Long-Term Fiscal Outlook

Fiscal sustainability is a challenge shared by all levels of government. Over the next few decades, the nation’s fiscal outlook will be shaped largely by rising health care costs and the aging population. As the baby boom generation retires, federal spending on retirement and health programs—Social Security, Medicare, and Medicaid—will grow dramatically. At the same time, state and local expenditures on Medicaid and the cost of health insurance for state and local retirees and employees are also projected to increase significantly. Absent policy changes, these trends will result in an unsustainable imbalance between expected spending and tax revenues over the long term.

To analyze and monitor changes in the long-term fiscal outlook, GAO maintains two models: a model of the long-term federal fiscal outlook and—to provide a broader perspective of our nation’s fiscal outlook—a model of the long-term state and local fiscal outlook. The results of these models dramatically illustrate the need for action to address the long-term fiscal imbalance by all levels of government.

Federal and Combined Federal, State, and Local Surpluses and Deficits under Two Fiscal Policy Simulations

Data are from GAO’s January 2010 federal simulations and March 2010 state and local simulations

Source: GAO.
Note: Data from GAO’s January 2010 analysis based on the Trustees’ assumptions for Social Security and Medicare.

For more information about the long-term fiscal outlook of the federal government together with GAO’s latest simulation results, see:

Long-Term Federal Fiscal Outlook

For more information about the long-term fiscal outlook for state and local governments together with GAO’s latest simulation results, see:

Long-Term State and Local Fiscal Outlook