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Choosing the Nation’s Fiscal Future
changes. With higher interest rates, and thus more of the budget devoted to debt service, the available revenues for programs would shrink, and the options for corrective action on the spending side would become still more difficult.
The Political Challenge
Given the magnitude of the fiscal challenge facing the nation and the costs of delay in meeting it, action would seem to be urgent. Yet the difficulty of the choices required, the nature of the U.S. political system, the record of most recent efforts to address the nation’s fiscal health, and continuing pressures for higher spending and lower taxes all suggest that early and decisive action will be difficult.
One way to increase the likelihood of appropriate and timely action would be to adopt budget process reforms such as those described in the next chapter. Budget reforms, while not sufficient in themselves to cause leaders to address the long-term fiscal challenge, can encourage and support those willing to make tough choices. The final chapter of the report addresses the kinds of actions needed by the nation’s people and leaders to avoid a fiscal catastrophe.
1. If state and local revenues remained at about their current percentage of GDP rather than growing in line with federal revenues over the projection period, total U.S. government revenues would be about 45 percent of GDP after 75 years. For projections of U.S. state and local government revenues and spending through 2050, see the Government Accountability Office (2007a).
2. International comparative statistics on public revenues and expenditures are available from the Organisation for Economic Co-operation and Development (2009). These estimates are based on National Income and Product Accounts concepts, which generally result in higher figures for both revenues and spending compared to U.S. federal budget concepts and the corresponding estimates used in this report. However, for purposes of the general comparisons made here, we are assuming that estimates using the National Income and Product Accounts and U.S. federal budget concepts remain roughly proportional to one another across time and with changes in levels.
3. The 1994-1998 percentages use GDP as estimated by the Congressional Budget Office (1994).
4. Part of the added budget cost arises from additional health and Social Security benefits. However, another part arises from a delay in controlling price inflation in health care costs.