Federal Government Faces Unstable Debt

Data are from Government Accountability Office’s January 2010 analysis based on the Trustees’ assumptions for Social Security and Medicare. Under the alternative simulation, debt held by the public as a share of GDP could exceed the historical high reached in the aftermath of World War II by 2020 - 10 years sooner than the simulation showed just two years ago. - Photo Courtesy of GAO

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The economic downturn and the federal government’s response continue to shape the near-term budget outlook. In fiscal year 2009 the overall federal deficit reached 9.9 percent of GDP—the largest since 1945. The deficit is expected to decline only slightly in 2010.

Deficits are projected to decrease further as federal support for states and the financial sector wind down and the economy recovers. However, increased debt and related interest costs will remain. For the landscape industry this means a fragile future in terms of growth. Long-term simulations show that absent policy changes the federal government faces an unsustainable growth in debt.

Recent events have made the fiscal challenge greater. Although the economy is still fragile, there is wide agreement on the need to begin to change the long-term fiscal path as soon as possible without slowing the recovery because the magnitude of the changes needed grows with time. Congress recently enacted a return to statutory PAYGO and, in February, the President established a commission to identify policies to change the fiscal path and stabilize the debt-to-GDP ratio. – Courtesy of GAO