GAO’s simulations continue to show escalating levels of debt that illustrate that the long-term fiscal outlook remains [emphasis added] unsustainable. In little over 10 years, debt held by the public as a percent of GDP under our Alternative simulation is projected to exceed the historical high reached in the aftermath of World War II and grow at a steady rate thereafter.

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Absent reform, Social Security, Medicare, and Medicaid will account for a growing share of the economy in coming years. The longer action to deal with the nation’s long-term fiscal outlook is delayed, the larger the changes will need to be, increasing the likelihood that they will be disruptive and destabilizing.

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…assuming revenue remains constant at 20.2 percent of GDP—higher than the historical average—by 2030 there will be little room for “all other spending,” which consists of what many think of as “government,” including national defense, homeland security, investment in highways and mass transit and alternative energy sources, plus smaller entitlement programs such as Supplemental Security Income, Temporary Assistance for Needy Families, and farm price supports.

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Policymakers could phase in the policy changes so that the tax increases or spending cuts would grow over time and allow people to adjust. However, 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. Under our Alternative simulation, waiting even 10 years would require a revenue increase of about 58 percent, a noninterest spending cut of about 39 percent, or some combination of the two.

via The Federal Government’s Long-Term Fiscal Outlook: Fall 2009 Update

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