The budgetary surpluses of recent years put us in a stronger position  to respond both to the events of September 11 and to the economic  slowdown than would otherwise have been the case. However, going forward, the nation’s commitment to surpluses will truly  be tested. Saving the Social Security  surplus became an achievable and compelling fiscal policy goal for the  nation in this context. At least for the next several  years the baseline does not turn to unified surplus. Although long-term projections are inherently more uncertain than short- term forecasts, in some ways we can be surer about the outlook 20 years  from now since it is driven by known demographics. GAO’s Model Simulations Illustrate Long-Term Budget Challenges

Because of the coming demographic shift, the message from our  simulations remains the same as last year, indeed as since we first  published results from our long-term model in 1992: Absent policy change,  in the long term, persistent deficits and escalating debt driven by  entitlement spending will overwhelm the budget. To move into  the future with no changes in federal health and retirement programs is to  envision a very different role for the federal government. The budget process is the one place where we as a nation can conduct a  healthy debate about competing claims and new priorities. However, such  a debate will be needlessly constrained if only new proposals and  activities are on the table. A fundamental review of existing programs and  operations can create much-needed fiscal flexibility to address emerging  needs by weeding out programs that have proven to be outdated, poorly  targeted, or inefficient in their design and management. We need to think about what government should do in the 21st  century and how it should do business. Budget Process Should Facilitate Discipline and Awareness of Long- Term Implications of Decisions

Today the Congress faces the challenge of sorting out these many claims  on the federal budget without the fiscal benchmarks and rules that served  as guides through the years of deficit reduction. However, the combination of the economic slowdown and the  need to respond to the events of September 11 has overtaken that  measure. However, the demographic trends that  drive the long-term outlook have not changed.
What GAO Found

Combating terrorism and ensuring homeland security have created urgent claims on the nation's attention and on the federal budget. Although an economic recovery seems to be underway, the recession that began last spring has had real consequences for the budget. At the same time, the fiscal pressures created by the retirement of the baby boomers and rising health care costs continue unchanged. However, the surpluses also put the nation in a stronger position to respond to the events of September 11 and to the economic slowdown. The nation's commitment to surpluses will be tested. A return to surplus will require sustained discipline and difficult choices. Because the longer-term outlook is driven in large part by known demographic trends, the outlook 20 years from now is surer than the forecast for the next few years. The message of GAO's updated simulations remains the same as last year: absent structural changes in entitlement programs for the elderly, persistent deficits and escalating debt will overwhelm the budget in the long term. Both longer-term and new commitments undertaken after September 11 sharpen the need for competing claims and new priorities. A fundamental review of existing programs and activities is necessary both to increase fiscal flexibility and to make government fit the modern world. Stated differently, there is a need to consider the proper role of the federal government in the 21st century and how government should do business. The fiscal benchmarks and rules that moved the country from deficit to surplus expire this fiscal year. Any successor system should include a debate about reprioritization today and a better understanding of the long-term implications of different policy choices. Many things that the nation may be able to afford today may not be sustainable in the future.