Transcript Federal Deficits Fiscal Years 2007 and 2008

Impact of Financial Crisis
on U.S. Public Debt
INTOSAI Public Debt Working Group
Kyiv, Ukraine
October 2009
Jose Oyola, PhD, CPA
U.S. Government Accountability Office
([email protected])
1
Outline
• U.S. Federal Debt – Past Performance and
Projections
• U.S. Long-Term Fiscal Outlook
• Oversight Roles of GAO
2
US Federal Debt Held by the Public, 2001 to 2019
65%
$12
82%
79%
79%
77%
75%
73%
Pe rce nt o f GDP
90%
17.1
15.9
14.4 15.4
13.5
80%
70%
12.6
57%
$14
71%
69%
$16
70%
In t rillio ns
$18
11.8
60%
11.1
10.3
50%
9.4
41%
37%
4.6
4.8
37%
38%
36%
34%
33%
$8
37%
$10
8.0
40%
5.8
$6
$4
3.9
3.5
3.3
4.3
30%
5.0
20%
$2
10%
Act ual
De bt He ld by t he Public:
19
20
18
20
17
20
16
20
15
20
14
20
13
20
12
20
11
20
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
20
20
02
0%
01
$-
Pro je ct e d
De bt He ld by t he Public ( As a Pe rce nt age o f Gro s s Do me s t ic Pro duct )
Source: GAO Analysis of CBO Data
3
US Treasury Marketable Securities by Year of Maturity,
(as of June 30, 2009, US$6.6 trillion)
4
U.S. Federal Net Interest Costs, 2000 to 2019
GAO Study on Treasury Inflation Protection Securities (TIPS):
Issuance, Announcements & Relative Costs, 1997-2009
In Billio ns
Ye ar-t o -Dat e TIPS Is s uance
Ave rage 10-Ye ar Bre ake ve n Rat e minus Ex pe ct e d Inflat io n
$90
0.6%
Treasury
speech and
expansion of
0.4%
TIPS 3
$80
Pe rce nt
Treasury speeches and
0.2%
expansion of TIPS2
$70
0.0%
Treasury
speeches and
expansion of
$60
-0.2%
TIPS1
$50
-0.4%
$40
-0.6%
-0.8%
$30
-1.0%
$20
-1.2%
$10
-1.4%
$-
-1.6%
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Source: GAO Analysis of Treasury TIPS Issuances and Federal Reserve Bank of Philadelphia's Survey of Professional Forecasters Inflation Expectations
1 Treasury official announcement on expansion of TIPS on 5/1/2002. Treasury speech on TIPS on 6/3/2002, 10/17/2002, 11/8/2002, and 12/5/2002
2Treasury official announcement on expansion of TIPS on 4/30/2003. Treasury speech on TIPS on 5/20/2002 and 6/26/2003
3Treasury official announcement on expansion of TIPS on 5/4/2004. Treasury speech on TIPS on 6/16/2004
2008
May-09
Long-Term Fiscal Challenges
• Today’s focus—understandably—is on dealing with financial
system stress & addressing the economic downturn
• BUT…. long-term fiscal challenge still need to be addressed:
• Driving factors: demographics and health care costs
• As the baby boom generation retires, federal spending on
retirement and health programs—Social Security,
Medicare, and Medicaid—will grow dramatically
(http://www.gao.gov/transition_2009/outlook/)
http://www.gao.gov/special.pubs/longterm/
7
Long-Term Fiscal Outlook in the United States
Revenues and Spending as a Share of Gross Domestic Product
Under GAO’s Alternative Simulation
Source: GAO’s March 2009 analysis.
8
Long-Term Fiscal Outlook in the United States
Interpreting Long-term Simulations
• Long-term simulations provide illustrations--not precise
forecasts--of the relative fiscal outcomes associated with
alternative policy paths.
• These simulations are not predictions of what will happen
in the future as policymakers would likely take action to
prevent damaging out-year fiscal consequences.
Long-Term Fiscal Outlook in the United States
Debt Held by the Public as a Share of GDP
under Two Different Fiscal Policy Simulations
200
Percent of GDP
Alternative
Baseline
Extended
150
Historical High
109 percent in 1946
100
50
0
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
Fiscal year
Source: GAO’s analysis of Social Security Administration and Medicare data. (See GAO, The Nation’s Long-Term Fiscal Outlook
March 2009 Update, GAO-09-405SP (Washington, D.C.: April 30, 2009).
Roles of GAO
Enhancing Transparency & Supporting Accountability
• Oversight
• US $700B Troubled Asset Relief Program (TARP)
• US $787B American Recovery and Reinvestment Act (ARRA)
• Financial Audits
• U.S. Government Financial Statements & major programs (deposit &
mortgage insurance)
Preventing Future Crises
• Produce framework to analyze proposals to change financial
regulatory system
• Participate in INTOSAI Task Force on Global Financial Crisis
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Enhancing Transparency &
Supporting Accountability
12
Preventing Future Crises:
Modernize the U.S. Financial
Regulatory System
Financial Regulation: A Framework for Crafting and Assessing
Proposals to Modernize the Outdated U.S. Financial
Regulatory System
•
•
•
•
Clearly defined regulatory goals in statute (protection of consumers)
Comprehensive (close gaps in oversight over mortgage lenders,
rating agencies and derivatives (credit default swaps))
Consistent oversight (over firms, products and service that pose
similar risks)
Sufficient authority to take prompt corrective actions to reduce
systemic risks (e.g., creation of clearinghouse of derivatives,
regulation of too-large-to-fail firms)
(GAO-09-216, Jan. 8, 2009)
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Preventing Future Crises:
Global Financial Crisis Task Force
of Supreme Audit Institutions (SAIs)
• Created by INTOSAI Governing Board in November 2008
• Purpose:
• Enhance the knowledge base of SAIs on financial and
economic matters related to the crisis
• Provide a source of information to help governments and the
global community respond to the crisis
• Membership:
Austria
Finland
Mexico
Slovakia
Canada
Hungary
Morocco
Spain
Chile
Indonesia
Netherlands
Sweden
China
Italy
Poland
United Kingdom
Cyprus
Japan
Russia
United States (Chair)
Denmark
Korea
Saudi Arabia Venezuela
Estonia
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