The government is on an unsustainable long-term fiscal path, according to a new report from the Government Accountability Office.
GAO ran two simulations to come to its finding and, in both cases, the debt held by the public grew as a share of gross domestic product over time, creating an unsustainable path for financial success.
In a baseline extended simulation, which assumes current law, including the discretionary spending limits and other spending reductions contained in the Budget Control Actof 2011 and expiration of certain tax cuts enacted in 2001 and 2003, debt as a share of gross domestic product declines in the short term before turning up again. In an alternative simulation, in which these laws are assumed to not take full effect, federal debt as a share of GDP grows throughout the period.
GAO said discretionary spending limits alone do not address the fundamental imbalance between estimated revenue and spending, which is driven largely by an aging population and rising health care costs.
“Significant actions to change the long-term fiscal path must be taken and the design of these actions should take into account concerns about the near-term impact on economic growth,” GAO said.