The mounting federal debt is unsustainable and Congress will have to consider reforming the entire government to bring it under control, a government watchdog agency warned Tuesday.
The Government Accountability Office said in a report sent to the president and congressional leaders that the federal government is “highly leveraged in debt by historical norms and on an unsustainable long-term fiscal path caused by a structural imbalance between revenue and spending.”
A plan to stabilize the debt is “essential” to meeting the government’s military and social promises, the report concluded, and to prepare for future contingencies such as wars or natural disasters.
That plan will also need to include controversial reforms like changes to retirement and other entitlement programs or tax hikes, the watchdog said.
Congress and the president will “need to consider policy changes to the entire range of federal activities and spending— entitlement programs, other mandatory spending, discretionary spending, and revenue.”
A new worry is that the federal debt held by the public reached 77 percent of economic output at the end of 2016, and is expected to match the record high of 106 percent in 2032, according to GAO’s calculations.
The U.S. has always had some debt, the report noted, but the current situation is “unusual.” When the debt hit the previous peak of 106 percent, the government was ramping up defense spending for World War II, and didn’t face the large future deficits expected today because of spending commitments not supported by taxes.
As a share of economic output, debt soared on President Obama’s watch, growing by nearly two-thirds as the financial crisis devastated revenues and government spending rose in response. While President-elect Trump has called for lowering the debt, his platform is centered on tax cuts, military spending increases and an infrastructure program, which together would add to the debt.
One way for government agencies to immediately improve the debt outlook, GAO said, would be to crack down on improper payments, which came to $144 billion in 2016. It also recommended decreasing the $458 billion “tax gap,” or the difference between taxes paid and what is owed.
