oversight

The Federal Government's Long-Term Fiscal Outlook: Fall 2012 Update

Published by the Government Accountability Office on 2012-12-03.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                            United States Government Accountability Office


GAO                                         The Federal Government’s
                                            Long-Term Fiscal Outlook
                                            Fall 2012 Update

                                            GAO’s simulations continue to illustrate that the federal government is on
 GAO’s Long-Term Fiscal
 Simulations                                an unsustainable long-term fiscal path. In both the Baseline Extended and
                                            Alternative simulations, debt held by the public grows as a share of gross
 Since 1992, GAO has published              domestic product (GDP) over the long term as shown in figure 1. While the
 long-term fiscal simulations
 showing federal deficits and debt
                                            timing and pace of growth varies depending on the assumptions used,
 under different sets of policy             neither set of assumptions achieves a sustainable path. In the Baseline
 assumptions. GAO developed its             Extended simulation, which assumes current law, including the
 long-term model in response to a           discretionary spending limits and other spending reductions contained in
 bipartisan request from members            the Budget Control Act (BCA) of 2011 and expiration of certain tax cuts
 of Congress concerned about the            enacted in 2001 and 2003, debt as a share of GDP declines in the short
 long-term effects of fiscal policy.
                                            term before turning up again. In the Alternative simulation, in which these
 GAO’s simulations provide context
 for consideration of policy options.       laws are assumed to not take full effect, federal debt as a share of GDP
 They are not intended to suggest           grows throughout the period. Discretionary spending limits alone do not
 particular policy choices or to            address the fundamental imbalance between estimated revenue and
 predict the economic impact of any         spending, which is driven largely by the aging of the population and rising
 set of choices but to help facilitate      health care costs. The Patient Protection and Affordable Care Act (PPACA)
 a dialogue on this important issue.
                                            slows the growth of health care spending and federal debt under the
 GAO regularly updates its                  Baseline Extended simulation, in which cost-containment mechanisms are
 simulations as new data become
                                            assumed to be fully implemented and effective. However, some have
 available. This update incorporates
 the most recent projections                questioned whether these mechanisms can be sustained over the long
 released by the Congressional              term; this is reflected in GAO’s Alternative simulation.
 Budget Office (CBO), the Social
 Security and Medicare Trustees
 (Trustees), and the Centers for            Figure 1: Debt Held by the Public under Two Fiscal Policy Simulations
 Medicare & Medicaid Services
 Office of the Actuary (CMS
 Actuary). As in the past, GAO
 shows two simulations:
    The Baseline Extended
    simulation follows CBO’s August
    2012 baseline, which generally
    reflects current law for the first 10
    years. The baseline includes the
    effects from the discretionary
    spending limits and automatic
    enforcement procedures put in
    place by the BCA. After the first
    10 years, this fiscal constraint is
    maintained; revenue and
    spending other than interest on
    the debt and large entitlement
    programs (Social Security,
    Medicare, and Medicaid) are held
    constant as a share of GDP.             Note: Data are from GAO’s Fall 2012 simulations based on the Trustees’ assumptions for Social
    Over the long term, revenue as a        Security and the Trustees’ and the CMS Actuary’s assumptions for Medicare.
    share of GDP is higher and
    discretionary spending lower than       Significant actions to change the long-term fiscal path must be taken and
    historical averages.                    the design of these actions should take into account concerns about the


GAO-13-148SP
                                           near-term impact on economic growth. In the near term, for example, the
     In the Alternative simulation,
     expiring tax provisions are           Baseline Extended simulation reflects a number of fiscal policy changes
     extended to 2022, and the             contained in current law that are projected to sharply reduce spending and
     alternative minimum tax               raise revenue from their current levels beginning in 2013. CBO, the Federal
     (AMT) exemption amount is             Reserve Board Chairman, and others project that such drastic fiscal
     indexed to inflation through          tightening—commonly referred to as the “fiscal cliff”—could disrupt
     2022; revenues are then               economic growth. In the Alternative simulation, historcial trends and past
     brought back to the historical
     average as a share of GDP.            policy preferences are assumed to continue; revenue is lower and spending
     For the first 10 years,               is higher than in the Baseline Extended simulation. While CBO projects that
     discretionary spending reflects       continuation of such polices would prevent disruptions to the economy in the
     the original caps set by the          very near term, it would lead to higher debt over the long term.
     BCA but not the lower caps
     triggered by the automatic            In both GAO simulations spending for the major health and retirement
     enforcement procedures. Over
     the long term, discretionary
                                           programs will increase in coming decades, putting greater pressure on
     spending and revenue are              the rest of the federal budget. For the first few decades this spending is
     held at historical averages.          driven largely by the aging of the population. The oldest members of the
                                           baby-boom generation are already eligible for Social Security retirement
The Baseline Extended simulation
follows the Trustees’ 2012                 benefits and for Medicare, and, as shown in figure 2, the number of baby
intermediate projections for Social        boomers turning 65 is projected to grow in coming years from an average
Security and Medicare and CBO’s            of about 7,600 per day in 2011 to more than 11,000 per day in 2029.
June 2012 long-term projections
for Medicaid adjusted to reflect
excess cost growth consistent with         Figure 2: Daily Average Number of People Turning 65 Each Year
the Trustees’ Medicare
projections. In the Alternative
simulation, Medicare spending is
based on the CMS Actuary’s
alternative projections that assume
reductions in Medicare physician
rates do not occur as scheduled
under current law and that certain
cost-containment mechanisms
intended to slow the growth of
health care cost are not sustained
over the long term. GAO also
shows the outlook using CBO’s
long-term projections for Social
Security and the major health
entitlements; the results are
consistent with GAO’s simulations
based largely on the Trustees’
projections.
Additional information on the fiscal
outlook and federal debt is available at
www.gao.gov/special.pubs/longterm/.
For more information, contact Susan J.     Note: Data are from the U.S. Census Bureau’s National Population Projections. For this analysis, we
Irving at (202) 512-6806 or                used data from the low net international migration series.
irvings@gao.gov or Thomas J. McCool,
at (202) 512-2642 or mccoolt@gao.gov.


                                           Page 2                                        GAO-13-148SP Long-Term Fiscal Outlook Fall 2012
Health care spending has been growing faster than the overall economy
and is expected to continue growing as more members of the baby-boom
generation become eligible for federal health programs and the cost of
caring for each enrollee increases. If PPACA is implemented as currently
written and is effective, it would have a major effect on slowing the rate of
growth in federal health care spending as shown in our Baseline
Extended simulation. In this simulation, spending on Medicare and
Medicaid, the Children’s Health Insurance Program (CHIP), and
exchange subsidies grows from 5 percent of GDP in 2010 to over 7
percent by 2030. If, however, the cost containment measures are not
sustained over the long term—a concern expressed by the Trustees, the
CMS Actuary, the CBO, and others—spending on federal health care
programs grows much more rapidly. Spending on Medicare and
Medicaid, CHIP, and exchange subsidies under the Alternative simulation
grows to over 8 percent of GDP by 2030.

Figures 3 and 4 below show revenue and the composition of spending in
the Baseline Extended and Alternative scenarios moving forward. In the
Baseline Extended simulation, not only is health care spending growth
slower, but revenue as a share of the economy is higher and
discretionary spending lower than at any point in the last 50 years. Even
in this simulation, revenue covers little more than spending on Social
Security, Medicare, Medicaid, CHIP, exchange subsidies, and interest in
2040 (see fig. 3).There is little room for “all other spending,” which
includes not only national defense, homeland security, veteran’s health
care, and investment in highways and mass transit, but also smaller
entitlement programs such as farm price supports and student loans.




Page 3                             GAO-13-148SP Long-Term Fiscal Outlook Fall 2012
Figure 3: Potential Fiscal Outcomes: Revenues and Composition of Spending in the
Baseline Extended Simulation




Notes: Data are from GAO’s Fall 2012 simulations based on the Trustees’ assumptions for Social
Security and Medicare.




Page 4                                       GAO-13-148SP Long-Term Fiscal Outlook Fall 2012
                      As figure 4 shows, if the federal government continues on the current
                      path, as assumed in the Alternative simulation, and borrows from the
                      public to finance the growing imbalance between revenue and spending,
                      by 2040 more than half of all federal revenue will go to net interest
                      payments. Overall, our simulations illustrate the difficult trade-offs that
                      policymakers will have to consider in order to put the federal government
                      on a more sustainable path.

                      Figure 4: Potential Fiscal Outcomes: Revenues and Composition of Spending in the
                      Alternative Simulation




                      Notes: Data are from GAO’s Fall 2012 simulations based on the Trustees’ assumptions for Social
                      Security and the CMS Actuary’s assumptions for Medicare.



                      One measure of the challenge over the long term is the “fiscal gap.” The
Balancing Near-Term   fiscal gap represents the difference, or gap, between revenue and
and Long-Term         noninterest spending over a certain period, such as 75 years, that would
                      need to be closed in order to achieve a specified debt level at the end of
Considerations        the period. From the fiscal gap, one can calculate the size of action


                      Page 5                                       GAO-13-148SP Long-Term Fiscal Outlook Fall 2012
                                        needed—in terms of tax increases, spending reductions, or, more likely,
                                        some combination of the two—to close the gap.

                                        For example, to keep debt held by the public as a share of GDP in 2086
                                        from exceeding its level at the beginning of 2012 (roughly 68 percent of
                                        GDP) in our Alternative simulation, the fiscal gap is 8.3 percent of GDP
                                        (see table 1). This means that revenue would have to increase by 46
                                        percent or noninterest spending would have to be reduced by about 32
                                        percent (or some combination of the two) on average over the 75-year
                                        period. Even more significant changes would be needed to reduce debt to
                                        lower levels.

Table 1: Federal Fiscal Gap under Our Simulations

                                                                Average percentage change required to close gap
                                                       If action is taken today                   If action is delayed until 2022
                                                                      Solely through                                     Solely through
                              Fiscal gap     Solely through            decreases in              Solely through           decreases in
                              2012–2086        increases in              noninterest               increases in             noninterest
Scenario             (percentage of GDP)            revenue                spending                     revenue               spending
Baseline Extended                     2.1                    10.0                  9.4                      11.8                        10.9
Alternative                           8.3                    46.0                 32.3                      54.7                        37.2
                                        Source: GAO.

                                        Note: Data are from GAO’s Fall 2012 simulations based on the Trustees’ assumptions for Social
                                        Security and the Trustees’ and CMS Actuary’s assumptions for Medicare.


                                        When considering action to address the longer-term fiscal challenge, it is
                                        important to recognize the current state of the economy. With this in mind,
                                        policy changes could be designed to phase in over time allowing for the
                                        economy to fully recover and for people to adjust to the changes.
                                        However, the longer action is delayed the greater the risk that the
                                        eventual changes will be disruptive and destabilizing. Table 1 illustrates
                                        how much greater fiscal policy changes would have to be if no actions
                                        were taken for the next decade. Under our Alternative simulation, waiting
                                        10 years would increase the fiscal gap to nearly 10 percent of GDP—
                                        meaning a revenue increase of more than 54 percent or a noninterest
                                        spending cut of about 37 percent or some combination of the two would
                                        be required to bring debt held by the public back to its level in 2012 by
                                        2086.




                                        Page 6                                           GAO-13-148SP Long-Term Fiscal Outlook Fall 2012
                    Addressing the long-term fiscal challenge will likely require difficult
Concluding          choices affecting both revenue and spending. In addition, the need to act
Observations        soon to develop a plan for addressing the long-term fiscal imbalance must
                    be balanced with concerns about the near-term impact of policy
                    decisions. Action now would allow for the greatest range of options to
                    address the fiscal imbalance and strengthen the economy for the long
                    term. Many of the long-term drivers highlighted in past updates, including
                    health care cost growth and the aging population, have already begun to
                    affect the federal budget. These are challenges for which there are no
                    quick or easy solutions.


                    This update incorporates CBO’s August 2012 baseline projections that
Changes since the   follow current law at the time. 1 This includes updated projections for
Last Update         Medicaid, CHIP, and exchange spending consistent with the Supreme
                    Court’s recent decision about PPACA. As a result of the decision, CBO
                    and the staff of the Joint Committee on Taxation (JCT) decreased their
                    estimates of federal spending for Medicaid and increased their estimates
                    of federal spending on health insurance exchange subsidies. CBO and
                    JCT’s projections reflect an assessment of the probabilities of different
                    outcomes. CBO notes, however, that what states decide to do regarding
                    the Medicaid expansion under PPACA is highly uncertain and depends in
                    part on how flexible executive branch agencies will be regarding the
                    choices that states have.

                    Consistent with our past practice, spending on Medicaid, CHIP, and
                    exchange subsidies in our simulations follows CBO’s baseline projections
                    for the first 10 years. After that, growth in spending for these programs is
                    based on CBO’s long-term projections adjusted to reflect excess cost
                    growth consistent with the 2012 Medicare Trustees’ intermediate
                    projections. Overall, the net effect of the changes in spending on
                    Medicaid, CHIP, and exchange subsidies in the 10-year baseline do not
                    significantly change the results of our simulations because the reduced
                    costs of covering fewer individuals in state Medicaid programs is partially
                    offset by increased costs of the exchange subsidies.

                    Beginning with this update, we also revised our method for developing an
                    excess cost growth rate for Medicaid, CHIP, and exchange subsidies
                    consistent with the Trustees intermediate projections. In prior updates,
                    our excess cost growth assumption, while based on growth for the U.S.
                    health sector as a whole, was affected by productivity adjustments and
                    other cost containment mechanisms for Medicare. For this update, we

                    1
                        The CBO report is available at http//:www.cbo.gov.


                    Page 7                                      GAO-13-148SP Long-Term Fiscal Outlook Fall 2012
                     removed the effects of productivity adjustments and other cost
                     containment mechanisms for Medicare from our estimates of excess cost
                     growth for Medicaid, CHIP, and exchange subsidies. Excess cost growth
                     for these programs is now 0.8 percent in the Baseline Extended
                     simulation, or 0.2 percentage points higher than it was in our previous
                     update, and tracks more closely with private insurance. This is in the
                     same range as CBO’s long-term projections for excess cost growth for
                     Medicaid, CHIP, and exchange subsidies. Unlike our prior update where
                     excess cost growth for Medicaid, CHIP, and exchange subsidies differed
                     in the Baseline Extended and Alternative simulations depending on
                     assumptions about Medicare spending, the same rate is used in both
                     simulations for this update.


                     Table 2 lists the key assumptions incorporated in the Baseline Extended
Key Assumptions in   and Alternative simulations based on the Trustees’ assumptions for
Our Federal          Social Security and the Trustees’ and CMS Actuary’s assumptions for
                     Medicare.
Simulations




                     Page 8                           GAO-13-148SP Long-Term Fiscal Outlook Fall 2012
Table 2: Key Budget Assumptions for Baseline Extended and Alternative Simulations Based on the Social Security and
Medicare Trustees’ Projections

 Model inputs      Baseline Extended simulation                               Alternative simulation
 Revenue           CBO’s August 2012 baseline that assumes tax cuts           CBO’s estimates that assume expiring tax provisions
                   will expire as scheduled under current law and that an     other than the temporary Social Security payroll tax
                   increasing share of taxpayers will be subject to higher    reduction are extended through 2022, and the 2011
                   tax rates through 2022; thereafter remains constant at     alternative minimum tax (AMT) exemption amount is
                   21.4 percent of GDP (CBO’s projection in 2022)             indexed to inflation for years 2012 to 2022; thereafter is
                                                                              phased into the 40-year historical average of 17.9
                                                                              percent of GDP
 Social Security   CBO’s August 2012 baseline through 2022; thereafter        Same as Baseline Extended
 spending          phases into the 2012 Social Security Trustees’
                   intermediate projections
 Medicare          CBO’s August 2012 baseline through 2022 that               Based on CMS Actuary’s alternative scenario that
 spending          assumes cuts in physician payment rates will occur         assumes physician payment rates grow by 1 percent
                                                   a
                   as scheduled under current law at the time and that        annually through 2022a and then gradually transition to
                   the implementation of the Budget Control Act’s             a long-term growth rate equal to the per capita increase
                   automatic enforcement procedures reduces                   in overall health spending; spending reductions under
                             b                                                                       b
                   spending; thereafter phases into the 2012 Medicare         the BCA do not occur, and policies that would restrain
                   Trustees’ intermediate projections in which cost           spending growth are applied fully through 2019 but
                   containment mechanisms reduce excess cost growth           begin to phase out thereafter; excess cost growth
                   to 0.2 percentage points on average between 2023           averages 0.8 percentage points between 2023 and
                   and 2086c                                                  2086c
 Medicaid, the     CBO’s August 2012 baseline through 2022; thereafter        CBO’s August 2012 baseline through 2022; thereafter
 Children’s        growth in spending for these programs is consistent        growth in spending for these programs is consistent with
 Health            with CBO’s June 2012 long-term assumptions for the         CBO’s June 2012 long-term assumptions for the
 Insurance         number and age composition of enrollees and the            number and age composition of enrollees and CBO’s
 Program, and      2012 Medicare Trustees’ intermediate assumptions           alternative assumption that a policy that would slow the
 exchange          for excess cost growth; excess cost growth averages        growth of per-participant subsidies for health insurance
                                                                  c
 subsidies         0.8 percentage points between 2023 and 2086                coverage is not in effect and eligibility thresholds are
 spending                                                                     modified to maintain the share of the population eligible
                                                                              for subsidies; as in Baseline Extended, excess cost
                                                                              growth averages 0.8 percentage points between 2023
                                                                                         c
                                                                              and 2086
 Other             CBO’s August 2012 baseline through 2022, which             CBO’s August 2012 baseline adjusted for extension of
 mandatory         incorporates the reductions in spending scheduled to       certain tax credits and to exclude the effects of the
 spending          occur under the Budget Control Act’s automatic             Budget Control Act’s automatic enforcement procedures
                                              b
                   enforcement procedures; thereafter remains                 through 2022;b thereafter is phased back to 2.4 percent
                   constant as a share of GDP at 2.4 percent of GDP           of GDP (same as Baseline Extended) by 2025
                   (implied by CBO’s projection in 2022)
 Discretionary     CBO’s August 2012 baseline through 2022, which             Follows the original caps set by the Budget Control Act
 spending          reflects the original caps set by the Budget Control       but not the lower caps triggered by the automatic
                   Act, as well as the lower caps triggered by the            enforcement procedures;b after 2022 it gradually phases
                                                         b
                   automatic enforcement procedures; thereafter               up to 7.5 percent of GDP (the 20-year historical
                   remains constant at 5.6 percent of GDP (CBO’s              average)
                   projection in 2022)
                                           Source: GAO.


                                           Notes: CBO’s projections are from An Update to the Budget and Economic Outlook: Fiscal Years
                                           2012 to 2022 (August 2012) and CBO’s The 2012 Long-Term Budget Outlook (June 2012). Trustees
                                           projections are from The 2012 Annual Report of the Board of Trustees of the Federal Old-Age and
                                           Survivors Insurance and Federal Disability Insurance Trust Funds and The 2012 Annual Report of the


                                           Page 9                                       GAO-13-148SP Long-Term Fiscal Outlook Fall 2012
                                            Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance
                                            Trust Funds, which were both issued on April 23, 2012. Projections from the CMS Actuary are based
                                            on Projected Medicare Expenditures under Illustrative Scenarios with Alternative Payment Updates to
                                            Medicare Providers (May 18, 2012). We assume that Social Security and Medicare benefits are paid
                                            in full regardless of the amounts available in the trust funds.
                                            a
                                             Physician payment rates are scheduled to be reduced by roughly 27 percent at the start of 2013.
                                            Since 2003, Congress has taken a series of legislative actions to override scheduled reductions in
                                            physician payment rates that would otherwise occur under law. Physician fee updates set by
                                            Congress have averaged 0.9 percent per year over this period.
                                            b
                                             The Budget Control Act established limits on discretionary budget authority for 2012 through 2021. It
                                            also specified additional limits on discretionary spending and automatic reductions in mandatory
                                            spending, including Medicare, that begin to take effect in January 2013 and are intended to reduce
                                            projected deficits by an additional $1.2 trillion.
                                            c
                                             Excess cost growth refers to the annual growth rate of health care spending per enrollee in excess of
                                            the annual growth rate of potential GDP, adjusted for demographic characteristics.



                                            Table 3 shows the key economic assumptions that underlie all of our
                                            simulations. GDP is held constant across simulations and does not
                                            respond to changes in fiscal policy. Also, the implied interest rate on
                                            federal debt held by the public in our simulations is held constant over the
                                            long term even when deficits climb. With large budget deficits, there could
                                            be a rise in the rate of interest and a more rapid increase in federal
                                            interest payments than our simulations display.

Table 3: Key Economic Assumptions Underlying All of Our Long-Term Federal Simulations

 Model inputs                  All simulations
 Real GDP growth               CBO August 2012 baseline through 2022; thereafter averages 2.1 percent based on the intermediate
                               assumptions of the 2012 Social Security and Medicare Trustees Reports
 Inflation (percentage         CBO August 2012 baseline through 2022; 2 percent thereafter (CBO’s projection in 2022)
 change in GDP price
 index)
 Interest rate (on debt held   Rate implied by CBO’s August 2012 baseline net interest payment projections through 2022; phasing
 by the public)                to 5.2 percent in 2025 and then constant thereafter (based on CBO’s June 2012 long-term projection)
                                            Source: GAO.



                                            A more detailed description of the federal model and key assumptions
                                            can be found at
                                            http://www.gao.gov/special.pubs/longterm/fed/aboutlongterm.html.




                                            Page 10                                        GAO-13-148SP Long-Term Fiscal Outlook Fall 2012
                                        The simulation results depend largely on what is assumed about growth
                                        in large entitlement programs. As in previous updates, we also show the
                                        Baseline Extended simulation using both Trustees and CBO estimates for
                                        long-term spending on Social Security and major health entitlement
                                        programs (Medicare, Medicaid, and others). In addition, we show the
                                        Alternative simulation using different assumptions about certain health
                                        care cost-containment provisions based on CBO and CMS Actuary
                                        alternative projections. As figure 5 shows, the results are not materially
                                        different. The outlook under either set of assumptions is unsustainable.

Figure 5: Debt Held by the Public under Fiscal Policy Simulations with Different Assumptions for Major Entitlement
Programs




                                        Page 11                                GAO-13-148SP Long-Term Fiscal Outlook Fall 2012
                                          Table 4 shows the CBO assumptions incorporated into the simulations
                                          that were used in the comparison shown in figure 5.

Table 4: Key Budget Assumptions Underlying Our Simulations Using CBO’s Spending Projections for Major Entitlement
Programs

 Model inputs        Baseline Extended simulation                              Alternative simulation
 Social Security     CBO’s August 2012 baseline through 2022;                  Same as Baseline Extended
 spending            thereafter based on CBO’s June 2012 long-term
                     projections for Social Security
 Medicare            CBO’s August 2012 baseline through 2022;                  Based on CBO’s projections under its alternative fiscal
 spending            thereafter based on CBO’s June 2012 long-term             scenario that assumes physician payment rates are
                     projections under its extended-baseline scenario          maintained at 2012 levels through 2022; spending
                     that assumes policies that would restrain                 reductions under the BCA do not occur; policies to
                     spending growth are not in effect after 2029 and          restrain growth are not in effect after 2022; and excess
                     excess cost growth averages 1.2 percentage points         cost growth averages 1.3 percentage points per year
                     per year over the long term
                                                 a
                                                                               over the long terma
 Medicaid, the       CBO’s August 2012 baseline through 2022;                  CBO’s August 2012 baseline through 2022; thereafter
 Children’s Health   thereafter based on CBO’s June 2012 long-term             CBO’s June 2012 projections under its alternative fiscal
 Insurance           projections under its extended-baseline scenario          scenario in which a policy that would slow the growth of
 Program, and        which follows current law and assumes that excess         per-participant subsidies for health insurance coverage
 exchange            cost growth for Medicaid and CHIP averages 0.7            is assumed not to be in effect; eligibility thresholds are
                                                                   a
 subsidies           percentage points per year over the long term             assumed to be modified to maintain the share of the
 spending                                                                      population eligible for subsidies; and excess cost
                                                                               growth for Medicaid and CHIP is assumed to average
                                                                               0.7 percentage points per year over the long terma
                                          Source: GAO.
                                          Notes: CBO’s projections are from An Update to the Budget and Economic Outlook: Fiscal Years
                                          2012 to 2022 (August 2012) and CBO’s The 2012 Long-Term Budget Outlook (June 2012). CBO
                                          assumes that full benefits are paid regardless of the amounts available in the trust funds.
                                          a
                                           Excess cost growth refers to the annual growth rate of health care spending per enrollee in excess of
                                          the annual growth rate of potential GDP, adjusted for demographic characteristics.


                                          This product is part of a body of work on federal debt and the long-term
                                          fiscal challenge. Related products can be found at
                                          http://www.gao.gov/special.pubs/longterm/index.html.

                                          We conducted our work from September 2012 to December 2012 in
                                          accordance with all sections of GAO’s Quality Assurance Framework that
                                          are relevant to our objectives. The framework requires that we plan and
                                          perform the engagement to obtain sufficient and appropriate evidence to
                                          meet our stated objectives and to discuss any limitations in our work. We
                                          believe that the information and data obtained, and the analysis
                                          conducted, provide a reasonable basis for any findings and conclusions in
                                          this product.



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                                          Page 12                                        GAO-13-148SP Long-Term Fiscal Outlook Fall 2012
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