GAO updates long-term fiscal outlook

GAO updates long-term fiscal outlook

The General Accountability Office (GAO) this week issued its latest look at the federal government’s long-term fiscal path.  This analysis, first published in 1992, evaluates the results of long-term fiscal simulations, based on GAO assumptions.  These simulations show the effects on the trend of federal deficits and debt levels under different assumptions.  One simulation extends the Congressional Budget Office (CBO) 10-year baseline assuming that revenue and spending (except for large entitlements programs) remains constant.  The second (alternate) simulation allows federal spending to grow with GDP during the first 10 years, does not reduce Medicare physician payments, extends all tax provisions until 2020, indexes the Alternative Minimum Tax (AMT) to inflation through 2020, and then brings revenues back to their historical level.  Under both simulations, GAO states that unless policy changes are made, the federal government will experience an unsustainable growth in debt.  GAO acknowledges that changes recently enacted (such as PAGO legislation) and being proposed by the Administration and in Congress, along greater economic growth than assumed in the simulations, could produce significant changes in actual fiscal trends.

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