Spring 2013 Update

April 11, 2013

Since 1992, GAO has published long-term fiscal simulations showing federal deficits and debt under different sets of policy assumptions.

GAO developed its long-term model in response to a bipartisan request from members of Congress concerned about the long-term effects of fiscal policy. GAO's simulations provide context for consideration of policy options. They are not intended to suggest particular policy choices or to predict the economic impact of any set of choices but to help facilitate a dialogue on this important issue. GAO regularly updates its simulations as new data become available. This update incorporates the Congressional Budget Office's (CBO) most recent 10-year baseline projections, which include the effects of the American Taxpayer Relief Act (ATRA) of 2012 enacted earlier this year. As in the past, GAO shows two simulations, which differ in the following ways: The Baseline Extended simulation follows CBO's February 2013 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 Budget Control Act (BCA) of 2011. After 2023, 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. Over the long term, revenue as a share of GDP is higher and discretionary spending lower than historical averages.

In the Alternative simulation, expiring tax provisions, such as the research and experimentation tax credit, are extended to 2023; revenues are then brought back to the historical average as a share of GDP. For the first 10 years, discretionary spending reflects the original caps set by the BCA but not the lower caps triggered by the automatic enforcement procedures. Over the long term, discretionary spending and revenue are held at historical averages.

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