Our President and the Congress are Doing Really Unsustainable Government Spending.

The Government's Financial Position and Condition Financial position refers to the Government's financial health as of a distinct point in time (September 30 of each year), based on past events. The Government's financial statements provide a number of 'vital signs' of its health, including the assets that the Government owns, the liabilities owed, and the cost of running the Government's many operations and services. How and why the Government's financial position changed during the year, as discussed in the 'Financial Highlights' section of this Report, are also important indicators. As of the end of 2007, the Government's net position (assets net of liabilities) was a net liability of $9.2 trillion.

By comparison, the Government's financial or fiscal condition not only considers the Government's current and past performance, but also its capacity to meet future demands and responsibilities. For example, the growing responsibilities associated with future social insurance benefits (e.g., Social Security, Medicare) is a well-documented issue that impacts every citizen in the Nation, due in great part to the aging of the 'baby boom' generation and rising health care costs. The Statement of Social Insurance (SOSI) compares the resources that the Government expects to receive for these programs from dedicated sources (e.g., earmarked taxes, premiums) to what it expects to have to pay out in benefits over the next 75 years in current dollar terms.

Chart A forecasts the Government's historical major spending programs and revenues over the next 75 years as a percent of Gross Domestic Product (GDP). The projection that revenue as a percent of GDP will remain relatively constant in future years is based on historical data and trends that are not expected to change. Since World War II Federal revenues as a share of GDP have been roughly constant at around 18 percent of GDP. Whenever taxes have risen above this range, policy actions have tended to pull them back.

Simply said, holding revenues constant, required Medicare, Medicaid, and Social Security spending and the related deficit financing costs will far exceed the Government's ability to pay. Projections show that by 2070, total Government expenditures are projected to be 50 percent of GDP. Such levels of expenditures have only been witnessed once before, during World War II, when Government expenditures reached a record high of 44 percent of GDP. And by 2080, expenditures are projected to approach 60 percent of GDP. This would cause dramatic increases in deficit spending, and consequently, as explained later, Federal debt needed to finance them.

The spending for social insurance programs, in particular, is projected to grow at an alarming rate under current law. The precise amounts of the Government's future social insurance responsibilities are far from certain, as they are based on complex calculations and many assumptions, e.g., age, life expectancy, and the cost of health care. However, the magnitude of the problem and the need for a solution are evident and could have a significant impact on the economy in the future unless action is taken in the near future.