ACitizen’s Guide
Without reform, federal deficits and debt will rise so high relativeto gross domestic product (GDP) that they will threaten oureconomic strength, our international status, our standard of living,and eventually, our national security.
Arguably, we are already getting a taste of what that future willbe like. Since the middle of 2007, problems in the U.S. housingsector have illustrated what happens when lenders lose confidencein borrowers. If our ability to manage our nation’s fiscal affairs iscalled into question, we are likely to face even more severeeconomic challenges, including sharply higher interest rates, furtherdownward pressure on the dollar, higher prices for oil, food andother necessities, and greater unemployment.What needs to be done? Simply stated, our elected officialsmust startto close the gap between spending and revenues thatresults primarily from large and growing unfunded promises forSocial Security and Medicare. Projections show that by 2027, ifrevenues stay at 18.3 percent of GDP—the level we are used to—they will not even cover net interest, Social Security, Medicare andMedicaid. The federal government will have to borrow to pay for allother activities including education, national defense and homelandsecurity.Or,we will have to do without those other programs.Wedon’t really have a choice. Borrowing at the levels projectedis not an option. The sooner we get started, the better because timeis not currently in our favor.
Acting sooner will lessen the degree ofchange required, allowmore time for transition, and reduce the riskof a major economic crisis.
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The Peter G.Peterson Foundation
Most of the 77 million post-World War II baby boomers(representing one-fourth of the U.S. population) are still working,but some are beginning to retire. As boomers retire, federalspending for Social Security and especially Medicare, given rapidlyrising health care costs, will grow dramatically. As they do, youngerworkers—our childrenand grandchildren—will ultimately have tofoot the bills.To lighten their load, we must mend our fiscally irresponsibleways, change current federal programs and tax policies, and createaclimate that is morefavorable to futureeconomic growth andgood government. If we do nothing, in the coming years the budgetwill have little room to address emerging national priorities andreal emergencies.
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Total Federal Debt (Percentage of GDP)
We cannot afford to wait for a crisis.By then,some options will be foreclosed,the cost of adjustment will be more severe,and the ensuing hardship on Americans much greater than if we act now.See pages 21-24 to learn what you can do.
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