by Calculated Risk on 2/01/2005 09:53:00 PM

The GAO released a report on their recent forum addressing long term fiscal challenges. Three key points:

1) Today's fiscal policy is unsustainable.

2) Health Care Is the Largest and Perhaps Most Difficult Part of the Long-Term Fiscal Challenge.

"Health care is a bigger problem than Social Security. Participants acknowledged the need for Social Security reform but emphasized that Social Security is a relatively small part of the long-term fiscal challenge when compared to spending on health care. One participant noted that the estimated Social Security shortfall is about one-third the estimated cost of recent tax cuts if made permanent. Several participants observed that few members of the public are aware of this. Rather, the general public impression is that solving Social Security would solve most of the longterm fiscal challenge, and this is not correct. Indeed, one forum participant stated that it was only by attending this forum that he had learned that health care spending was a much more important, and potentially far more difficult, component of the long-term fiscal challenge than Social Security.

Participants expressed the view that in characterizing the long-term fiscal outlook, several key distinctions needed to be made between Social Security and the largest federal health programs, Medicare and Medicaid. Participants observed that the public was largely unaware that health spending accounted for a much larger share of the long-term fiscal problem than did Social Security."

3) We need to elevate the public discourse to address the problem. There is a serious lack of leadership, especially in the White House.

"Participants agreed that a key moral context is the impact federal budget deficits will have on future generations. Another key moral context is integrity. Some participants called for greater integrity, e.g., transparency, in the federal budget process."

And a table of fiscal exposures (billions of dollars, End of 2003):
See page 50, GAO-05-282SP CG Forum

Selected Fiscal Exposures: Sources and Examples

Explicit Liabilities
Publicly held debt ($3,913)
Military and civilian pension and post-retirement health ($2,857)
Veterans benefits payable ($955)
Environmental and disposal liabilities ($250)
Loan guarantees ($35)

Explicit Financial commitments
Undelivered orders ($596)
Long-term leases ($47)

Financial contingencies
Unadjudicated claims ($9)
Pension Benefit Guaranty Corporation ($86)
Other national insurance programs ($7)
Government corporations e.g., Ginnie Mae

Exposures implied by current policies or the public's expectations about the role of government
Debt held by government accounts ($2,859)b
Future Social Security benefit payments ($3,699)c
Future Medicare Part A benefit payments ($8,236)c
Future Medicare Part B benefit payments ($11,416)c
Future Medicare Part D benefit payments ($8,119) c
Life cycle cost including deferred and future maintenance and operating costs (amount unknown)
Government Sponsored Enterprises e.g., Fannie Mae and Freddie Mac