	The Long-term Budget Challenge

The long-term fiscal pressures created by the impending retirement of the  baby boom generation, rising health care costs and increased homeland  security and defense commitments sharpen the need to look at competing  claims on existing federal budgetary resources and emerging new  priorities. Absent substantive entitlement reform and/or dramatic  changes in tax and spending policies, we will face large, escalating, and  persistent deficits. As a result, we need to incorporate new metrics and mechanisms into the  budget process that better signal the long-term commitments and implicit  promises made by the government—its fiscal exposures—so that decision  makers’ attention and efforts can be more concentrated on their long-term  sustainability. Fiscal Exposures Are Wide-ranging and Varied

While Social Security, Medicare, and Medicaid are the major drivers of the  long-term spending outlook in the aggregate, they are not the only  promises the federal government has made to the future. The federal  government undertakes a wide range of responsibilities, programs, and  activities that may either obligate the government to future spending or  create an expectation for such spending. Given this breadth, it is useful  to think of fiscal exposures as a spectrum extending from explicit  liabilities to the implicit promises embedded in current policy and/or  public expectations. Truth and transparency in government reporting are essential if the United  States is to effectively address its long-term fiscal challenges.
Why GAO Did This Study

The structure of the budget process can help ensure that budget decision makers are presented with the information and choices for timely and informed decisionmaking. GAO's long-term budget simulations show that, absent substantive entitlement reform and/or dramatic changes in tax and spending policies, we will face large, escalating, and persistent deficits. A budget process incorporating new metrics and mechanisms that better signal the long-term commitments and promises made by the government will help concentrate decision makers' efforts on long-term sustainability.

What GAO Found

The long-term fiscal pressures created by the impending retirement of the baby boom generation sharpen the need to look at competing claims on existing federal budgetary resources and emerging new priorities. Truth and transparency in government reporting are essential if the United States is to effectively address these long-term fiscal challenges. Current metrics and mechanisms do not fully inform policy makers about the sustainability of existing federal programs or commitments they are considering making. While Social Security and health programs are the major drivers of the long-term spending outlook, they are not the only promises the federal government has made to the future. The government undertakes a wide range of responsibilities, programs, and activities that may either obligate the government to future spending or create an expectation for such spending. It is useful to think of such fiscal exposures as a spectrum extending from explicit liabilities to the implicit promises embedded in current policy and/or public expectations.