For two months, reporters and lawmakers have ignored a devastating report from the federal government itself, which warns that the nation's current fiscal policy will lead to economic collapse. The Government Accountability Office (GAO)—the personal auditor of President Obama and the federal government—released its assessment of the federal government on January 17, 2013. The report's findings illuminate just how dire America's spending problem is and, therefore, how little the current cuts debated by Congress do to fix it.
The findings of the paper include these excerpts (emphasis added):
- “The projections in this Report indicate that current policy is not sustainable... Preventing the debt-to-GDP ratio from rising over the next 75 years is estimated to require some combination of spending reductions and revenue increases that amount to 2.7 percent of GDP over the period.”
- “It is estimated that running primary surpluses that average 1.0 percent of GDP over the next 75 years would result in the 2087 debt-to-GDP ratio equaling its level in fiscal year 2012, which compares with primary deficits that average 1.7 percent of GDP under current policies.”
- “It is noteworthy that preventing the debt-to-GDP ratio from rising over the next 75 years requires that primary surpluses be substantially positive on average. This is true because projected GDP growth is on average smaller than the projected government borrowing rate over the next 75 years.”
- “If the primary surplus was precisely zero in every year, then debt would grow at the rate of interest in every year, which would be faster than GDP growth.”
- “The differences between the primary surplus boost starting in 2023 and 2033 (3.2 and 4.1 percent of GDP, respectively) and the primary surplus boost starting in 2012 (2.7 percent of GDP) is a measure of the additional burden policy delay would impose on future generations. Future generations are harmed by a policy delay of this sort, because the higher the primary surplus is during their lifetimes the greater the difference is between the taxes they pay and the programmatic spending from which they benefit.”
This is the reality: when President Obama’s personal auditor says the federal government has a spending problem, it indeed has a spending problem—and one that is growing rapidly.
The most devastating part of the report is the fact that the federal government must run surpluses over the next century to keep the same debt-to-GDP ratio it has today. Meanwhile, Congress and President Obama are throwing a fit over the looming sequester—which will cut a mere 1.2 percent of total deficits (not total debt) over the next ten years—and the Senate has not produced a budget for close to 1,400 days.
A balanced budget will not be enough to cover the rapid growth of interest payments owed on U.S. national debt in the future. The federal government currently pays $223 billion—roughly $3,000 per taxpayer—in annual interest payments. This number is expected to increase to $857 billion by the end of the decade, a 290 percent increase.
If the federal government does not fix the spending problem detailed in this report, it will have to take out more and more loans to pay for the already-outstanding interest payments on the federal government—loans to pay off loans.
Thus, the question remains: what happens when no one will grant Congress more loans?