	Long-term Demographic Trends Drive the Fiscal Future and Frame Current Debates

Any discussion about the role of the federal government, about the design  and performance of federal activities, and about the near-term federal fiscal  outlook takes place in the context of two dominating facts: a demographic  tidal wave is on the horizon, and it combined with rising health care costs  threatens to overwhelm the nation’s fiscal future. Absent structural reforms in these  programs, budgetary flexibility will continue to shrink and eventually  disappear. In  addition, the failure to reprioritize other claims in the budget will make it  increasingly difficult to finance the rest of government, let alone respond to  compelling new priorities and needs. Metrics and mechanisms need to be developed to facilitate consideration of  the long-term implications of existing and proposed policies or programs. There is also a need to reexamine existing programs, policies, and  activities. We must strive to maintain a government that is  effective and relevant to a changing society—a government that is as free  as possible of outmoded commitments and operations that can  inappropriately encumber the future. Any review of the base of existing policy should address this  broader picture of federal involvement. Public Education Is Critical

Good information—which is more than just budget numbers—helps to  inform debate. In the 10 years since GRPA was enacted,  agencies have improved the focus of their planning and the quality of their  performance information. In attempting to link resources to results, it also will be important to  measure the full costs of the resources associated with performance goals  using a consistent definition of costs between and among programs. OMB arrives at a profile for each program  by reviewing information from budget submissions, agency strategic and  annual performance plans, program evaluations, and other sources. In such areas as low-income housing  or health care, the outcomes achieved by federal policy are the result of the  interplay of a complex array of tools including those on the spending side  of the budget as well as the tax code and regulations. The PART may be used to  facilitate this kind of cross-cutting perspective. Such an effort requires fundamental  shifts in current human capital policies, organizational structures,  governmental tools, and performance and financial accountability  approaches.
Why GAO Did This Study

This testimony discusses efforts to link resources to results--also known as "performance budgeting." During the past decade, Congress and several administrations have put in place a structure for increasing the focus on and accountability for government performance.

What GAO Found

Federal agencies have been working to carry out the Government Performance Act, which requires the development of periodic strategic and annual performance plans and reports. Absent structural change in a number of major entitlement programs, budgetary flexibility will continue to decline and eventually disappear--while demands for new federal resources to address such emerging challenges as homeland security and other issues become more compelling and pressing. Given the country's longer-range fiscal imbalance, there is also a need to broaden the measures and focus of the federal budget process to accommodate these goals. The nation's fiscal challenges escalate rapidly just beyond the 10-year budget projection period. As a result, new metrics and mechanisms are needed to better highlight the longer-term implications of existing programs and proposed new fiscal commitments. Furthermore, in order to address emerging challenges, it is necessary to address both retirement and health programs encumbering the nation's fiscal future, in addition to reexamining the base of existing programs--both discretionary programs and other entitlements--to free up resources to address new needs in a rapidly changing society. Such an examination should be cross-cutting and comprehensive in nature--all relevant policy tools and federal programs, including tax preferences, should be "on the table" in addressing such policy areas as low-income housing or health care financing and delivery. Although such a comprehensive reassessment will take time and may have to be addressed in phases, it is critically important that it occur. An extensive public education effort will be required to fully inform the American people about a long-term outlook under current policy portfolio as well as the alternative choices that are available.