LTC Bullet: Surplus Won't Save Us
Wednesday,
March 14, 2001
In testimony before the U.S. Senate Budget Committee
last month, David Walker, Comptroller General of the
Below are excerpts from Comptroller General Walker's compelling testimony:
"Our [GAO's] long-term simulations . . . show that spending for federal
health and retirement programs eventually overwhelms even today's projected
surpluses. This is true even assuming no
additional spending for defense, education, or a Medicare prescription
benefit—i.e., even if the entire unified surplus was saved." (p. 3)
* * *
"Although the ten-year horizon looks better in CBO's
[Congressional Budget Office's] January 31st projections than it did in July
2000, the long-term fiscal outlook looks worse.
In the longer term--beyond the 10-year budget window of CBO's projections—the share of the population over 65 will
begin to climb and the federal budget will increasingly be driven by
demographic trends.
"As more and more of the baby boom generation enters retirement, spending
for Social Security, Medicare, and Medicaid will demand correspondingly larger
shares of federal revenues. Federal
health and retirement spending will also surge due to improvements in
longevity. People are likely to live
longer than they did in the past, and spend more time in retirement. Finally, advances in medical technology are
likely to keep pushing up the cost of providing health care."
(pps. 5-6)
* * *
"The message from our long-term simulations, which incorporate CBO's 10-year estimates, remains the same as it was a year
ago. Indeed, it is the same as when we
first published long-term simulations in 1992.
Even if all projected unified surpluses are saved and used for debt
reduction, deficits reappear in 2042. If
only the Social Security surpluses are saved, unified deficits emerge in 2019.
. . . In both scenarios deficits would
eventually grow to unsustainable levels absent policy changes.
"To move into a future with no changes in federal health and retirement
programs is to envision a very different role for the federal government. Assuming, for example, that
Congress and the President adhere to the often-stated goal of saving the Social
Security surpluses our long-term model shows a world by 2030 in which Social
Security, Medicare, and Medicaid increasingly absorb available revenues within
the federal budget. Under this
scenario, these programs would require more than three-quarters of total
federal revenue.
"Little room would be left for other federal spending priorities such as
national defense, education, and law enforcement. Absent changes in the structure of Social
Security and Medicare, some time during the 2040s government would do nothing
but mail checks to the elderly and their healthcare providers. Accordingly, substantive reform of Social
Security and health programs remains critical to recapturing our future fiscal
flexibility." (pps. 8-10)
* * *
"As we have stated elsewhere, early action to change these programs would
yield the highest fiscal dividends for the federal budget and would provide a
longer period for prospective beneficiaries to make adjustments in the own
planning. This message is not changed by
the new surplus numbers. It remains true
that the longer we wait to take action on the programs driving long-term
deficits, the more painful and difficult the choices will become." (p. 20)
Source: "Long-Term Budget Issues: Moving From Balancing the Budget to
Balancing Fiscal Risk," Testimony before the Committee on the Budget, U.S.
Senate, Statement of David M. Walker, Comptroller General of the United States,
February 6, 2001, GAO-01-385T,
www.gao.gov.
_____________
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