The Nation's Fiscal Health:
A Long-Term Plan Is Needed for Fiscal Sustainability
GAO-21-161T: Published: Oct 7, 2020. Publicly Released: Oct 7, 2020.
Additional Materials:
- Highlights Page:
- Full Report:
- Accessible Version:
Contact:
(202) 512-6806
arkinj@gao.gov
Susan J. Irving
(202) 512-6806
irvings@gao.gov
Office of Public Affairs
(202) 512-4800
youngc1@gao.gov
Even before COVID-19, the federal government's long-term fiscal path was unsustainable because debt was growing faster than the economy. By the end of FY 2019, debt held by the public had climbed to 79% of GDP. It is expected to reach 195% of GDP by FY 2050.
We testified that the federal government does not have a long-term fiscal plan to control the growing debt. Such a plan could benefit from fiscal rules and targets, as well as an alternative approach to the debt limit. Federal agencies can also contribute to the nation's fiscal health through things like reducing the tax gap—i.e., the difference between taxes owed and taxes paid.
Federal Debt Held by the Public
Additional Materials:
- Highlights Page:
- Full Report:
- Accessible Version:
Contact:
(202) 512-6806
arkinj@gao.gov
Susan J. Irving
(202) 512-6806
irvings@gao.gov
Office of Public Affairs
(202) 512-4800
youngc1@gao.gov
What GAO Found
The federal government faced an unsustainable long-term fiscal path—even before complications resulting from COVID-19—caused by an imbalance between revenue and spending built into the structure of current law. Congress and the administration have taken necessary actions—which totaled $2.6 trillion—to respond to COVID-19 and the resulting severe economic downturn. Once public health goals have been attained and the economy has substantially recovered, Congress and the administration should swiftly implement a broad plan to address the long-term fiscal outlook.
This plan could benefit from the inclusion of fiscal rules and targets, which guide fiscal policy by controlling factors like expenditures, revenue, or the ratio of debt to gross domestic product, as well as from an alternative approach to the debt limit.
The nation also faces impending fiscal pressures for major programs, which add to the need for action (see figure).
Key Dates for Major Programs
Notes: Years above may reflect either fiscal or calendar years. The Congressional Budget Office projections for the trust funds reflect the effects of COVID-19. Pension Benefit Guaranty Corporation projections do not reflect the effects of COVID-19.
The federal government also faces certain fiscal exposures—including unforeseen events like COVID-19 and natural disasters—that present risks to its future fiscal condition. In addition, executive agencies could achieve billions of dollars in financial benefits by reducing improper payments and the tax gap; increasing scrutiny of tax expenditures; and continuing to address duplication, overlap, and fragmentation in federal programs.
Why GAO Did This Study
By the end of fiscal year 2019, debt held by the public had climbed to 79 percent of GDP. The Congressional Budget Office (CBO) projects debt to reach 107 percent of GDP by 2023, its highest point in history. In addition, CBO projects that annual deficits will exceed $1 trillion in each of the next 10 years.
As currently structured, the federal debt limit is not a control on debt, but a legal limit on the total amount of federal debt that can be outstanding at one time. It restricts the Department of the Treasury's (Treasury) authority to borrow to finance fiscal decisions that have already been made. Uncertainty around the debt limit increases borrowing costs and decreases demand for Treasury securities, among other things.
This statement focuses on (1) the federal government's unsustainable long-term fiscal path, (2) actions needed to address the federal government's fiscal challenges, and (3) executive agencies' opportunities to contribute to fiscal health.
This statement is based upon GAO's September 2020 report on fiscal rules and targets, and GAO's March 2020 annual report on the nation's fiscal health. GAO updated certain information with new data from CBO and others.
What GAO Recommends
GAO has previously suggested that Congress (1) establish a long-term plan that includes fiscal rules and targets and (2) consider alternative approaches to the debt limit.
For more information, contact Jeff Arkin at (202) 512-6806 or arkinj@gao.gov or Susan J. Irving at irvings@gao.gov or (202) 512-6806.
Dec 15, 2020
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The Nation's Fiscal Health:
Information on the Spending and Revenue Implications of Potential Debt TargetsGAO-21-211: Published: Dec 15, 2020. Publicly Released: Dec 15, 2020.
Sep 23, 2020
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The Nation's Fiscal Health:
Effective Use of Fiscal Rules and TargetsGAO-20-561: Published: Sep 23, 2020. Publicly Released: Sep 23, 2020.
Jan 23, 2020
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Federal Trust Funds and Other Dedicated Funds:
Fiscal Sustainability Is a Growing Concern for Some Key FundsGAO-20-156: Published: Jan 16, 2020. Publicly Released: Jan 23, 2020.
Dec 19, 2019
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State and Local Governments' Fiscal Outlook:
2019 UpdateGAO-20-269SP: Published: Dec 19, 2019. Publicly Released: Dec 19, 2019.
Nov 14, 2019
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Certificated Expenditures:
Executive Office of the President FY 2018 Certificated Expenditures Were Spent for Authorized PurposesGAO-20-139R: Published: Nov 14, 2019. Publicly Released: Nov 14, 2019.
Oct 16, 2019
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Civilian Personnel:
Additional Guidance and Consistent Data Reporting Could Help Improve the Marine Corps' Budget ManagementGAO-20-148: Published: Oct 16, 2019. Publicly Released: Oct 16, 2019.
Jun 26, 2019
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The Nation's Fiscal Health:
Actions Needed to Achieve Long-Term Fiscal SustainabilityGAO-19-611T: Published: Jun 26, 2019. Publicly Released: Jun 26, 2019.
Apr 10, 2019
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The Nation's Fiscal Health:
Action Is Needed to Address the Federal Government's Fiscal FutureGAO-19-314SP: Published: Apr 10, 2019. Publicly Released: Apr 10, 2019.
Mar 27, 2019
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Fiscal Exposures:
Federal Insurance and Other Activities That Transfer Risk or Losses to the GovernmentGAO-19-353: Published: Mar 27, 2019. Publicly Released: Mar 27, 2019.
Mar 22, 2019
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Data Act:
OMB Needs to Formalize Data Governance for Reporting Federal SpendingGAO-19-284: Published: Mar 22, 2019. Publicly Released: Mar 22, 2019.
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