This is the accessible text file for GAO report number GAO-09-405SP entitled 'The Nation's Long-Term Fiscal Outlook: March 2009 Update' which was released on April 30, 2009. This text file was formatted by the U.S. Government Accountability Office (GAO) to be accessible to users with visual impairments, as part of a longer term project to improve GAO products' accessibility. Every attempt has been made to maintain the structural and data integrity of the original printed product. Accessibility features, such as text descriptions of tables, consecutively numbered footnotes placed at the end of the file, and the text of agency comment letters, are provided but may not exactly duplicate the presentation or format of the printed version. The portable document format (PDF) file is an exact electronic replica of the printed version. We welcome your feedback. Please E-mail your comments regarding the contents or accessibility features of this document to Webmaster@gao.gov. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. Because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately. United States Government Accountability Office: GAO: The Nation's Long-Term Fiscal Outlook: March 2009 Update: GAO-09-405SP: GAO's Long-Term Fiscal Simulations: Since 1992, GAO has published long-term fiscal simulations of what might happen to federal deficits and debt levels under varying policy assumptions. GAO developed its 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: * Baseline Extended follows the Congressional Budget Office's (CBO) baseline estimates for the first 10 years and then holds revenue and spending other than large entitlement programs constant as a share of gross domestic product (GDP). * The Alternative simulation is based on historical trends and 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, and expiring tax provisions, except for those enacted in the American Recovery and Reinvestment Act (Recovery Act), are extended until 2019 and then revenue is brought back to about its historical level. Recovery Act provisions are included in both simulations but are assumed to be temporary. GAO updates its simulations as new estimates become available from CBO and the Social Security and Medicare Trustees. This update incorporates CBO's March 2009 baseline projections. Additional information can be found at: [hyperlink, http://www.gao.gov/special.pubs/longterm/]. For more information, contact Susan J. Irving at (202) 512-6806 or irvings@gao.gov. [End of section] The new President, the new Congress, and the American people have been understandably focused on addressing problems with financial markets and responding to the economic downturn. However, the nation will need to apply the same level of intensity to the nation's long-term fiscal challenge. As shown in the figure below and the attached charts, GAO's updated simulations continue to show escalating and persistent debt that illustrates the long-term fiscal outlook is unsustainable. By 2025, debt held by the public under the Alternative simulation exceeds the historical high reached in the aftermath of World War II. Figure 1: Debt Held by the Public under Two Fiscal Policy Simulations (Percent of GDP): [Refer to PDF for image: multiple line graph] Historical high: 109% in 1946. Year: 2005; Baseline extended: 37.5; Alternative: 37.5. Year: 2006; Baseline extended: 37; Alternative: 37. Year: 2007; Baseline extended: 36.9; Alternative: 36.9. Year: 2008; Baseline extended: 40.8; Alternative: 40.8. Year: 2009; Baseline extended: 54.8; Alternative: 54.9. Year: 2010; Baseline extended: 60; Alternative: 60.6. Year: 2011; Baseline extended: 62; Alternative: 64. Year: 2012; Baseline extended: 61.6; Alternative: 66.2. Year: 2013; Baseline extended: 60.8; Alternative: 68.4. Year: 2014; Baseline extended: 60.1; Alternative: 71.1. Year: 2015; Baseline extended: 59.5; Alternative: 74. Year: 2016; Baseline extended: 59; Alternative: 77.3. Year: 2017; Baseline extended: 58.5; Alternative: 80.6. Year: 2018; Baseline extended: 56.1; Alternative: 82.3. Year: 2019; Baseline extended: 56.1; Alternative: 86.6. Year: 2020; Baseline extended: 56.2; Alternative: 91.2. Year: 2021; Baseline extended: 56.5; Alternative: 96. Year: 2022; Baseline extended: 57.1; Alternative: 101.2. Year: 2023; Baseline extended: 58; Alternative: 106.7. Year: 2024; Baseline extended: 59.2; Alternative: 112.5. Year: 2025; Baseline extended: 60.8; Alternative: 118.8. Year: 2026; Baseline extended: 62.6; Alternative: 125.3. Year: 2027; Baseline extended: 64.7; Alternative: 132.3. Year: 2028; Baseline extended: 67.2; Alternative: 139.7. Year: 2029; Baseline extended: 70.1. Alternative: 147.5. Year: 2030; Baseline extended: 73.1; Alternative: 155.6. Year: 2031; Baseline extended: 76.6; Alternative: 164.2. Year: 2032; Baseline extended: 80.4; Alternative: 173.2. Year: 2033; Baseline extended: 84.4; Alternative: 182.5. Year: 2034; Baseline extended: 88.7; Alternative: 192.1. Year: 2035; Baseline extended: 93.2; Alternative: 202. Year: 2036; Baseline extended: 98; Alternative: 212.4. Year: 2037; Baseline extended: 103.2; Alternative: 223.1. Year: 2038; Baseline extended: 108.5; Alternative: 234.1. Year: 2039; Baseline extended: 114.1; Alternative: 245.4. Year: 2040; Baseline extended: 119.9; Alternative: 257.1. Year: 2041; Baseline extended: 125.9; Alternative: 269.1. Year: 2042; Baseline extended: 132.2; Alternative: 281.4. Year: 2043; Baseline extended: 138.6; Alternative: 294.1. Year: 2044; Baseline extended: 145.3; Alternative: 306.9. Year: 2045; Baseline extended: 152.2; Alternative: 320.2. Year: 2046; Baseline extended: 159.3; Alternative: 333.8. Year: 2047; Baseline extended: 166.6; Alternative: 347.7. Year: 2048; Baseline extended: 174.2; Alternative: 362. Year: 2049; Baseline extended: 182.1; Alternative: 376.8. Year: 2050; Baseline extended: 190.2; Alternative: 391.9. Source: GAO. Note: Data from GAO's simulations based on the 2008 Trustees' assumptions for Social Security and Medicare. We also run simulations using CBO's Social Security and Medicare projections; the results are not materially different. [End of figure] GAO's updated simulations reflect the effects of policies undertaken to stabilize the financial markets and stimulate the economy through mid- March 2009. According to CBO's March 2009 estimates, the actions taken to date and the weakened economy will produce a surge in debt held by the public in fiscal year 2009. While the factors driving the near-term outlook can be and have been quite volatile, the long-term fundamentals have not changed. Health care costs are still growing faster than the economy and the nation's population continues to age. GAO's long-term simulations show that absent policy actions aimed at reforming the key drivers of our structural deficits--health spending and Social Security--the federal government faces unsustainable growth in debt. The longer that action to deal with the federal government's long-term fiscal outlook is delayed, the greater the risk that the eventual changes will be disruptive and destabilizing. Alternative Fiscal Policy Simulations: * Baseline Extended follows CBO’s March 2009 10-year baseline projections that assume discretionary spending authority, except that enacted in the Recovery Act, grows with inflation; Recovery Act provisions are included but assumed to be temporary. Tax provisions scheduled to expire will actually do so. After 2019, discretionary spending is assumed to grow with the economy and revenue is held constant as a share of GDP at the 2019 level of 20.3 percent—implicitly assuming that action is taken to offset increased revenue from real bracket creep, the alternative minimum tax (AMT), and tax-deferred retirement accounts. Medicare spending is based on projections assuming the continuation of current law under which fees for physicians treating Medicare patients would be cut in future years. * The Alternative simulation follows Baseline Extended except for changes to the assumptions for three variables. Discretionary spending other than Recovery Act provisions grows with the economy after 2009; Recovery Act provisions are included but assumed to be temporary. Expiring tax provisions are extended, except for expiring provisions enacted in the Recovery Act.[Footnote 1] After 2019, revenue is brought back to its 40-year historical average level of 18.3 percent of GDP plus expected revenues from deferred taxes (i.e., taxes on withdrawals from retirement accounts). Throughout the simulation period, Medicare spending is based on projections assuming that physician payments are not reduced as specified under current law. Note: CBO’s projections are from A Preliminary Analysis of the President’s Budget and an Update of CBO’s Budget and Economic Outlook (March 2009). Figure: Unified Deficits as a Share of GDP: Under the Two Fiscal Policy Simulations (Percent of GDP): [Refer to PDF for image: multiple line graph] Fiscal year: 2005; Baseline extended: -2.60; Alternative: -2.60. Fiscal year: 2006; Baseline extended: -1.90; Alternative: -1.90. Fiscal year: 2007; Baseline extended: -1.19; Alternative: -1.19. Fiscal year: 2008; Baseline extended: -3.22; Alternative: -3.22. Fiscal year: 2009; Baseline extended: -11.85; Alternative: -11.93. Fiscal year: 2010; Baseline extended: -7.90; Alternative: -8.29. Fiscal year: 2011; Baseline extended: -4.60; Alternative: -6.21. Fiscal year: 2012; Baseline extended: -2.09; Alternative: -4.84. Fiscal year: 2013; Baseline extended: -1.81; Alternative: -5.01. Fiscal year: 2014; Baseline extended: -1.79; Alternative: -5.41. Fiscal year: 2015; Baseline extended: -1.57; Alternative: -5.52. Fiscal year: 2016; Baseline extended: -1.75; Alternative: -6.03. Fiscal year: 2017; Baseline extended: -1.60; Alternative: -6.19. Fiscal year: 2018; Baseline extended: -1.61; Alternative: -6.55. Fiscal year: 2019; Baseline extended: -2.01; Alternative: -7.32. Fiscal year: 2020; Baseline extended: -2.19; Alternative: -7.83. Fiscal year: 2021; Baseline extended: -2.50; Alternative: -8.31. Fiscal year: 2022; Baseline extended: -2.72; Alternative: -8.72. Fiscal year: 2023; Baseline extended: -3.06; Alternative: -9.25. Fiscal year: 2024; Baseline extended: -3.31; Alternative: -9.72. Fiscal year: 2025; Baseline extended: -3.68; Alternative: -10.29. Fiscal year: 2026; Baseline extended: -3.99; Alternative: -10.81. Fiscal year: 2027; Baseline extended: -4.41; Alternative: -11.45. Fiscal year: 2028; Baseline extended: -4.74; Alternative: -12.00. Fiscal year: 2029; Baseline extended: -5.19; Alternative: -12.67. Fiscal year: 2030; Baseline extended: -5.53; Alternative: -13.25. Fiscal year: 2031; Baseline extended: -5.98; Alternative: -13.94. Fiscal year: 2032; Baseline extended: -6.42; Alternative: -14.64. Fiscal year: 2033; Baseline extended: -6.78; Alternative: -15.25. Fiscal year: 2034; Baseline extended: -7.23; Alternative: -15.96. Fiscal year: 2035; Baseline extended: -7.58; Alternative: -16.53. Fiscal year: 2036; Baseline extended: -8.04; Alternative: -17.25. Fiscal year: 2037; Baseline extended: -8.50; Alternative: -17.98. Fiscal year: 2038; Baseline extended: -8.86; Alternative: -18.62. Fiscal year: 2039; Baseline extended: -9.31; Alternative: -19.35. Fiscal year: 2040; Baseline extended: -9.67; Alternative: -20.00. Fiscal year: 2041; Baseline extended: -10.12; Alternative: -20.75. Fiscal year: 2042; Baseline extended: -10.49; Alternative: -21.41. Fiscal year: 2043; Baseline extended: -10.96; Alternative: -22.17. Fiscal year: 2044; Baseline extended: -11.34; Alternative: -22.85. Fiscal year: 2045; Baseline extended: -11.82; Alternative: -23.64. Fiscal year: 2046; Baseline extended: -12.22; Alternative: -24.35. Fiscal year: 2047; Baseline extended: -12.73; Alternative: -25.17. Fiscal year: 2048; Baseline extended: -13.15; Alternative: -25.91. Fiscal year: 2049; Baseline extended: -13.68; Alternative: -26.77. Fiscal year: 2050; Baseline extended: -14.13; Alternative: -27.54. Source: GAO. Notes: Based on simulations using the Trustees’ Assumptions for Social Security and Medicare. We also run simulations using CBO’s projections for Social Security and Medicare; as shown on page 5, the results are not materially different. [End of figure] Budget Assumptions after the First 10 Years: GAO uses two different sources for long-term projections for Social Security, Medicare, and Medicaid: * In the first set of simulations, Social Security and Medicare are based on the Trustees’ 2008 estimates. Medicaid spending is based on CBO’s projections but adjusted to reflect excess cost growth consistent with the Trustees. * In the second set of simulations, Social Security, Medicare, and Medicaid are based on CBO’s most recent long-term projections. In both sets of simulations, we assume the following: * Social Security and Medicare benefits are paid in full after the trust funds are exhausted through borrowing from the general fund to meet any payroll tax shortfall. * Other mandatory spending is held constant as a share of GDP at the 2019 level. Notes: The Trustees’ 2008 estimates are from The 2008 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds and 2008 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds that were both issued on March 25, 2008. CBO’s estimates are from Updated Long-Term Projections for Social Security (August 2008) and The Long-Term Budget Outlook (December 2007). Figure: Unified Surpluses and Deficits as a Share of GDP: Under the Two Fiscal Policy Simulations Using Different Social Security, Medicare and Medicaid Assumptions (Percent of GDP): [Refer to PDF for image: multiple line graph] Fiscal year: 2000; Baseline Extended: 2.433; Alternative: 2.433; Baseline w/CBO: 2.433; Alternative w/CBO: 2.433. Fiscal year: 2001; Baseline Extended: 1.274; Alternative: 1.274; Baseline w/CBO: 1.274; Alternative w/CBO: 1.274. Fiscal year: 2002; Baseline Extended: -1.52; Alternative: -1.52; Baseline w/CBO: -1.52; Alternative w/CBO: -1.52. Fiscal year: 2003; Baseline Extended: -3.495; Alternative: -3.495; Baseline w/CBO: -3.495; Alternative w/CBO: -3.495. Fiscal year: 2004; Baseline Extended: -3.588; Alternative: -3.588; Baseline w/CBO: -3.588; Alternative w/CBO: -3.588. Fiscal year: 2005; Baseline Extended: -2.602; Alternative: -2.602; Baseline w/CBO: -2.602; Alternative w/CBO: -2.602. Fiscal year: 2006; Baseline Extended: -1.908; Alternative: -1.908; Baseline w/CBO: -1.908; Alternative w/CBO: -1.908. Fiscal year: 2007; Baseline Extended: -1.193; Alternative: -1.193; Baseline w/CBO: -1.193; Alternative w/CBO: -1.193. Fiscal year: 2008; Baseline Extended: -3.227; Alternative: -3.227; Baseline w/CBO: -3.227; Alternative w/CBO: -3.227. Fiscal year: 2009; Baseline Extended: -11.859; Alternative: -11.936; Baseline w/CBO: -11.859; Alternative w/CBO: -11.887. Fiscal year: 2010; Baseline Extended: -7.907; Alternative: -8.294; Baseline w/CBO: -7.907; Alternative w/CBO: -8.298. Fiscal year: 2011; Baseline Extended: -4.601; Alternative: -6.218; Baseline w/CBO: -4.601; Alternative w/CBO: -6.226. Fiscal year: 2012; Baseline Extended: -2.098; Alternative: -4.84; Baseline w/CBO: -2.098; Alternative w/CBO: -4.83. Fiscal year: 2013; Baseline Extended: -1.819; Alternative: -5.01; Baseline w/CBO: -1.819; Alternative w/CBO: -4.998. Fiscal year: 2014; Baseline Extended: -1.798; Alternative: -5.413; Baseline w/CBO: -1.798; Alternative w/CBO: -5.352 Fiscal year: 2015; Baseline Extended: -1.57; Alternative: -5.529; Baseline w/CBO: -1.57; Alternative w/CBO: -5.519. Fiscal year: 2016; Baseline Extended: -1.75; Alternative: -6.031; Baseline w/CBO: -1.75; Alternative w/CBO: -6.016. Fiscal year: 2017; Baseline Extended: -1.605; Alternative: -6.194; Baseline w/CBO: -1.605; Alternative w/CBO: -6.111. Fiscal year: 2018; Baseline Extended: -1.61; Alternative: -6.551; Baseline w/CBO: -1.61; Alternative w/CBO: -6.521. Fiscal year: 2019; Baseline Extended: -2.018; Alternative: -7.32; Baseline w/CBO: -2.018; Alternative w/CBO: -7.314. Fiscal year: 2020; Baseline Extended: -2.194; Alternative: -7.836; Baseline w/CBO: -2.355; Alternative w/CBO: -7.995. Fiscal year: 2021; Baseline Extended: -2.501; Alternative: -8.319; Baseline w/CBO: -2.571; Alternative w/CBO: -8.467. Fiscal year: 2022; Baseline Extended: -2.726; Alternative: -8.725; Baseline w/CBO: -2.923; Alternative w/CBO: -8.957. Fiscal year: 2023; Baseline Extended: -3.063; Alternative: -9.252; Baseline w/CBO: -3.268; Alternative w/CBO: -9.472. Fiscal year: 2024; Baseline Extended: -3.316; Alternative: -9.728; Baseline w/CBO: -3.559; Alternative w/CBO: -10.065. Fiscal year: 2025; Baseline Extended: -3.68; Alternative: -10.297; Baseline w/CBO: -3.9; Alternative w/CBO: -10.645. Fiscal year: 2026; Baseline Extended: -3.99; Alternative: -10.817; Baseline w/CBO: -4.267; Alternative w/CBO: -11.227. Fiscal year: 2027; Baseline Extended: -4.412; Alternative: -11.453; Baseline w/CBO: -4.714; Alternative w/CBO: -11.894. Fiscal year: 2028; Baseline Extended: -4.749; Alternative: -12.009; Baseline w/CBO: -5.119; Alternative w/CBO: -12.524. Fiscal year: 2029; Baseline Extended: -5.192; Alternative: -12.679; Baseline w/CBO: -5.521; Alternative w/CBO: -13.157. Fiscal year: 2030; Baseline Extended: -5.535; Alternative: -13.257; Baseline w/CBO: -5.994; Alternative w/CBO: -13.869. Fiscal year: 2031; Baseline Extended: -5.981; Alternative: -13.948; Baseline w/CBO: -6.36; Alternative w/CBO: -14.557. Fiscal year: 2032; Baseline Extended: -6.428; Alternative: -14.645; Baseline w/CBO: -6.819; Alternative w/CBO: -15.297. Fiscal year: 2033; Baseline Extended: -6.78; Alternative: -15.252; Baseline w/CBO: -7.267; Alternative w/CBO: -15.932. Fiscal year: 2034; Baseline Extended: -7.231; Alternative: -15.966; Baseline w/CBO: -7.708; Alternative w/CBO: -16.614. Fiscal year: 2035; Baseline Extended: -7.589; Alternative: -16.53; Baseline w/CBO: -8.216; Alternative w/CBO: -17.33. Fiscal year: 2036; Baseline Extended: -8.048; Alternative: -17.255; Baseline w/CBO: -8.661; Alternative w/CBO: -18.043. Fiscal year: 2037; Baseline Extended: -8.507; Alternative: -17.988; Baseline w/CBO: -9.027; Alternative w/CBO: -18.761. Fiscal year: 2038; Baseline Extended: -8.863; Alternative: -18.623; Baseline w/CBO: -9.525; Alternative w/CBO: -19.569. Fiscal year: 2039; Baseline Extended: -9.315; Alternative: -19.358; Baseline w/CBO: -10.018; Alternative w/CBO: -20.352. Fiscal year: 2040; Baseline Extended: -9.672; Alternative: -20.003; Baseline w/CBO: -10.406; Alternative w/CBO: -21.037. Fiscal year: 2041; Baseline Extended: -10.129; Alternative: -20.751; Baseline w/CBO: -10.929; Alternative w/CBO: -21.858. Fiscal year: 2042; Baseline Extended: -10.495; Alternative: -21.411; Baseline w/CBO: -11.368; Alternative w/CBO: -22.675. Fiscal year: 2043; Baseline Extended: -10.963; Alternative: -22.176; Baseline w/CBO: -11.851; Alternative w/CBO: -23.417. Fiscal year: 2044; Baseline Extended: -11.343; Alternative: -22.855; Baseline w/CBO: -12.434; Alternative w/CBO: -24.21. Fiscal year: 2045; Baseline Extended: -11.829; Alternative: -23.646; Baseline w/CBO: -12.911; Alternative w/CBO: -25.046. Fiscal year: 2046; Baseline Extended: -12.229; Alternative: -24.355; Baseline w/CBO: -13.442; Alternative w/CBO: -25.919. Fiscal year: 2047; Baseline Extended: -12.735; Alternative: -25.173; Baseline w/CBO: -13.934; Alternative w/CBO: -26.806. Fiscal year: 2048; Baseline Extended: -13.157; Alternative: -25.916; Baseline w/CBO: -14.57; Alternative w/CBO: -27.727. Fiscal year: 2049; Baseline Extended: -13.687; Alternative: -26.772; Baseline w/CBO: -15.136; Alternative w/CBO: -28.678. Fiscal year: 2050; Baseline Extended: -14.133; Alternative: -27.547; Baseline w/CBO: -15.75; Alternative w/CBO: -29.66. Fiscal year: 2051; Baseline Extended: -14.689; Alternative: -28.437; Baseline w/CBO: -16.318; Alternative w/CBO: -30.575. Fiscal year: 2052; Baseline Extended: -15.159; Alternative: -29.247; Baseline w/CBO: -17.01; Alternative w/CBO: -31.622. Fiscal year: 2053; Baseline Extended: -15.74; Alternative: -30.169; Baseline w/CBO: -17.694; Alternative w/CBO: -32.661. Fiscal year: 2054; Baseline Extended: -16.239; Alternative: -31.015; Baseline w/CBO: -18.332; Alternative w/CBO: -33.661. Fiscal year: 2055; Baseline Extended: -16.854; Alternative: -31.982; Baseline w/CBO: -19.009; Alternative w/CBO: -34.705. Fiscal year: 2056; Baseline Extended: -17.388; Alternative: -32.874; Baseline w/CBO: -19.752; Alternative w/CBO: -35.896. Fiscal year: 2057; Baseline Extended: -18.033; Alternative: -33.883; Baseline w/CBO: -20.489; Alternative w/CBO: -37.038. Fiscal year: 2058; Baseline Extended: -18.592; Alternative: -34.809; Baseline w/CBO: -21.253; Alternative w/CBO: -38.19. Fiscal year: 2059; Baseline Extended: -19.159; Alternative: -35.752; Baseline w/CBO: -22.05; Alternative w/CBO: -39.382. Fiscal year: 2060; Baseline Extended: -19.836; Alternative: -36.808; Baseline w/CBO: -22.853; Alternative w/CBO: -40.585. Fiscal year: 2061; Baseline Extended: -20.428; Alternative: -37.785; Baseline w/CBO: -23.761; Alternative w/CBO: -41.822. Fiscal year: 2062; Baseline Extended: -21.131; Alternative: -38.877; Baseline w/CBO: -24.556; Alternative w/CBO: -43.074. Fiscal year: 2063; Baseline Extended: -21.749; Alternative: -39.889; Baseline w/CBO: -25.38; Alternative w/CBO: -44.338. Fiscal year: 2064; Baseline Extended: -22.479; Alternative: -41.021; Baseline w/CBO: -26.252; Alternative w/CBO: -45.632. Fiscal year: 2065; Baseline Extended: -23.128; Alternative: -42.075; Baseline w/CBO: -27.138; Alternative w/CBO: -46.945. Fiscal year: 2066; Baseline Extended: -23.888; Alternative: -43.246; Baseline w/CBO: -28.116; Alternative w/CBO: -48.28. Fiscal year: 2067; Baseline Extended: -24.562; Alternative: -44.338; Baseline w/CBO: -29.082; Alternative w/CBO: -49.731. Fiscal year: 2068; Baseline Extended: -25.245; Alternative: -45.445; Baseline w/CBO: -30.041; Alternative w/CBO: -51.161. Fiscal year: 2069; Baseline Extended: -26.04; Alternative: -46.669; Baseline w/CBO: -31.019; Alternative w/CBO: -52.59;. Fiscal year: 2070; Baseline Extended: -26.752; Alternative: -47.816; Baseline w/CBO: -32.032; Alternative w/CBO: -54.06. Fiscal year: 2071; Baseline Extended: -27.574; Alternative: -49.076; Baseline w/CBO: -32.989; Alternative w/CBO: -55.554. Fiscal year: 2072; Baseline Extended: -28.31; Alternative: -50.257; Baseline w/CBO: -34.094; Alternative w/CBO: -57.156. Fiscal year: 2073; Baseline Extended: -29.155; Alternative: -51.553; Baseline w/CBO: -35.209; Alternative w/CBO: -58.75. Fiscal year: 2074; Baseline Extended: -29.917; Alternative: -52.771; Baseline w/CBO: -36.288; Alternative w/CBO: -60.388. Fiscal year: 2075; Baseline Extended: -30.79; Alternative: -54.106; Baseline w/CBO: -37.398; Alternative w/CBO: -62.018. Fiscal year: 2076; Baseline Extended: -31.579; Alternative: -55.362; Baseline w/CBO: -38.537; Alternative w/CBO: -63.659. Fiscal year: 2077; Baseline Extended: -32.379; Alternative: -56.637; Baseline w/CBO: -39.789; Alternative w/CBO: -65.422. Fiscal year: 2078; Baseline Extended: -33.289; Alternative: -58.028; Baseline w/CBO: -40.994; Alternative w/CBO: -67.143. Fiscal year: 2079; Baseline Extended: -34.116; Alternative: -59.342; Baseline w/CBO: -42.203; Alternative w/CBO: -68.874. Fiscal year: 2080; Baseline Extended: -35.056; Alternative: -60.774; Baseline w/CBO: -43.439; Alternative w/CBO: -70.64. Fiscal year: 2081; Baseline Extended: -35.91; Alternative: -62.128; Baseline w/CBO: -44.73; Alternative w/CBO: -72.466. Fiscal year: 2082; Baseline Extended: -36.877; Alternative: -63.599; Baseline w/CBO: -46.004; Alternative w/CBO: -74.282. Fiscal year: 2083; Baseline Extended: -37.864; Alternative: -65.039; Baseline w/CBO: -47.304; Alternative w/CBO: -76.131. Source: GAO. [End of figure] Figure: Debt Held by the Public as a Share of GDP: Under the Two Fiscal Policy Simulations Using Different Social Security, Medicare and Medicaid Assumptions: [Refer to PDF for image: multiple line graph] Fiscal year: 2000; Baseline extended: 35; Alternative simulation: 35; Baseline w/CBO: 35; Alternative w/CBO: 35. Fiscal year: 2001; Baseline extended: 33; Alternative simulation: 33; Baseline w/CBO: 33; Alternative w/CBO: 33. Fiscal year: 2002; Baseline extended: 34; Alternative simulation: 34; Baseline w/CBO: 34; Alternative w/CBO: 34. Fiscal year: 2003; Baseline extended: 36; Alternative simulation: 36; Baseline w/CBO: 36; Alternative w/CBO: 36. Fiscal year: 2004; Baseline extended: 37; Alternative simulation: 37; Baseline w/CBO: 37; Alternative w/CBO: 37. Fiscal year: 2005; Baseline extended: 37; Alternative simulation: 37; Baseline w/CBO: 37; Alternative w/CBO: 37. Fiscal year: 2006; Baseline extended: 37; Alternative simulation: 37; Baseline w/CBO: 37; Alternative w/CBO: 37. Fiscal year: 2007; Baseline extended: 36; Alternative simulation: 36; Baseline w/CBO: 36; Alternative w/CBO: 36. Fiscal year: 2008; Baseline extended: 40; Alternative simulation: 40; Baseline w/CBO: 40; Alternative w/CBO: 40. Fiscal year: 2009; Baseline extended: 54; Alternative simulation: 54; Baseline w/CBO: 54; Alternative w/CBO: 54. Fiscal year: 2010; Baseline extended: 60; Alternative simulation: 60; Baseline w/CBO: 60; Alternative w/CBO: 60. Fiscal year: 2011; Baseline extended: 62; Alternative simulation: 64; Baseline w/CBO: 62; Alternative w/CBO: 64. Fiscal year: 2012; Baseline extended: 61; Alternative simulation: 66; Baseline w/CBO: 61; Alternative w/CBO: 66. Fiscal year: 2013; Baseline extended: 60; Alternative simulation: 68; Baseline w/CBO: 60; Alternative w/CBO: 68. Fiscal year: 2014; Baseline extended: 60; Alternative simulation: 71; Baseline w/CBO: 60; Alternative w/CBO: 71. Fiscal year: 2015; Baseline extended: 59; Alternative simulation: 73; Baseline w/CBO: 59; Alternative w/CBO: 73. Fiscal year: 2016; Baseline extended: 59; Alternative simulation: 77; Baseline w/CBO: 59; Alternative w/CBO: 77. Fiscal year: 2017; Baseline extended: 58; Alternative simulation: 80; Baseline w/CBO: 58; Alternative w/CBO: 80. Fiscal year: 2018; Baseline extended: 56; Alternative simulation: 82; Baseline w/CBO: 56; Alternative w/CBO: 82. Fiscal year: 2019; Baseline extended: 56; Alternative simulation: 86; Baseline w/CBO: 56; Alternative w/CBO: 86. Fiscal year: 2020; Baseline extended: 56; Alternative simulation: 91; Baseline w/CBO: 56; Alternative w/CBO: 91. Fiscal year: 2021; Baseline extended: 56; Alternative simulation: 96; Baseline w/CBO: 56; Alternative w/CBO: 96. Fiscal year: 2022; Baseline extended: 57; Alternative simulation: 101; Baseline w/CBO: 57; Alternative w/CBO: 101. Fiscal year: 2023; Baseline extended: 58; Alternative simulation: 106; Baseline w/CBO: 58; Alternative w/CBO: 107. Fiscal year: 2024; Baseline extended: 59; Alternative simulation: 112; Baseline w/CBO: 60; Alternative w/CBO: 113. Fiscal year: 2025; Baseline extended: 60; Alternative simulation: 118; Baseline w/CBO: 61; Alternative w/CBO: 119. Fiscal year: 2026; Baseline extended: 62; Alternative simulation: 125; Baseline w/CBO: 63; Alternative w/CBO: 126. Fiscal year: 2027; Baseline extended: 64; Alternative simulation: 132; Baseline w/CBO: 66; Alternative w/CBO: 134. Fiscal year: 2028; Baseline extended: 67; Alternative simulation: 139; Baseline w/CBO: 69; Alternative w/CBO: 142. Fiscal year: 2029; Baseline extended: 70; Alternative simulation: 147; Baseline w/CBO: 72; Alternative w/CBO: 150. Fiscal year: 2030; Baseline extended: 73; Alternative simulation: 155; Baseline w/CBO: 75; Alternative w/CBO: 158. Fiscal year: 2031; Baseline extended: 76; Alternative simulation: 164; Baseline w/CBO: 79; Alternative w/CBO: 167. Fiscal year: 2032; Baseline extended: 80; Alternative simulation: 173; Baseline w/CBO: 83; Alternative w/CBO: 177. Fiscal year: 2033; Baseline extended: 84; Alternative simulation: 182; Baseline w/CBO: 87; Alternative w/CBO: 187. Fiscal year: 2034; Baseline extended: 88; Alternative simulation: 192; Baseline w/CBO: 92; Alternative w/CBO: 197. Fiscal year: 2035; Baseline extended: 93; Alternative simulation: 202; Baseline w/CBO: 97; Alternative w/CBO: 207. Fiscal year: 2036; Baseline extended: 98; Alternative simulation: 212; Baseline w/CBO: 102; Alternative w/CBO: 218. Fiscal year: 2037; Baseline extended: 103; Alternative simulation: 223; Baseline w/CBO: 108; Alternative w/CBO: 230. Fiscal year: 2038; Baseline extended: 108; Alternative simulation: 234; Baseline w/CBO: 114; Alternative w/CBO: 241. Fiscal year: 2039; Baseline extended: 114; Alternative simulation: 245; Baseline w/CBO: 120; Alternative w/CBO: 253. Fiscal year: 2040; Baseline extended: 119; Alternative simulation: 257; Baseline w/CBO: 126; Alternative w/CBO: 266. Fiscal year: 2041; Baseline extended: 125; Alternative simulation: 269; Baseline w/CBO: 133; Alternative w/CBO: 279. Fiscal year: 2042; Baseline extended: 132; Alternative simulation: 281; Baseline w/CBO: 140; Alternative w/CBO: 292. Fiscal year: 2043; Baseline extended: 138; Alternative simulation: 294; Baseline w/CBO: 147; Alternative w/CBO: 305. Fiscal year: 2044; Baseline extended: 145; Alternative simulation: 306; Baseline w/CBO: 154; Alternative w/CBO: 319. Fiscal year: 2045; Baseline extended: 152; Alternative simulation: 320; Baseline w/CBO: 162; Alternative w/CBO: 334. Fiscal year: 2046; Baseline extended: 159; Alternative simulation: 333; Baseline w/CBO: 170; Alternative w/CBO: 348. Fiscal year: 2047; Baseline extended: 166; Alternative simulation: 347; Baseline w/CBO: 178; Alternative w/CBO: 363. Fiscal year: 2048; Baseline extended: 174; Alternative simulation: 362; Baseline w/CBO: 187; Alternative w/CBO: 379. Fiscal year: 2049; Baseline extended: 182; Alternative simulation: 376; Baseline w/CBO: 195; Alternative w/CBO: 395. Fiscal year: 2050; Baseline extended: 190; Alternative simulation: 391; Baseline w/CBO: 205; Alternative w/CBO: 412. Fiscal year: 2051; Baseline extended: 198; Alternative simulation: 407; Baseline w/CBO: 214; Alternative w/CBO: 428. Fiscal year: 2052; Baseline extended: 207; Alternative simulation: 423; Baseline w/CBO: 224; Alternative w/CBO: 446. Fiscal year: 2053; Baseline extended: 216; Alternative simulation: 439; Baseline w/CBO: 234; Alternative w/CBO: 464. Fiscal year: 2054; Baseline extended: 225; Alternative simulation: 455; Baseline w/CBO: 245; Alternative w/CBO: 482. Fiscal year: 2055; Baseline extended: 234; Alternative simulation: 472; Baseline w/CBO: 256; Alternative w/CBO: 501. Fiscal year: 2056; Baseline extended: 244; Alternative simulation: 490; Baseline w/CBO: 267; Alternative w/CBO: 520. Fiscal year: 2057; Baseline extended: 254; Alternative simulation: 507; Baseline w/CBO: 279; Alternative w/CBO: 540. Fiscal year: 2058; Baseline extended: 264; Alternative simulation: 525; Baseline w/CBO: 291; Alternative w/CBO: 560. Fiscal year: 2059; Baseline extended: 274; Alternative simulation: 544; Baseline w/CBO: 303; Alternative w/CBO: 581. Fiscal year: 2060; Baseline extended: 285; Alternative simulation: 562; Baseline w/CBO: 316; Alternative w/CBO: 603. Fiscal year: 2061; Baseline extended: 296; Alternative simulation: 582; Baseline w/CBO: 329; Alternative w/CBO: 624. Fiscal year: 2062; Baseline extended: 307; Alternative simulation: 601; Baseline w/CBO: 343; Alternative w/CBO: 647. Fiscal year: 2063; Baseline extended: 319; Alternative simulation: 621; Baseline w/CBO: 357; Alternative w/CBO: 670. Fiscal year: 2064; Baseline extended: 331; Alternative simulation: 641; Baseline w/CBO: 371; Alternative w/CBO: 693. Fiscal year: 2065; Baseline extended: 343; Alternative simulation: 662; Baseline w/CBO: 386; Alternative w/CBO: 717. Fiscal year: 2066; Baseline extended: 355; Alternative simulation: 683; Baseline w/CBO: 401; Alternative w/CBO: 741. Fiscal year: 2067; Baseline extended: 368; Alternative simulation: 705; Baseline w/CBO: 417; Alternative w/CBO: 766. Fiscal year: 2068; Baseline extended: 381; Alternative simulation: 727; Baseline w/CBO: 433; Alternative w/CBO: 792. Fiscal year: 2069; Baseline extended: 394; Alternative simulation: 749; Baseline w/CBO: 450; Alternative w/CBO: 818. Fiscal year: 2070; Baseline extended: 408; Alternative simulation: 772; Baseline w/CBO: 467; Alternative w/CBO: 845. Fiscal year: 2071; Baseline extended: 422; Alternative simulation: 795; Baseline w/CBO: 484; Alternative w/CBO: 872. Fiscal year: 2072; Baseline extended: 436; Alternative simulation: 819; Baseline w/CBO: 502; Alternative w/CBO: 900. Fiscal year: 2073; Baseline extended: 450; Alternative simulation: 843; Baseline w/CBO: 520; Alternative w/CBO: 929. Fiscal year: 2074; Baseline extended: 465; Alternative simulation: 868; Baseline w/CBO: 539; Alternative w/CBO: 958. Fiscal year: 2075; Baseline extended: 480; Alternative simulation: 892; Baseline w/CBO: 558; Alternative w/CBO: 988. Fiscal year: 2076; Baseline extended: 496; Alternative simulation: 918; Baseline w/CBO: 578; Alternative w/CBO: 1018. Fiscal year: 2077; Baseline extended: 511; Alternative simulation: 944; Baseline w/CBO: 598; Alternative w/CBO: 1049. Fiscal year: 2078; Baseline extended: 527; Alternative simulation: 970; Baseline w/CBO: 619; Alternative w/CBO: 1081. Fiscal year: 2079; Baseline extended: 544; Alternative simulation: 996; Baseline w/CBO: 641; Alternative w/CBO: 1114. Fiscal year: 2080; Baseline extended: 560; Alternative simulation: 1024; Baseline w/CBO: 662; Alternative w/CBO: 1147. Fiscal year: 2081; Baseline extended: 577; Alternative simulation: 1051; Baseline w/CBO: 685; Alternative w/CBO: 1180. Fiscal year: 2082; Baseline extended: 595; Alternative simulation: 1079; Baseline w/CBO: 707; Alternative w/CBO: 1215. Fiscal year: 2083; Baseline extended: 612; Alternative simulation: 1108; Baseline w/CBO: 731; Alternative w/CBO: 1250. Source: GAO. [End of figure] Figure: Revenues and Composition of Spending as a Share of GDP: Under Baseline Extended Simulation Based on the Trustees’ Assumptions for Social Security and Medicare (Percent of GDP): [Refer to PDF for image: combined stacked vertical bar and line graph] Fiscal year: 2008; Net interest: 1.8; Social Security: 4.3; Medicare & Medicaid: 4.1; All other spending: 10.8; Revenue: 17.7. Fiscal year: 2019; Net interest: 2.7; Social Security: 5.2; Medicare & Medicaid: 5.8; All other spending: 8.5; Revenue: 20.3. Fiscal year: 2030; Net interest: 3.4; Social Security: 6; Medicare & Medicaid: 7.9; All other spending: 8.5; Revenue: 20.3. Fiscal year: 2040; Net interest: 5.5; Social Security: 6.2; Medicare & Medicaid: 9.6; All other spending: 8.5; Revenue: 20.3. Source: GAO. Notes: Simulation results using CBO’s projections for Social Security and Medicare are not materially different. [End of figure] Figure: Revenues and Composition of Spending as a Share of GDP: Under Alternative Simulation Based on the Trustees’ Assumptions for Social Security and Medicare (Percent of GDP): [Refer to PDF for image: combined stacked vertical bar and line graph] Fiscal year: 2008; Net interest: 1.8; Social Security: 4.3; Medicare & Medicaid: 4.2; All other spending: 10.7; Revenue: 17.7. Fiscal year: 2019; Net interest: 4; Social Security: 5.2; Medicare & Medicaid: 6; All other spending: 10.7; Revenue: 18.5. Fiscal year: 2030; Net interest: 7.1; Social Security: 6; Medicare & Medicaid: 8.1; All other spending: 10.7; Revenue: 18.6. Fiscal year: 2040; Net interest: 11.8; Social Security: 6.2; Medicare & Medicaid: 9.9; All other spending: 10.7; Revenue: 18.6. Source: GAO. Notes: Simulation results using CBO’s projections for Social Security and Medicare are not materially different. [End of figure] Table: Federal Fiscal Gap (2009-2083): Under GAO’s Simulations Based on the Trustees’ Assumptions for Social Security and Medicare: Baseline Extended: Fiscal gap: Trillions of present value 2009 dollars: $33.7; Fiscal gap: Percent of GDP: 4.3%; Change required to close gap: Percent increase in revenue: 21.5%; Change required to close gap: Percent decrease in noninterest spending: 18.0%. Alternative: Fiscal gap: Trillions of present value 2009 dollars: $62.9; Fiscal gap: Percent of GDP: 8.1%; Change required to close gap: Percent increase in revenue: 43.6%; Change required to close gap: Percent decrease in noninterest spending: 30.9%. Source: GAO. Notes: The fiscal gap is the amount of spending reduction or tax increases that would be needed to keep debt as a share of GDP at or below today’s ratio over a certain time period, such as 75 years as shown above. Results from simulations using CBO’s projections for Social Security and Medicare are not materially different. [End of table] Table: Key Budget Assumptions: For Simulations Based on the Trustees’ Assumptions for Social Security and Medicare: Model Inputs: Revenue; Baseline Extended: CBO’s March 2009 baseline through 2019; thereafter remains constant at 20.3 percent of GDP (CBO’s projection in 2019); Alternative: CBO’s estimates assuming expiring tax provisions other than those enacted in the Recovery Act are extended through 2019; thereafter equal to 40-year historical average of 18.3 percent of GDP plus revenue from tax-deferred retirement plans. Model Inputs: Social Security spending; Baseline Extended: CBO’s March 2009 baseline through 2019; thereafter based on 2008 Social Security Trustees’ intermediate projections; Alternative: Same as Baseline Extended. Model Inputs: Medicare spending; Baseline Extended: CBO’s March 2009 baseline through 2019; thereafter 2008 Medicare Trustees’ intermediate projections that assume per enrollee Medicare spending grows on average 1 percent faster than GDP per capita over the long term; Alternative: 2008 Trustees intermediate projections adjusted for the Centers for Medicare & Medicaid Services’ alternative assumption of 0 percent physician payment updates in the first 10 years. Model Inputs: Medicaid spending; Baseline Extended: CBO’s March 2009 baseline through 2019; thereafter CBO’s December 2007 long-term projections adjusted to reflect excess cost growth consistent with the 2008 Medicare Trustees’ intermediate projections; Alternative: Same as Baseline Extended. Model Inputs: Other mandatory spending; Baseline Extended: CBO’s March 2009 baseline through 2019; thereafter remains constant as a share of GDP at 2.1 percent of GDP; Alternative: Baseline Extended adjusted for extension of certain tax credits through 2019; thereafter remains constant at 2.2 percent of GDP. Model Inputs: Discretionary spending; Baseline Extended: CBO’s March 2009 baseline through 2019; thereafter remains constant at 6.4 percent of GDP; Alternative: Discretionary spending other than Recovery Act provisions increases at the rate of economic growth after 2009 (i.e., remains constant at 8.5 percent of GDP); Recovery Act provisions are included but assumed to be temporary. Source: GAO. Note: CBO’s March 2009 projections are from A Preliminary Analysis of the President’s Budget and an Update of CBO’s Budget and Economic Outlook and the Trustees’ projections are from The 2008 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds and 2008 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, which were both issued on March 25, 2008. [End of table] Table: Key Budget Assumptions That Change in Simulations Using CBO’s Entitlement Spending Projections: Model Inputs: Social Security spending; Baseline Extended: CBO’s March 2009 baseline through 2019; thereafter CBO’s August 2008 projections that assume full benefits as calculated under current law are paid regardless of the amounts available in the trust funds. These projections are based on the 2008 Social Security Trustees’ demographic projections and CBO’s own economic assumptions. Alternative: Same as Baseline Extended. Model Inputs: Medicare spending; Baseline Extended: CBO’s March 2009 baseline through 2019; thereafter CBO’s December 2007 projections based on current law. Per enrollee Medicare spending grows on average 1.7 percentage points faster than GDP per capita over the long term. Alternative: Based on CBO’s projections that assume physician payment rates grow with inflation (using the Medicare Economic Index)[A]. Model Inputs: Medicaid spending; Baseline Extended: CBO’s March 2009 baseline through 2019; thereafter CBO’s December 2007 long-term projections based on current law. Per enrollee Medicaid spending grows on average 0.9 percentage points faster than GDP per capita over the long term. Alternative: Same as Baseline Extended. Source: GAO. Notes: CBO’s projections are from Updated Long-Term Projections for Social Security (August 2008) and The Long-Term Budget Outlook (December 2007). [A] This is slightly higher than the assumption used in GAO’s alternative using the 2008 Trustees’ assumptions. In the Trustees’ analysis, expenditures under the Medicare Economic Index are 22.5 percent higher than current law by 2017, whereas expenditures under the 0 percent update are only 16.8 percent higher. [End of table] Table: Federal Revenue and Discretionary Spending as Shares of GDP: Historical Averages and Assumptions after 2019 in Both Sets of GAO’s Simulations (Percent of GDP): Total revenue: 20-year historical average: 18.4%; 40-year historical average: 18.3%; Baseline Extended: 20.3%; Alternative: 18.7%[A]. Discretionary spending: 20-year historical average: 7.6%; 40-year historical average: 8.9%; Baseline Extended: 6.4%; Alternative: 8.5%. [A] Average over the period from 2020 to 2083 represents a return to the 40-year historical revenue average of 18.3 percent of GDP plus expected revenues from deferred taxes (i.e., taxes on withdrawals from retirement accounts). Sources: CBO and GAO. Note: Simulation values represent GAO’s assumptions for year 10 and beyond and are the same regardless of whether we use the Trustees’ or CBO’s projections for Social Security and Medicare. [End of table] Table: Key Economic Assumptions Used in Both Sets of Simulations: Model inputs: Labor: growth in hours worked; All simulations: 2008 Social Security Trustees’ intermediate projections. Model inputs: Nonfederal saving: gross saving of the private sector and state and local government sector; All simulations: Increases gradually over the first 10 years to 18.5 percent of GDP (the average nonfederal saving rate from 1950 to 2008). Model inputs: Current account balance (percent of GDP); All simulations: From 2009 to 2019, 2008 share of GDP plus one-third of any change in gross national saving from 2008; thereafter equal to 2019 nominal level plus one-third of any change in gross national saving from 2008. Model inputs: Total factor productivity growth; All simulations: 1.4 percent through 2019 (CBO’s March 2009 short-term assumption); 1.4 percent thereafter (long-term average from 1950 to 2008). Model inputs: Inflation (percent change in GDP price index): All simulations: CBO March 2009 baseline through 2019; 1.6 percent thereafter (CBO’s projection in 2019). Model inputs: Interest rate (on publicly held debt); All simulations: Rate implied by CBO’s March 2009 baseline net interest payment projections through 2019; 5.0 percent thereafter (the rate implied in 2019). Source: GAO. Note: GDP in GAO’s simulations does not incorporate the negative effect of long-term deficits on the economy. GDP is derived using a textbook growth model in which national saving remains stable over the long term. The same GDP is used in each budget simulation. [End of table] We conducted this work from January to April 2009 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. This product is part of a body of work on the long-term fiscal challenge. Related products and additional information about the GAO model and data can be found at: [hyperlink, http://www.gao.gov/special.pubs/longterm/]. [End of section] Footnote: [1] The 1-year extension of the increased exemption amount for the AMT that is part of the Recovery Act was not extended because updated estimates were not available. While extending the AMT could reduce revenue by over $600 billion over the first 10 years, it would not affect the long-term outlook in our simulation because we assume that revenue/GDP returns to its historical average over the long term. [End of section] GAO's Mission: The Government Accountability Office, the audit, evaluation and investigative arm of Congress, exists to support Congress in meeting its constitutional responsibilities and to help improve the performance and accountability of the federal government for the American people. GAO examines the use of public funds; evaluates federal programs and policies; and provides analyses, recommendations, and other assistance to help Congress make informed oversight, policy, and funding decisions. 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