GAO again warns Congress about nation's 'unsustainable fiscal path'

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(The Center Square) – A federal watchdog warned Congress on Friday about the nation's mounting fiscal dangers, urging lawmakers to address what it called an "unsustainable fiscal path."

The Government Accountability Office released a report examining federal debt management, cautioning that the government's long-term financial trajectory is untenable due to a persistent gap between revenue and spending.

"The federal government's unsustainable fiscal path poses serious economic, security, and social challenges if not addressed," according to the report.

The GAO’s warning highlights growing concern about the federal government’s escalating debt and recurring budget deficits, which threaten U.S. economic stability and global creditworthiness. As Congress weighs proposals to rein in deficits, experts caution that failing to close the gap between spending and revenue could have dire consequences for taxpayers and the broader economy.

The GAO, the nonpartisan research arm of Congress, said lawmakers must act.

"Congress has a critical role to play in addressing risks to the Treasury market stemming from the unsustainable fiscal path and the debt limit," the GAO report said. "Taking action to address these risks would help ensure the continued broad-based demand for Treasury securities, reinforce the global role of the U.S. dollar, and support Treasury's efforts to finance government borrowing at the lowest cost over time."

While the dollar remains the world's reserve currency, the GAO report noted that it could change.

"Even gradual or partial erosion of the dollar's status could reduce demand for Treasury securities as investors shifted to other assets," the report noted. "All else being equal, this would raise borrowing costs for the U.S. government and taxpayers."

The GAO has repeatedly warned Congress about the imbalance between spending and revenue since at least 2017. In 2020, it recommended that lawmakers adopt a fiscal plan with clear rules and targets for managing deficits.

The national debt stands at $39 trillion, according to the Treasury Department.

In February, the International Monetary Fund warned that U.S. debt is likely to remain elevated in the coming years. It also found that U.S. debt poses risks to both the U.S. and the global economy.

"The conclusion is that the current account deficit is too big," IMF Managing Director Kristalina Georgieva said at the time.

Lawmakers have introduced a bipartisan proposal to cap annual deficits at 3% of GDP, but the resolution would still permit spending beyond annual revenue for years to come.

Congress has run budget deficits for more than two decades, with the last surplus recorded in 2001. Spending has outpaced revenue ever since, and annual deficits ballooned during the COVID-19 pandemic.

In fiscal year 2025 alone, the deficit reached $1.7 trillion, about 6% of GDP. The last time Congress passed a budget below the 3% target was in 2015, according to the resolution.

The national debt is driven by chronic overspending, rising costs for Social Security and Medicare as the population ages, and increasing healthcare expenses. As debt piles up, the federal government also faces higher interest payments.

Last May, the U.S. lost its final AAA credit rating when Moody's downgraded the country, joining S&P Global and Fitch. Fitch had lowered the U.S. rating in 2023, and S&P Global did so in 2011.