US urged to take action to stem rising debt

13 Nov 14

The United States needs to either cut spending or increase taxes by around $18.4bn to stop its national debt levels from rising, a senior accountant in the country’s public accountability body has said. 

By Richard Johnstone in Rome | 13 November 2014

Speaking to the World Congress of Accountants today, Bob Dacey, chief accountant at the US Government Accountability Office, said the body would publish the country’s first fully-audited report on fiscal sustainability after the 2015/16 financial year.

Dacey said the audited statement of long-term fiscal projections would set out the predicted ‘fiscal gap’ over the next 75 years, based on the present value of expected receipts and projected non-interest spending over 75 years. A fiscal gap is defined as the gap between government spending and revenues that needs to be closed to keep total debt levels constant, which currently stand at 72% of gross domestic product.

The statement, which has been under development in a non-audited form since 2010/11, showed that in 2013/14, the gap stood at 1.7% based on assumptions that current programmes will continue.

This amounted to $18.4bn, Dacey told delegates, which ‘cannot be sustained’.

‘Our debt to the public would increase substantially over time, and in effect on our definition we are not sustainable. There needs to be some change or action to deal with it.

‘Our fiscal gap indicates that we would need to increase receipts and/or decrease spending by about 1.7% of GDP in order to keep our debt at its current, and more if we wanted to reduce it in any way. We are talking substantial change if in fact, as a matter of policy, we can’t control those costs or make policy decisions that we need to have additional funding to cover them.’

Even this projection is based on the cost of government healthcare support programmes – Medicare and Medicaid – increasing on the basis of GDP plus 0.2 percentage points. However, Dacey said he was optimistic as spending in this area has historically grown faster, which would further increase the fiscal gap.