The United States took a potentially significant step towards fiscal sustainability in 2010 by reforming its system of health insurance. The legislated changes for Medicare, Medicaid, and other health coverage hold the prospect of lowering the long-term growth trend for future health care costs and significantly reducing the long-term fiscal gap. Furthermore, enactment of the Budget Control Act in August 2011 placed limits on future discretionary spending and established a process to assure further deficit reduction of $1.2 trillion over 10 years. But even with the new laws, the projections in this Report indicate that if policy remains unchanged then the debt-to-GDP ratio will continually increase over the next 75 years and beyond, which means current policies are not sustainable and must ultimately change. Subject to the important caveat that policy changes are not so abrupt that they slow the economic recovery, the sooner policies are put in place to avert these trends, the smaller are the revenue increases and/or spending decreases necessary to reach a target debt-to-GDP ratio in 2086 and return the Nation to a sustainable fiscal path.
The projections presented in this Report assume current policies remain unchanged so as to inform the question of whether current fiscal policy is sustainable and, if it is not sustainable, the magnitude of needed reforms to make it sustainable. The projections are therefore neither forecasts nor predictions. If policy changes are enacted, perhaps in response to projections like those presented here, then actual financial outcomes will of course be different than those projected. While this these projections of expenditures and receipts under current policies are highly uncertain, there is little question that current policies cannot be sustained indefinitely.