This report provides an update on the federal government’s fiscal condition at the end of FY 2019 and the unsustainable path it is on if policies don’t change.
Among its findings:
- Publicly held debt rose to 79% of GDP. The Congressional Budget Office and this new report both project it will continue to grow
- Interest on the debt is the fastest growing item in the budget; it is projected to be the largest spending category by 2049
- The longer action is delayed, the more drastic the changes that will be needed to address the issue
Spending on national debt interest will exceed Medicare, Social Security, and discretionary spending in the years shown below:
The nation faces serious economic, security, and social challenges that require difficult policy choices in the near term in setting national priorities and charting a path forward for economic growth. This will influence the level of federal spending and how the government obtains needed resources. At the same time, the federal government is highly leveraged in debt by historical norms.
A broad plan is needed to put the federal government on a sustainable long-term fiscal path and ensure that the United States remains in a strong economic position to meet its security and social needs, as well as to preserve flexibility to address unforeseen events. This report describes the fiscal condition of the U.S. government as of the end of fiscal year 2019 and its future unsustainable fiscal path absent policy changes. It draws on the Fiscal Year 2019 Financial Report of the United States Government (2019 Financial Report) and GAO’s work, including its audit of the government’s consolidated financial statements.
According to the 2019 Financial Report, the federal deficit in fiscal year 2019 increased to $984 billion—up from $779 billion in fiscal year 2018. Federal receipts increased by $134 billion, but that was outweighed by a $339 billion increase in spending driven by increases in Medicare and Medicaid, Social Security, defense, and interest on debt held by the public. Debt held by the public increased from $15.8 trillion (or 77 percent of gross domestic product (GDP)) at the end of fiscal year 2018 to $16.8 trillion (or 79 percent of GDP) at the end of fiscal year 2019. By comparison, debt has averaged 46 percent of GDP since 1946.
Executive actions alone cannot put the U.S. government on a sustainable fiscal path, but it is important for agencies to act as stewards of federal resources. In prior work, GAO has identified numerous actions for executive agencies to contribute toward a sustainable fiscal future.
Address improper payments: Reducing payments that should not have been made or were made in an incorrect amount could yield significant savings. Reported improper payment estimates totaled about $175 billion for fiscal year 2019. Since fiscal year 2003, cumulative estimates have totaled almost $1.7 trillion.
Narrow persistent tax gap: Reducing the gap between taxes owed and those paid could increase tax collections by billions of dollars annually. The average annual net tax gap is estimated to be $381 billion (for tax years 2011-2013).
Improve information on programs and fiscal operations: Decision-making could be improved by ensuring the government’s financial statements are fully auditable and by increasing attention to tax expenditures—tax provisions that reduce tax liabilities. Estimated to collectively reduce tax revenue by approximately $1.3 trillion in fiscal year 2019, tax expenditures are not regularly reviewed and their outcomes are not measured as closely as spending programs’ outcomes.
Address duplication, overlap, and fragmentation: GAO has identified numerous areas to reduce, eliminate, or better manage fragmentation, overlap, or duplication; achieve cost savings; or enhance revenue. Actions taken so far by Congress and executive branch agencies have resulted in roughly $262 billion financial benefits since fiscal year 2010.