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Government watchdog: US debt is unsustainable

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TIMOTHY A. CLARY/AFP/Getty Images

The ever-growing federal debt is on an unsustainable path and requires swift action from Congress, according to a new report from the Government Accountability Office.

The study, which was sent to President Barack Obama and congressional leaders, said the federal government is "highly leveraged in debt by historical norms and on an unsustainable long-term fiscal path caused by a structural imbalance between revenue and spending."

One of the leading concerns addressed by the auditors is that, given the budget is so strained, there is no wiggle room should an emergency situation — such as wars, economic, financial or weather-related crises — arise, requiring a federal fiscal response.

The government collected nearly $3.3 trillion in taxes in fiscal year 2016, which, according to the Washington Free Beacon, is $11.3 billion more than in 2015. However, the government's gross total costs came in at around $4.5 trillion.

The government's net operating cost, the difference between the money coming in and the money going out, rose to an astonishing $1.05 trillion in fiscal year 2016 — more than double the previous fiscal year, which was $514 billion.

Furthermore, due to increased spending on health care and heightened interest rates on the national debt, the federal deficit increased to $587 billion in 2016, up from $438 billion in 2015. Despite this concerning trend, Obama's Treasury secretary, Jack Lew, called the White House's fiscal path a "solid foundation" for the next president.

"We have built a solid foundation for continued investment in economic growth and opportunity for all, while maintaining fiscal discipline and using fiscal space appropriately to grow the economy," he said in October.

The federal departments responsible for the largest chunks of the government's net operating cost were Health and Human Services, Veterans Affairs, the Department of Defense and the Social Security Administration.

Spending on Medicare and Social Security increased by $45 billion and $37 billion, respectively, according to the watchdog report. In addition, the Defense Department's spending on military operations, retirement benefits and readiness increased by $47 billion.

Congress and President-elect Donald Trump will "need to consider policy changes to the entire range of federal activities and spending— entitlement programs, other mandatory spending, discretionary spending, and revenue" in order to get the U.S. fiscal house in order, the report determined.

"As budget deficits continue to occur, the government will have to continue to borrow from the public," the study also states. "Instances where the debt held by the public increases faster than the economy for extended periods can pose challenges to the sustainability of current fiscal policy."

The GAO report also highlighted the staggering amount of debt held by the public as a share of GDP — 77 percent. In fiscal year 2015, the debt-to-GDP ratio was 74 percent, well above the historical average of 44 percent since 1946. Even more startling, unless there are major financial changes imposed, the study projects "that the debt-to-GDP ratio would surpass its historical high of 106 percent within 15 to 25 years."

The GAO described the current financial situation in the U.S. as "unusual." When the debt-to-GDP ratio hit 106 percent in 1946, the government was increasing defense spending for World War II. It is worth noting, too, that the U.S. wasn't hampered at the time by large deficits incurred by federal spending that surpassed tax revenue.

"Our report on the U.S. government’s consolidated financial statements for fiscal years 2016 and 2015 underscores that much work remains to improve federal financial management and that the federal government continues to face an unsustainable long-term fiscal path," auditors concluded.

One way to immediately improve the fiscal outlook, the GAO explained, would be to cut out improper payments, which is when the government gives federal funds to the wrong recipient, the wrong amount of funds is given, documentation to support receiving the funds is not available or the recipient uses the federal funds in the wrong way.

According to the GAO, the government has handed out more than $1 trillion in improper payments since fiscal year 2003.

Obama has played an undeniable role in the exorbitant increase of the federal debt. When he took office on Jan. 20, 2009, the debt was at $10.6 trillion. Today, it is at nearly $20 trillion.

It is important to note that, though President-elect Donald Trump, who takes the oath of office Friday, has vowed to decrease the debt, he has simultaneously guaranteed tax cuts and increased spending on the military and infrastructure.

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