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The Future Sustainability of Social Insurance Programs: 

28th General Assembly of the International Social Security Association: 

Beijing, China: 

The Honorable David M. Walker: 
Comptroller General of the United Sates: 

September 17, 2004: 

The Case for Change: 

* Government is on a "burning platform," and the status quo way of 
doing business is unacceptable for a variety of reasons, including: 
-Zero tolerance for corruption; 
-Desire for enhanced results and improved responsiveness; 
-Selected trends and challenges that have no boundaries; 
* Long-Term Fiscal Imbalances; 
* Security Concerns; 
* Global Interdependence; 
* Changing Economy; 
* Demographics; 
* Science and Technology; 
* Quality of Life; 
* Governance. 

Life Expectancy at Birth Has Risen Around the World: 

[See PDF for image] - graphic text. 

Bar chart with 7 groups and two items per group. 

China; 
1950-55: 41; 
1995-00: 70. 

South Korea; 
1950-55: 48; 
1995-00: 74. 

US; 
1950-55: 69; 
1995-00: 76. 

Singapore; 
1950-55: 60; 
1995-00: 77. 

EU15; 
1950-55: 67; 
1995-00: 78. 

Hong Kong; 
1950-55: 61; 
1995-00: 79. 

Japan; 
1950-55: 64; 
1995-00: 81. 

Center for Strategic & International Studies, The Graying of the Middle 
Kingdom, April 2004. 

[End of figure] 

The Elderly Dependency Ratio is Projected to Increase Rapidly in Many 
Parts of the World: 

[See PDF for image] - graphic text. 

Bar chart with 6 groups and two items per group. 

Europe; 
2000: Elderly Dependency Ratio (in percent): 22%; 
2050: Elderly Dependency Ratio (in percent): 51%. 

North America; 
2000: Elderly Dependency Ratio (in percent): 19%; 
2050: Elderly Dependency Ratio (in percent): 35%. 

Oceania; 
2000: Elderly Dependency Ratio (in percent): 15%; 
2050: Elderly Dependency Ratio (in percent): 29%. 

Latin America and Caribbean; 
2000: Elderly Dependency Ratio (in percent): 9%; 
2050: Elderly Dependency Ratio (in percent): 26%. 

Asia; 
2000: Elderly Dependency Ratio (in percent): 9%; 
2050: Elderly Dependency Ratio (in percent): 26%. 

Africa; 
2000: Elderly Dependency Ratio (in percent): 6%; 
2050: Elderly Dependency Ratio (in percent): 11%. 

Source: Population Division of the Department of Economic and Social 
Affairs of the United Nations Secretariat, World Population Ageing 
1950-2050. 

[End of figure] 

Many Other Industrialized Nations Aging More Rapidly Than the United 
States: 

[See PDF for image] - graphic text. 

Line graph with 5 lines and 5 points per line. 

Aggregate for all 23 high-income OECD nations: 
1950; Median age: 30.1.
1980; Median age: 32.2.
2000; Median age: 37.8.
2030; Median age: 44.8.
2050; Median age: 45.7.
 
Japan: 
1950; Median age: 22.3.
1980; Median age: 32.6.
2000; Median age: 41.2.
2030; Median age: 51.4.
2050; Median age: 53.1.
 
Sweden: 
1950; Median age: 34.3.
1980; Median age: 36.2.
2000; Median age: 39.7.
2030; Median age: 47.8.
2050; Median age: 51.2.
 
United Kingdom: 
1950; Median age: 34.6.
1980; Median age: 34.6.
2000; Median age: 37.7.
2030; Median age: 45.2.
2050; Median age: 47.4.
 
United States: 
1950; Median age: 30.
1980; Median age: 30.1.
2000; Median age: 35.5.
2030; Median age: 40.
2050; Median age: 40.7. 

Source: Population Division of the Department of Economic and Social 
Affairs of the United Nations Secretariat, World Population Prospects: 
2000 Revision and World Urbanization Prospects: 2001 Revision. Data 
for 2030 - 2050 are projected. 

[End of figure] 

Elderly Dependency Ratio Expected to Increase Faster in Most Other 
Industrialized Nations: 

[See PDF for image] - graphic text. 

Line graph with 5 lines and 5 points per line. 

Aggregate for all 23 high-income OECD nations: 
1950; Elderly Dependency Ratio: 12.9%.
1980; Elderly Dependency Ratio: 18.4%.
2000; Elderly Dependency Ratio: 22.3%.
2030; Elderly Dependency Ratio: 39.6%.
2050; Elderly Dependency Ratio: 47%.
 
Japan: 
1950; Elderly Dependency Ratio: 8%.
1980; Elderly Dependency Ratio: 13%.
2000; Elderly Dependency Ratio: 25%.
2030; Elderly Dependency Ratio: 52%.
2050; Elderly Dependency Ratio: 71%.
 
Sweden: 
1950; Elderly Dependency Ratio: 15%.
1980; Elderly Dependency Ratio: 25%.
2000; Elderly Dependency Ratio: 27%.
2030; Elderly Dependency Ratio: 46%.
2050; Elderly Dependency Ratio: 55%.
 
United Kingdom: 
1950; Elderly Dependency Ratio: 16%.
1980; Elderly Dependency Ratio: 24%.
2000; Elderly Dependency Ratio: 24%.
2030; Elderly Dependency Ratio: 40%.
2050; Elderly Dependency Ratio: 47%.
 
United States: 
1950; Elderly Dependency Ratio: 13%.
1980; Elderly Dependency Ratio: 17%.
2000; Elderly Dependency Ratio: 19%.
2030; Elderly Dependency Ratio: 33%.
2050; Elderly Dependency Ratio: 35%. 

Source: Population Division of the Department of Economic and Social 
Affairs of the United Nations Secretariat, World Population Prospects: 
2000 Revision and World Urbanization Prospects: 2001 Revision. Data 
for 2030 - 2050 are projected. 

[End of figure] 

U.S. and China Benchmarks: 

Total Population (thousands); 
United States 2000: 285,003; 
China 2000: 1,275,215; 
United States 2050*: 408,695; 
China 2050*: 1,395,182. 

Population 65 and Over (thousands); 
United States 2000: 34,999; 
China 2000: 87,295; 
United States 2050*: 81,665; 
China 2050*: 319,262. 

Percent of Population 65 and Over; 
United States 2000: 12.3%; 
China 2000: 6.8%; 
United States 2050*: 20%; 
China 2050*: 22.9%. 

Elderly Dependency Ratio (per 100 workers); 
United States 2000: 19%; 
China 2000: 10%; 
United States 2050*: 32%; 
China 2050*: 37%. 

Source: World Population Prospects: The 2002 Revision, Population 
Database (United Nations Population Division; 2003). 

*Projected. 

[End of table] 

Implications of Demographic Challenges: 

* Fiscal challenges; 
* Potential adverse effects on real economic growth and overall living 
standards. 

Health Expenditures Will Continue to Absorb an Increasing Share of 
GDP: 

[See PDF for image] - graphic text. 

Bar graph with 5 bars. 

1972; National health expenditures as a percent of GDP: 7.3%. 
1982; National health expenditures as a percent of GDP: 9.8%. 
1992; National health expenditures as a percent of GDP: 13.1%. 
2002; National health expenditures as a percent of GDP: 14.9%. 
2012; National health expenditures as a percent of GDP: 18.1%. 

Source: CMS, OACT, National Health Statistics Group and U.S. 
Department of Commerce, Bureau of Economic Analysis. 

Note: The figure for 2012 is projected. These projections do not 
include the impacts of the MMA. 

[End of figure] 

Policy Levers: 

* Social insurance reform; 
* Health care reform; 
* Labor policy reform; 
* Tax policy reform; 
* Immigration reform; 
* Pension policy reform; 
* Public education efforts. 

Options for Change: Increasing Female Labor Force Participation: 

[See PDF for image] - graphic text. 

Bar chart with 9 groups and two items per group. 

World; 
Labor Force Participation Rate: Female: 53.9%; 
Labor Force Participation Rate: Male: 79.4%. 

Middle East & North Africa; 
Labor Force Participation Rate: Female: 28.2%; 
Labor Force Participation Rate: Male: 76.8%. 

South Asia; 
Labor Force Participation Rate: Female: 37.4%; 
Labor Force Participation Rate: Male: 81.1%. 

Latin American & Caribbean; 
Labor Force Participation Rate: Female: 49.2%; 
Labor Force Participation Rate: Male: 80.5%. 

Industrialized Economies; 
Labor Force Participation Rate: Female: 50.5%; 
Labor Force Participation Rate: Male: 70.3%. 

Transition Economies; 
Labor Force Participation Rate: Female: 53.1%; 
Labor Force Participation Rate: Male: 65.7%. 

South-East Asia; 
Labor Force Participation Rate: Female: 60.5%; 
Labor Force Participation Rate: Male: 82.9%. 

Sub-Saharan Africa; 
Labor Force Participation Rate: Female: 63.2%; 
Labor Force Participation Rate: Male: 85.3%. 

East Asia; 
Labor Force Participation Rate: Female: 73.1%; 
Labor Force Participation Rate: Male: 85.1%. 

Source: Global Employment Trends for Women 2004, International Labour 
Office. 

[End of figure] 

Options for Change: Increasing Labor Force Participation at Older Ages: 

[See PDF for image] - graphic text. 

Bar chart with 9 groups and two items per group. 

World; 
Labor Force Participation Rate: Age 15 to 64: 73.28%; 
Labor Force Participation Rate: Age 65 and Over: 18.77%. 

Western Asia; 
Labor Force Participation Rate: Age 15 to 64: 62.12%; 
Labor Force Participation Rate: Age 65 and Over: 23.22%. 

South Asia; 
Labor Force Participation Rate: Age 15 to 64: 67.09%; 
Labor Force Participation Rate: Age 65 and Over: 31.64%. 

Latin American and Caribbean; 
Labor Force Participation Rate: Age 15 to 64: 65.04%; 
Labor Force Participation Rate: Age 65 and Over: 19.97%. 

More Developed Regions; 
Labor Force Participation Rate: Age 15 to 64: 73.06%; 
Labor Force Participation Rate: Age 65 and Over: 8.46%. 

Less Developed Regions; 
Labor Force Participation Rate: Age 15 to 64: 73.33%; 
Labor Force Participation Rate: Age 65 and Over: 25.84%. 

South-East Asia; 
Labor Force Participation Rate: Age 15 to 64: 74.61%; 
Labor Force Participation Rate: Age 65 and Over: 34.71%. 

Southern Africa; 
Labor Force Participation Rate: Age 15 to 64: 66.35%; 
Labor Force Participation Rate: Age 65 and Over: 14.62%. 

East Asia; 
Labor Force Participation Rate: Age 15 to 64: 83.12%; 
Labor Force Participation Rate: Age 65 and Over: 18.00%. 

Source: GAO analysis based on data from the International Labour 
Organization, LABORSTA database. 

[End of figure] 

Options for Change: Increasing Immigration: 

[See PDF for image] - graphic text. 

Bar chart with 9 items. 

Sub-Saharan Africa; 
Net Migration Rate (per 1000 population): -0.1. 

South Asia; 
Net Migration Rate (per 1000 population): -0.5. 

South-East Asia; 
Net Migration Rate (per 1000 population): -0.5. 

Latin American & Caribbean; 
Net Migration Rate (per 1000 population): -1.1. 

Northern America; 
Net Migration Rate (per 1000 population): 4.2. 

Western Europe; 
Net Migration Rate (per 1000 population): 1.9. 

Eastern Europe; 
Net Migration Rate (per 1000 population): -0.3. 

More Developed Regions; 
Net Migration Rate (per 1000 population): 1.8. 

Less Developed Regions; 
Net Migration Rate (per 1000 population): -0.4. 

Source: Population Division of the Department of Economic and Social 
Affairs of the United Nations Secretariat, World Population Prospects: 
The 2002 Revision and World Urbanization Prospects: The 2001 Revision. 
Data projected for 2000 - 2005. 

[End of figure] 

Options for Change: Increasing Private Saving: 

[See PDF for image] - graphic text. 

Line chart with 4 lines and 19 points each 

Germany; 
Gross National Saving (Percent of GDP): 1985: 23.1%. 
Gross National Saving (Percent of GDP): 1986: 24.6%. 
Gross National Saving (Percent of GDP): 1987: 23.8%. 
Gross National Saving (Percent of GDP): 1988: 24.9%. 
Gross National Saving (Percent of GDP): 1989: 26.1%. 
Gross National Saving (Percent of GDP): 1990: 26.1%. 
Gross National Saving (Percent of GDP): 1991: 23.3%. 
Gross National Saving (Percent of GDP): 1992: 23.1%. 
Gross National Saving (Percent of GDP): 1993: 21.9%. 
Gross National Saving (Percent of GDP): 1994: 21.9%. 
Gross National Saving (Percent of GDP): 1995: 21.8%. 
Gross National Saving (Percent of GDP): 1996: 21.3%. 
Gross National Saving (Percent of GDP): 1997: 21.4%. 
Gross National Saving (Percent of GDP): 1998: 21.5%. 
Gross National Saving (Percent of GDP): 1999: 20.8%. 
Gross National Saving (Percent of GDP): 2000: 20.6%. 
Gross National Saving (Percent of GDP): 2001: 20.2%. 
Gross National Saving (Percent of GDP): 2002: 21.1%. 
Gross National Saving (Percent of GDP): 2003: 20.4%. 

Japan; 
Gross National Saving (Percent of GDP): 1985: 32%. 
Gross National Saving (Percent of GDP): 1986: 32.1%. 
Gross National Saving (Percent of GDP): 1987: 32.3%. 
Gross National Saving (Percent of GDP): 1988: 33.5%. 
Gross National Saving (Percent of GDP): 1989: 33.6%. 
Gross National Saving (Percent of GDP): 1990: 33.8%. 
Gross National Saving (Percent of GDP): 1991: 34.5%. 
Gross National Saving (Percent of GDP): 1992: 33.7%. 
Gross National Saving (Percent of GDP): 1993: 32.3%. 
Gross National Saving (Percent of GDP): 1994: 30.4%. 
Gross National Saving (Percent of GDP): 1995: 29.5%. 
Gross National Saving (Percent of GDP): 1996: 29.8%. 
Gross National Saving (Percent of GDP): 1997: 30.1%. 
Gross National Saving (Percent of GDP): 1998: 29.1%. 
Gross National Saving (Percent of GDP): 1999: 27.9%. 
Gross National Saving (Percent of GDP): 2000: 27.8%. 
Gross National Saving (Percent of GDP): 2001: 26.4%. 
Gross National Saving (Percent of GDP): 2002: 25.7%. 
Gross National Saving (Percent of GDP): 2003: No data. 

United Kingdom; 
Gross National Saving (Percent of GDP): 1985: 18.1%. 
Gross National Saving (Percent of GDP): 1986: 17.2%. 
Gross National Saving (Percent of GDP): 1987: 17.3%. 
Gross National Saving (Percent of GDP): 1988: 17.2%. 
Gross National Saving (Percent of GDP): 1989: 17.1%. 
Gross National Saving (Percent of GDP): 1990: 16.2%. 
Gross National Saving (Percent of GDP): 1991: 15.3%. 
Gross National Saving (Percent of GDP): 1992: 14%. 
Gross National Saving (Percent of GDP): 1993: 13.9%. 
Gross National Saving (Percent of GDP): 1994: 15.5%. 
Gross National Saving (Percent of GDP): 1995: 15.7%. 
Gross National Saving (Percent of GDP): 1996: 15.8%. 
Gross National Saving (Percent of GDP): 1997: 16.9%. 
Gross National Saving (Percent of GDP): 1998: 17.7%. 
Gross National Saving (Percent of GDP): 1999: 15.5%. 
Gross National Saving (Percent of GDP): 2000: 15.4%. 
Gross National Saving (Percent of GDP): 2001: 15.3%. 
Gross National Saving (Percent of GDP): 2002: 14.9%. 
Gross National Saving (Percent of GDP): 2003: 14.7%. 

United States; 
Gross National Saving (Percent of GDP): 1985: 17.2%. 
Gross National Saving (Percent of GDP): 1986: 15.4%. 
Gross National Saving (Percent of GDP): 1987: 15.9%. 
Gross National Saving (Percent of GDP): 1988: 17.2%. 
Gross National Saving (Percent of GDP): 1989: 16.7%. 
Gross National Saving (Percent of GDP): 1990: 15.9%. 
Gross National Saving (Percent of GDP): 1991: 16.1%. 
Gross National Saving (Percent of GDP): 1992: 15.1%. 
Gross National Saving (Percent of GDP): 1993: 15%. 
Gross National Saving (Percent of GDP): 1994: 15.8%. 
Gross National Saving (Percent of GDP): 1995: 16.4%. 
Gross National Saving (Percent of GDP): 1996: 16.7%. 
Gross National Saving (Percent of GDP): 1997: 17.6%. 
Gross National Saving (Percent of GDP): 1998: 18.3%. 
Gross National Saving (Percent of GDP): 1999: 17.9%. 
Gross National Saving (Percent of GDP): 2000: 18%. 
Gross National Saving (Percent of GDP): 2001: 16.1%. 
Gross National Saving (Percent of GDP): 2002: 14.6%. 
Gross National Saving (Percent of GDP): 2003: No data. 

Source: OECD June 2004 Economic Outlook. 

[End of figure] 

GAO's Role: Addressing Current and Emerging Challenges: 

* GAO's Strategic Plan; 

* Selected Fiscal Exposures and Trends; 

* 21st Century Questions. 

GAO's Strategic Plan: 

[See PDF for image] - graphic text: 

Serving the Congress and the Nation: GAO's Strategic Plan Framework: 

Mission: 

GAO exists to support the Congress in meeting its constitutional 
responsibilities and to help improve the performance and ensure the 
accountability of the federal government for the benefit of the 
American people. 

Themes: 

* Long-term Fiscal Imbalance; 

* National Security; 

* Global interdependence; 

* Changing Economy; 

* Demographics; 

* Science and Technology; 

* Quality of Life; 

* Governance; 

Goals and Objectives: 

Provide Timely, Quality Service to the Congress and the Federal 
Government to Address Current and Emerging Challenges to the Well-
Being and Financial Security of the American People related to: 

* Health care needs and financing; 

* Education and protection of children; 

* Work opportunities and worker protection; 

* Retirement income security; 

* Effective system of justice; 

* Viable communities; 

* Natural resources use and environmental protection; 

* Physical infrastructure; 

Respond to Changing Security Threats and the Challenges of Global 
Interdependence involving: 

* Emerging threats; 

* Military capabilities and readiness; 

* Advancement of U.S. interests; 

* Global market forces; 

Help Transform the Federal Government's Role and How It Does Business 
to Meet 21st Century Challenges by assessing: 

* Roles in achieving federal objectives; 

* Government transformation; 

* Key management challenges and program risks; 

* Fiscal position and financing of the government; 

Maximize the Value of GAO by Being a Model Federal Agency and a World-
Class Professional Services Organization in the areas of: 

* Client and customer service; 

* Strategic leadership; 

* Institutional knowledge and experience; 

* Process improvement; 

* Employer of choice; 

Core Values: 

* Accountability; 

* Integrity; 

* Reliability; 

Source: GAO. 

GAO Strategic Plan 2004-2009. 

[End of strategic plan framework] 

Composition of Federal Spending: 

[See PDF for image] - graphic text 

3 pie charts with 5 items each.

1964: 
Defense: 46.0%. 
Social Security: 14.0%. 
Medicare & Medicaid: 0%. 
Net interest: 7.0%. 
All other spending: 33.0%. 

1984: 
Defense: 27.0%. 
Social Security: 21.0%. 
Medicare & Medicaid: 9.0%. 
Net interest: 13.0%. 
All other spending: 30.0%. 

2004*: 
Defense: 20.0%. 
Social Security: 21.0%. 
Medicare & Medicaid: 20.0%. 
Net interest: 7.0%. 
All other spending: 33.0%. 

*Current services estimate. 

Note: Numbers may not add to 100 percent due to rounding. 

Source: Budget of the United States Government, Fiscal Year 2005 
(February 2004) and Budget of the United States Government, Fiscal 
Year 2005, Mid-session Review (July 2004), Office of Management and 
Budget. 

[End of figure] 

Selected Fiscal Exposures: Sources and Examples (End of 2003)[A]: 

[See PDF for image] - graphic text 

Type: Explicit liabilities; 
Example (dollars in billions): Publicly held debt: ($3,913). 

Type: Explicit liabilities; 
Example (dollars in billions): Military and civilian pension and post-
retirement health: ($2,857). 

Type: Explicit liabilities; 
Example (dollars in billions): Veterans benefits payable: ($955). 

Type: Explicit liabilities; 
Example (dollars in billions): Environmental and disposal liabilities: 
($250). 

Type: Explicit liabilities; 
Example (dollars in billions): Loan guarantees: ($35). 

Type: Explicit financial commitments; 
Example (dollars in billions): Undelivered orders: ($596). 

Type: Explicit financial commitments; 
Example (dollars in billions): Long-term leases: ($47). 

Type: Explicit financial contingencies; 
Example (dollars in billions): Unadjudicated claims: ($9). 

Type: Explicit financial contingencies; 
Example (dollars in billions): Pension Benefit Guaranty Corporation: 
($86). 

Type: Explicit financial contingencies; 
Example (dollars in billions): Other national insurance programs: ($7). 

Type: Explicit financial contingencies; 
Example (dollars in billions): Government corporations e.g., Ginnie 
Mae. 

Type: Implicit exposures implied by current policies or the public's 
expectations about the role of government; 
Example (dollars in billions): Debt held by government accounts: 
($2,859)[B]. 

Type: Implicit exposures implied by current policies or the public's 
expectations about the role of government; 
Example (dollars in billions): Future Social Security benefit payments: 
($3,699) [C]. 

Type: Implicit exposures implied by current policies or the public's 
expectations about the role of government; 
Example (dollars in billions): Future Medicare Part A benefit payments: 
($8,236) [C]. 

Type: Implicit exposures implied by current policies or the public's 
expectations about the role of government; 
Example (dollars in billions): Future Medicare Part B benefit payments: 
($11,416) [C]. 

Type: Implicit exposures implied by current policies or the public's 
expectations about the role of government; 
Example (dollars in billions): Future Medicare Part D benefit payments: 
($8,119) [C]. 

Type: Implicit exposures implied by current policies or the public's 
expectations about the role of government; 
Example (dollars in billions): Life cycle cost including deferred and 
future maintenance and operating costs (amount unknown). 

Type: Implicit exposures implied by current policies or the public's 
expectations about the role of government; 
Example (dollars in billions): Government Sponsored Enterprises e.g., 
Fannie Mae and Freddie Mac. 

[A] All figures are for end of fiscal year 2003, except Social Security 
and Medicare estimates, which are end of calendar year 2003. 

[B] This amount includes $774 billion held by military and civilian 
pension funds that would offset the explicit liabilities reported by 
those funds. 

[C] Figures for Social Security and Medicare are net of debt held by 
the trust funds: ($1,531 billion for Social Security, $256 billion for 
Medicare Part A, and $24 billion for Medicare Part B) and represent 
net present value estimates over a 75-year period. Over an infinite 
horizon, the estimate for Social Security would be $10.4 trillion, 
$21.8 trillion for Medicare Part A, $23.2 trillion for Medicare Part 
B, and $16.5 trillion for Medicare Part D. 

Source: GAO analysis of data from the Department of the Treasury, the 
Office of the Chief Actuary, Social Security Administration, and the 
Office of the Actuary, Centers for Medicare and Medicaid Services. 

Updated 3/30/04. 

[End of table] 

Composition of Spending as a Share of GDP Assuming Discretionary 
Spending Grows With the Economy After 2014 and All Expiring Tax 
Provisions are Not Extended: 

[See PDF for image] - graphic text 

Line/Stacked Bar combo chart with 4 Groups, 1 line (Revenue) and 4 bars 
per Group. 

2003; 
All other spending; Percent of GDP: 10.3%; 
Medicare & Medicaid; Percent of GDP: 3.8%; 
Social Security; Percent of GDP: 4.4%; 
Net interest; Percent of GDP: 1.4%; 
Revenue (percent of GDP): 16.5%. 

2015; 
All other spending; Percent of GDP: 8.4%; 
Medicare & Medicaid; Percent of GDP: 5.3%; 
Social Security; Percent of GDP: 4.8%; 
Net interest; Percent of GDP: 1.8%; 
Revenue (percent of GDP): 20.1%. 

2030; 
All other spending; Percent of GDP: 8.4%; 
Medicare & Medicaid; Percent of GDP: 8.1%; 
Social Security; Percent of GDP: 6.6%; 
Net interest; Percent of GDP: 2.7%; 
Revenue (percent of GDP): 20.1%. 

2040; 
All other spending; Percent of GDP: 8.4%; 
Medicare & Medicaid; Percent of GDP: 9.9%; 
Social Security; Percent of GDP: 7.2%; 
Net interest; Percent of GDP: 5.7%; 
Revenue (percent of GDP): 20.1%. 

Notes: In addition to the expiration of tax cuts, revenue as a share 
of GDP increases through 2014 due to (1) real bracket creep, (2) more 
taxpayers becoming subject to the AMT, and (3) increased revenue from 
tax-deferred retirement accounts. After 2014, revenue as a share of 
GDP is held constant. 

Source: GAO's March 2004 analysis. 

[End of figure] 

Composition of Spending as a Share of GDP Assuming Discretionary 
Spending Grows With GDP After 2004 and All Expiring Tax Provisions Are 
Extended: 

[See PDF for image] - graphic text 

Line/Stacked Bar combo chart with 4 Groups, 1 line (Revenue) and 4 bars 
per Group. 

2003; 
All other spending; Percent of GDP: 10.3%; 
Medicare & Medicaid; Percent of GDP: 3.8%; 
Social Security; Percent of GDP: 4.4%; 
Net interest; Percent of GDP: 1.4%; 
Revenue (Percent of GDP): 16.5%. 

2015; 
All other spending; Percent of GDP: 9.9%; 
Medicare & Medicaid; Percent of GDP: 5.3%; 
Social Security; Percent of GDP: 4.9%; 
Net interest; Percent of GDP: 3.1%; 
Revenue (Percent of GDP): 17.7%. 

2030; 
All other spending; Percent of GDP: 9.9%; 
Medicare & Medicaid; Percent of GDP: 8.1%; 
Social Security; Percent of GDP: 7.1%; 
Net interest; Percent of GDP: 8.5%; 
Revenue (Percent of GDP): 17.7%. 

2040; 
All other spending; Percent of GDP: 9.9%; 
Medicare & Medicaid; Percent of GDP: 9.9%; 
Social Security; Percent of GDP: 8.7%; 
Net interest; Percent of GDP: 17.9%; 
Revenue (Percent of GDP): 17.7%. 

Notes: Although expiring tax provisions are extended, revenue as a 
share of GDP increases through 2014 due to (1) real bracket creep, (2) 
more taxpayers becoming subject to the AMT, and (3) increased revenue 
from tax-deferred retirement accounts. After 2014, revenue as a share 
of GDP is held constant. 

Source: GAO's March 2004 analysis. 

[End of figure]

Social Security and Health Spending as a Percent of GDP: 

[See PDF for image] - graphic text 

Area graph with 81 Groups and 3 items per Group. 

2000; 
Medicare; Percent of GDP: 2.29%; 
Medicaid; Percent of GDP: 1.23%; 
Social Security; Percent of GDP: 4.23%. 

2001; 
Medicare; Percent of GDP: 2.46%; 
Medicaid; Percent of GDP: 1.33%; 
Social Security; Percent of GDP: 4.35%. 

2002; 
Medicare; Percent of GDP: 2.55%; 
Medicaid; Percent of GDP: 1.44%; 
Social Security; Percent of GDP: 4.41%. 

2003; 
Medicare; Percent of GDP: 2.59%; 
Medicaid; Percent of GDP: 1.49%; 
Social Security; Percent of GDP: 4.36%. 

2004; 
Medicare; Percent of GDP: 2.68%; 
Medicaid; Percent of GDP: 1.51%; 
Social Security; Percent of GDP: 4.33%. 

2005; 
Medicare; Percent of GDP: 2.76%; 
Medicaid; Percent of GDP: 1.48%; 
Social Security; Percent of GDP: 4.28%. 

2006; 
Medicare; Percent of GDP: 3.44%; 
Medicaid; Percent of GDP: 1.47%; 
Social Security; Percent of GDP: 4.25%. 

2007; 
Medicare; Percent of GDP: 3.51%; 
Medicaid; Percent of GDP: 1.49%; 
Social Security; Percent of GDP: 4.23%. 

2008; 
Medicare; Percent of GDP: 3.56%; 
Medicaid; Percent of GDP: 1.54%; 
Social Security; Percent of GDP: 4.24%. 

2009; 
Medicare; Percent of GDP: 3.61%; 
Medicaid; Percent of GDP: 1.6%; 
Social Security; Percent of GDP: 4.28%. 

2010; 
Medicare; Percent of GDP: 3.66%; 
Medicaid; Percent of GDP: 1.66%; 
Social Security; Percent of GDP: 4.32%. 

2011; 
Medicare; Percent of GDP: 3.72%; 
Medicaid; Percent of GDP: 1.73%; 
Social Security; Percent of GDP: 4.37%. 

2012; 
Medicare; Percent of GDP: 3.81%; 
Medicaid; Percent of GDP: 1.8%; 
Social Security; Percent of GDP: 4.45%. 

2013; 
Medicare; Percent of GDP: 3.93%; 
Medicaid; Percent of GDP: 1.87%; 
Social Security; Percent of GDP: 4.54%. 

2014; 
Medicare; Percent of GDP: 4.07%; 
Medicaid; Percent of GDP: 1.9%; 
Social Security; Percent of GDP: 4.63%. 

2015; 
Medicare; Percent of GDP: 4.24%; 
Medicaid; Percent of GDP: 1.9%; 
Social Security; Percent of GDP: 4.74%. 

2016; 
Medicare; Percent of GDP: 4.4%; 
Medicaid; Percent of GDP: 1.9%; 
Social Security; Percent of GDP: 4.85%. 

2017; 
Medicare; Percent of GDP: 4.55%; 
Medicaid; Percent of GDP: 1.9%; 
Social Security; Percent of GDP: 4.96%. 

2018; 
Medicare; Percent of GDP: 4.72%; 
Medicaid; Percent of GDP: 1.9%; 
Social Security; Percent of GDP: 5.07%. 

2019; 
Medicare; Percent of GDP: 4.89%; 
Medicaid; Percent of GDP: 1.92%; 
Social Security; Percent of GDP: 5.19%. 

2020; 
Medicare; Percent of GDP: 5.08%; 
Medicaid; Percent of GDP: 1.95%; 
Social Security; Percent of GDP: 5.32%. 

2021; 
Medicare; Percent of GDP: 5.26%; 
Medicaid; Percent of GDP: 1.99%; 
Social Security; Percent of GDP: 5.44%. 

2022; 
Medicare; Percent of GDP: 5.45%; 
Medicaid; Percent of GDP: 2.02%; 
Social Security; Percent of GDP: 5.55%. 

2023; 
Medicare; Percent of GDP: 5.64%; 
Medicaid; Percent of GDP: 2.06%; 
Social Security; Percent of GDP: 5.67%. 

2024; 
Medicare; Percent of GDP: 5.84%; 
Medicaid; Percent of GDP: 2.09%; 
Social Security; Percent of GDP: 5.78%. 

2025; 
Medicare; Percent of GDP: 6.04%; 
Medicaid; Percent of GDP: 2.13%; 
Social Security; Percent of GDP: 5.89%. 

2026; 
Medicare; Percent of GDP: 6.22%; 
Medicaid; Percent of GDP: 2.17%; 
Social Security; Percent of GDP: 5.99%. 

2027; 
Medicare; Percent of GDP: 6.4%; 
Medicaid; Percent of GDP: 2.2%; 
Social Security; Percent of GDP: 6.08%. 

2028; 
Medicare; Percent of GDP: 6.58%; 
Medicaid; Percent of GDP: 2.23%; 
Social Security; Percent of GDP: 6.17%. 

2029; 
Medicare; Percent of GDP: 6.77%; 
Medicaid; Percent of GDP: 2.27%; 
Social Security; Percent of GDP: 6.24%. 

2030; 
Medicare; Percent of GDP: 6.95%; 
Medicaid; Percent of GDP: 2.31%; 
Social Security; Percent of GDP: 6.31%. 

2031; 
Medicare; Percent of GDP: 7.11%; 
Medicaid; Percent of GDP: 2.35%; 
Social Security; Percent of GDP: 6.37%. 

2032; 
Medicare; Percent of GDP: 7.26%; 
Medicaid; Percent of GDP: 2.4%; 
Social Security; Percent of GDP: 6.42%. 

2033; 
Medicare; Percent of GDP: 7.42%; 
Medicaid; Percent of GDP: 2.45%; 
Social Security; Percent of GDP: 6.46%. 

2034; 
Medicare; Percent of GDP: 7.58%; 
Medicaid; Percent of GDP: 2.5%; 
Social Security; Percent of GDP: 6.5%. 

2035; 
Medicare; Percent of GDP: 7.75%; 
Medicaid; Percent of GDP: 2.55%; 
Social Security; Percent of GDP: 6.52%. 

2036; 
Medicare; Percent of GDP: 7.9%; 
Medicaid; Percent of GDP: 2.6%; 
Social Security; Percent of GDP: 6.54%. 

2037; 
Medicare; Percent of GDP: 8.04%; 
Medicaid; Percent of GDP: 2.65%; 
Social Security; Percent of GDP: 6.55%. 

2038; 
Medicare; Percent of GDP: 8.17%; 
Medicaid; Percent of GDP: 2.7%; 
Social Security; Percent of GDP: 6.55%. 

2039; 
Medicare; Percent of GDP: 8.29%; 
Medicaid; Percent of GDP: 2.75%; 
Social Security; Percent of GDP: 6.55%. 

2040; 
Medicare; Percent of GDP: 8.41%; 
Medicaid; Percent of GDP: 2.8%; 
Social Security; Percent of GDP: 6.54%. 

2041; 
Medicare; Percent of GDP: 8.53%; 
Medicaid; Percent of GDP: 2.85%; 
Social Security; Percent of GDP: 6.53%. 

2042; 
Medicare; Percent of GDP: 8.64%; 
Medicaid; Percent of GDP: 2.9%; 
Social Security; Percent of GDP: 6.53%. 

2043; 
Medicare; Percent of GDP: 8.76%; 
Medicaid; Percent of GDP: 2.95%; 
Social Security; Percent of GDP: 6.52%. 

2044; 
Medicare; Percent of GDP: 8.88%; 
Medicaid; Percent of GDP: 3%; 
Social Security; Percent of GDP: 6.51%. 

2045; 
Medicare; Percent of GDP: 9%; 
Medicaid; Percent of GDP: 3.05%; 
Social Security; Percent of GDP: 6.5%. 

2046; 
Medicare; Percent of GDP: 9.12%; 
Medicaid; Percent of GDP: 3.1%; 
Social Security; Percent of GDP: 6.49%. 

2047; 
Medicare; Percent of GDP: 9.23%; 
Medicaid; Percent of GDP: 3.14%; 
Social Security; Percent of GDP: 6.49%. 

2048; 
Medicare; Percent of GDP: 9.33%; 
Medicaid; Percent of GDP: 3.19%; 
Social Security; Percent of GDP: 6.48%. 

2049; 
Medicare; Percent of GDP: 9.44%; 
Medicaid; Percent of GDP: 3.23%; 
Social Security; Percent of GDP: 6.48%. 

2050; 
Medicare; Percent of GDP: 9.56%; 
Medicaid; Percent of GDP: 3.27%; 
Social Security; Percent of GDP: 6.47%. 

2051; 
Medicare; Percent of GDP: 9.67%; 
Medicaid; Percent of GDP: 3.31%; 
Social Security; Percent of GDP: 6.47%. 

2052; 
Medicare; Percent of GDP: 9.78%; 
Medicaid; Percent of GDP: 3.35%; 
Social Security; Percent of GDP: 6.48%. 

2053; 
Medicare; Percent of GDP: 9.9%; 
Medicaid; Percent of GDP: 3.39%; 
Social Security; Percent of GDP: 6.48%. 

2054; 
Medicare; Percent of GDP: 10.03%; 
Medicaid; Percent of GDP: 3.44%; 
Social Security; Percent of GDP: 6.49%. 

2055; 
Medicare; Percent of GDP: 10.16%; 
Medicaid; Percent of GDP: 3.48%; 
Social Security; Percent of GDP: 6.49%. 

2056; 
Medicare; Percent of GDP: 10.3%; 
Medicaid; Percent of GDP: 3.52%; 
Social Security; Percent of GDP: 6.5%. 

2057; 
Medicare; Percent of GDP: 10.44%; 
Medicaid; Percent of GDP: 3.57%; 
Social Security; Percent of GDP: 6.51%. 

2058; 
Medicare; Percent of GDP: 10.59%; 
Medicaid; Percent of GDP: 3.61%; 
Social Security; Percent of GDP: 6.52%. 

2059; 
Medicare; Percent of GDP: 10.74%; 
Medicaid; Percent of GDP: 3.66%; 
Social Security; Percent of GDP: 6.52%. 

2060; 
Medicare; Percent of GDP: 10.89%; 
Medicaid; Percent of GDP: 3.7%; 
Social Security; Percent of GDP: 6.53%. 

2061; 
Medicare; Percent of GDP: 11.04%; 
Medicaid; Percent of GDP: 3.75%; 
Social Security; Percent of GDP: 6.54%. 

2062; 
Medicare; Percent of GDP: 11.19%; 
Medicaid; Percent of GDP: 3.8%; 
Social Security; Percent of GDP: 6.55%. 

2063; 
Medicare; Percent of GDP: 11.34%; 
Medicaid; Percent of GDP: 3.84%; 
Social Security; Percent of GDP: 6.56%. 

2064; 
Medicare; Percent of GDP: 11.51%; 
Medicaid; Percent of GDP: 3.89%; 
Social Security; Percent of GDP: 6.56%. 

2065; 
Medicare; Percent of GDP: 11.68%; 
Medicaid; Percent of GDP: 3.94%; 
Social Security; Percent of GDP: 6.57%. 

2066; 
Medicare; Percent of GDP: 11.86%; 
Medicaid; Percent of GDP: 3.99%; 
Social Security; Percent of GDP: 6.58%. 

2067; 
Medicare; Percent of GDP: 12.03%; 
Medicaid; Percent of GDP: 4.04%; 
Social Security; Percent of GDP: 6.59%. 

2068; 
Medicare; Percent of GDP: 12.19%; 
Medicaid; Percent of GDP: 4.09%; 
Social Security; Percent of GDP: 6.59%. 

2069; 
Medicare; Percent of GDP: 12.35%; 
Medicaid; Percent of GDP: 4.14%; 
Social Security; Percent of GDP: 6.59%. 

2070; 
Medicare; Percent of GDP: 12.51%; 
Medicaid; Percent of GDP: 4.19%; 
Social Security; Percent of GDP: 6.6%. 

2071; 
Medicare; Percent of GDP: 12.68%; 
Medicaid; Percent of GDP: 4.25%; 
Social Security; Percent of GDP: 6.6%. 

2072; 
Medicare; Percent of GDP: 12.84%; 
Medicaid; Percent of GDP: 4.3%; 
Social Security; Percent of GDP: 6.6%. 

2073; 
Medicare; Percent of GDP: 13.01%; 
Medicaid; Percent of GDP: 4.35%; 
Social Security; Percent of GDP: 6.61%. 

2074; 
Medicare; Percent of GDP: 13.17%; 
Medicaid; Percent of GDP: 4.41%; 
Social Security; Percent of GDP: 6.61%. 

2075; 
Medicare; Percent of GDP: 13.34%; 
Medicaid; Percent of GDP: 4.46%; 
Social Security; Percent of GDP: 6.61%. 

2076; 
Medicare; Percent of GDP: 13.509%; 
Medicaid; Percent of GDP: 4.52%; 
Social Security; Percent of GDP: 6.61%. 

2077; 
Medicare; Percent of GDP: 13.679%; 
Medicaid; Percent of GDP: 4.57%; 
Social Security; Percent of GDP: 6.62%. 

2078; 
Medicare; Percent of GDP: 13.85%; 
Medicaid; Percent of GDP: 4.63%; 
Social Security; Percent of GDP: 6.62%. 

2079; 
Medicare; Percent of GDP: 13.85%; 
Medicaid; Percent of GDP: 4.69%; 
Social Security; Percent of GDP: 6.62%. 

2080; 
Medicare; Percent of GDP: 13.85%; 
Medicaid; Percent of GDP: 4.75%; 
Social Security; Percent of GDP: 6.63%. 

Note: Social Security and Medicare projections based on the 
intermediate assumptions of the 2004 Trustees' Reports. Medicaid 
projections based on CBO's January 2004 short-term Medicaid estimates 
and CBO's December 2003 long-term Medicaid projections under mid-range 
assumptions. 

Source: GAO analysis based on data from the Office of the Chief 
Actuary, Social Security Administration, Office of the Actuary, 
Centers for Medicare and Medicaid Services, and the Congressional 
Budget Office. 

[End of figure] 

Current Fiscal Policy Is Unsustainable: 

* The "Status Quo" is Not an Option 
 We face large and growing structural deficits largely due to known 
demographic trends and rising health care costs. 
 GAO's simulations show that balancing the budget in 2040 could 
require actions as large as: 
* Cutting total federal spending by about 60 percent or 
* Raising taxes to about 2.5 times today's level;  
* Faster Economic Growth Can Help, but It Cannot Solve the Problem;  
 Closing the current long-term fiscal gap based on responsible 
assumptions would require real average annual economic growth in the 
double digit range every year for the next 75 years. 
 During the 1990s, the economy grew at an average 3.2 percent per 
year. 
 As a result, we cannot simply grow our way out of this problem. 
Tough choices will be required. 
* The Sooner We Get Started, the Better 
 Less change would be needed, and there would be more time to make 
adjustments. 
 The miracle of compounding would work with us rather than against us. 
 Our demographic changes will serve to make reform more difficult 
over time. 

We Need a 3-Pronged Approach: 

* Restructure existing entitlement programs; 

* Reexamine the base of discretionary and other spending; 

* Review and revise our tax policy and enforcement programs. 

21st Century Questions:

* How should Social Security be reformed to make it both solvent and 
sustainable while better aligning it with 21st Century economic, 
demographic and fiscal realities? 

* Should the current criteria and process for determining disability 
be revised in light of substantial changes in health care and real 
enhancements in work prospects for many who are disabled? 

* What changes should be made to existing pension laws in order to 
enhance the retirement income security of workers and help assure the 
financial integrity of the Pension Benefit Guaranty Corporation? 

* How should federal programs and policies be revised to encourage 
people to work longer and to facilitate phased retirement approaches? 
 
21st Century Questions: 
 
* How should our overall health care system be reformed to make it 
more successful and sustainable over time (e.g., focusing on certain 
defined needs versus unlimited wants; addressing the division of 
responsibilities between levels of government, employers, and 
individuals; and facilitating individual choice, cost control and 
quality improvement? 

* Which tax incentives and preferences need to be reconsidered given 
their costs and effects, failure to achieve goals intended by 
Congress, or their unintended consequences? For example, can adequate 
health care coverage be achieved at less cost and greater 
distributional equity through a fundamental redesign of the current 
health tax preferences, or through their elimination and the use of 
other means to provide for coverage? 

[End of slide presentation]