighting obesity and encouraging better 
nutrition; 
Short-term action: [check];
Long-term action: [check]. 

Reform Approach: Promote more personal responsibility in connection 
with health care; 
Short-term action: [check];
Long-term action: [check]. 

Reform Approach: Limit spending growth for government-sponsored health 
care programs (e.g., percentage of the budget and/or economy); 
Short-term action: [Empty]; 
Long-term action: [check]. 

Reform Approach: Develop a core set of basic and essential services. 
Create insurance pools for alternative levels of coverage, as 
necessary; 
Short-term action: [Empty]; 
Long-term action: [check]. 

Reform Approach: Develop a set of evidence-based national practice 
standards to help avoid unnecessary care, improve outcomes, and reduce 
litigation; 
Short-term action: [Empty]; 
Long-term action: [check]. 

Reform Approach: Pursue multinational approaches to investing in health 
care R&D; 
Short-term action: [Empty]; 
Long-term action: [check]. 

[End of table] 

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. 

Three Key Illnesses: 

* Myopia; 
* Tunnel Vision; 
* Self-Centeredness. 

Four National Deficits: 

* Budget; 
* Balance of Payments; 
* Savings; 
* Leadership. 

Key Leadership Attributes Needed for These Challenging and Changing 
Times: 

* Courage; 
* Integrity; 
* Creativity; 
* Stewardship; 
* Partnership. 

Three Key Groups That Need to Increase Their Influence and Involvement: 

* The Business and Professional Community; 
* Young Americans; 
* The Media. 

[End of presentation] 

On the Web: 

Web site: [hyperlink, http://www.gao.gov/cghome.htm]: 

Contact: 

Chuck Young, Managing Director, Public Affairs: YoungC1@gao.gov: 
(202) 512-4800: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7149: 
Washington, D.C. 20548: 

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