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Retirement Planning > Social Security

GAO: Budget Crisis Could Come Faster Than We Think

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Medicare and Social Security might push the federal government way into the red in 2030 – but they might start pushing the government way into the red as early as 2018.

Researchers at the U.S. Government Accountability Office have illustrated the possible effects of increasing expenditures on Medicare, Social Security and alternative minimum tax relief in an appendix to the GAO’s latest long-term fiscal outlook review.

If the government simply operates under the policies already in effect, the federal government should run a small surplus 10 years from now, then run a deficit equal to about 20% of the budget in around 2030, according to an illustration of the results obtained from one GAO simulation.

If Congress cuts the AMT without doing much to control Medicare and Social Security spending, the deficit could increase to about 25% of the budget in 2018, and the budget itself would be large enough to cover the cost of only about half of spending on items other then Medicare, Medicaid, Social Security and interest on the federal debt, GAO researchers warn.

Under that scenario, the government would have to borrow money to pay for everything but interest, Medicare, Medicaid and Social Security by 2030, and the government would have to borrow to pay for almost everything but interest and Social Security by 2040, the researchers report.

“Our updated simulations continue to illustrate that the long-term fiscal outlook is unsustainable,” GAO officials write in a discussion of the results of the GAO fiscal outlook simulations. “By definition, what is unsustainable will not be sustained. The question is how and when the nation’s current imprudent and unsustainable path will end…. The longer action to deal with the nation’s long-term fiscal outlook is delayed, the greater the risk that the eventual changes will be disruptive and destabilizing.”


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