–GAO: Last Year’s Debt Deal Didn’t Focus on ‘Drivers’ of Deficits
–GAO: Soc Sec, Medicare, Medicaid, Debt Service Devour Half of Budget
–GAO: Need ‘Difficult Decisions’ on Spending, Taxes To Fix Deficit

By John Shaw

WASHINGTON (MNI) – Those seeking to bask in the feeling of hope,
optimism and renewal that is associated with springtime probably should
not read the most recent long-term fiscal outlook released by the
Government Accountability Office.

The GAO’s report on the U.S.’s long-term fiscal challenges is the
latest in a series of reports that began in 1992 which show federal
deficits and debt under different sets of policy assumptions.

The GAO’s spring 2012 update begins with some positive news. A
recovering economy and the spending controls that were the heart of last
year’s debt ceiling accord will help reduce budget deficits “over the
next several years,” the GAO says.

But this fiscal reprieve, the GAO adds, will be short-lived, partly
because last year’s deficit deal “did not focus on the fundamental
drivers of the government’s future fiscal imbalances–a structural gap
between revenues and spending driven by rising health care costs and
demographics.”

The GAO report notes that spending pressures are being driven by
rising health care costs and the aging of the American population. This
later factor is illustrated by a specific number. The number of baby
boomers turning 65 is projected to grow in the coming years, averaging
about 7,600 per day in 2011 and reaching about 11,400 a day by 2029.

The GAO report observes that in 2010, about 47 cents of every
federal dollar spent went to Social Security, Medicare, Medicaid and
interest on the federal debt.

By 2040, these same programs will consume at least 70 cents of
every federal dollar spent.

The GAO report, released last week, says the call for more federal
action to support the economy must be “balanced with the need to act
soon to develop a plan for addressing the long-term fiscal imbalance.”

The GAO report says that a plan to cut deficits too quickly and
deeply “could stifle the pace of the recovery in the near term.”

The GAO says that its simulations show total federal spending
continuing to outpace revenues in the coming years, feeding an
unsustainable growth in debt.

“The policy actions required to close the fiscal gap are
significant and changing the long-term outlook will likely require
difficult decisions about both federal spending and revenue,” the GAO
report concludes.

** MNI Washington Bureau: (202) 371-2121 **

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