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Presentation by The Honorable David M. Walker: Comptroller General of 
the United States: 

"America's Fiscal Future" 

Speech before the London School of Economics: 

London, England: 

March 14, 2006: 

United States Government Accountability Office: 


Thank you for that kind introduction. It's a great honor for my wife, 
Mary, and me to be here this evening. To my knowledge, this is the 
first time a Comptroller General of the United States has spoken at the 
London School of Economics. I'd like to acknowledge my good friend and 
counterpart here in the United Kingdom, Sir John Bourn, who has strong 
ties to this school. Finally, I'd also like to acknowledge that several 
of my colleagues are here this evening, including my counterparts from 
Morocco and Peru. I'd like to thank Professor Patrick Dunleavy and his 
staff for their help in arranging this lecture. 

I'm sure you've all heard the saying that the only sure things in life 
are death and taxes. But the truth is that there's a third certainty in 
our world, and that's the certainty of change. 

One vivid example is the changing relationship between our two 
countries. The American colonies and England were at war in 1776, and 
we were at war again as recently as 1815. But today, we're strong 
allies on many issues of mutual interest and concern around the world. 
I can assure you that this relationship means a lot to America and to 
Americans, including me. 

As we all know, during the last century, the United States played an 
increasingly important role in world affairs. For better or for worse, 
America's economic, foreign policy, military, and cultural influences 
have been increasingly felt on every continent and in every virtually 
nation. But no one should assume that this will be the case forever. 

As a student of history, I couldn't agree more with the famous remark 
from philosopher George Santayana that "Those who cannot remember the 
past are condemned to repeat it." As history makes clear, no nation has 
been able to sustain its preeminence indefinitely. In fact, it's highly 
likely that in the next 20 years we'll see the emergence of at least 
one and possibly more new superpowers. 

Nonetheless, in my view, the greatest threat to America's future isn't 
a new superpower or even persons hiding in a cave somewhere in 
Afghanistan or Pakistan. Instead, this threat is widespread, involving 
U.S. policymakers, the public, and even the press. What I'm talking 
about is a decline in societal values and political comity, combined 
with continuing ignorance and inaction on a range of known issues that 
are rapidly reshaping the United States and the world. I'm talking 
about known forces like changing demographics and global economic 
trends that are having an impact on a scale not seen since the 
Industrial Revolution. Unfortunately, these and other current and 
emerging challenges are getting too little attention, provoking too 
little concern, and prompting too little action. 

Today in America, both policymakers and the public need to face the 
facts, take a long-term perspective, and accept the need for dramatic 
reform and some shared sacrifice. After all, when our days on this 
earth are nearing an end, we should be able to look our children and 
our grandchildren in the eye and say we did everything we could to pass 
on a community, a country, and a world that's better off and better 
positioned for their future. Unfortunately, unless things change, the 
baby boom generation may be the first generation in our country to not 
continue this long-standing tradition. 

Tonight, I'm going to talk about the challenges facing the United 
States and Europe, many of which are shared challenges. I'm then going 
to talk about the United States' growing fiscal imbalance and what that 
may mean not just for us but also for the international community. 
Finally, I'm going to discuss what the United States needs to do to get 
its fiscal house in order. 

In today's world, no nation, including the United States, should try to 
go it alone. In fact, most developed nations now face a range of shared 
challenges that have no geopolitical boundaries. These challenges 
include such trends as the globalization of markets, enterprises, and 
information; changing demographics; new and emerging security threats; 
rapidly evolving technologies; and various quality-of-life concerns. 

Globalization has been marked by increasing economic interdependence 
and accelerated integration of the worldwide capital markets. NASDAQ's 
recent tender offer for the London Stock Exchange is a recent vivid 
example of this. A recent World Bank report found that between 1990 and 
2003, gross private capital flows in the United States, the United 
Kingdom, and several other EU member countries more than doubled 
relative to GDP. Labor markets, and regulatory environments that were 
once primarily national in focus, have also become more interdependent. 
More and more companies are becoming global in their reach, and their 
loyalties lie with their shareholders rather than a particular country. 

Perhaps the most striking aspect of world interconnectedness has been 
the globalization of information. Thanks to the Internet and other 
technology, there's virtually no lag time in the flow of information 
from one continent to another. This freer flow of information is a one 
reason that Eastern Europe is now free. 

Beyond globalization, known demographic trends will also decisively 
change the American and global landscape of 2020 and beyond. The 
populations in the United States and many other countries are aging. 
Diversity is also increasing. 

And yet, even with increased immigration, U.S. workforce growth is 
slowing and will continue to slow. This means that just when increasing 
numbers of baby boomers start to retire and draw benefits, there will 
be relatively fewer full-time workers to help support these retirees. 
What's more, people are living longer and yet hoping to retire earlier. 
All of these developments are going to put huge strains on our nation's 
pension and health care systems. 

Clearly, this is a challenge that America shares with Europe, Japan, 
and other parts of the developed world. Consider that last year, 16 
percent of the population in Britain, 17 percent of the population in 
Western Europe, and 12 percent of the population in the United States 
were over age 65. By 2030, those percentages are expected to rise to 21 
percent for Britain, 25 percent for Western Europe, and 19 percent for 
the United States. 

A relatively high personal savings rate in many European countries will 
help to cushion the impact of their aging populations. In 2003, the 
household net savings rate in Europe was about 10 percent of disposable 
income. According to OECD data, the savings rate in France that year 
topped 12 percent, and countries like Germany, Italy, Ireland, Norway, 
Switzerland, and Sweden weren't far behind. As I'll point out later, 
that's far from the case in America, where the annual savings rate has 
been extremely low in recent years and in 2005 actually declined to 
negative levels. 

Significantly, the elderly dependency ratios in both our countries and 
elsewhere in Europe are rising. An added challenge in many European 
countries is the prospect of falling birth rates and shrinking 
populations. In a nutshell, there are going to be relatively fewer full-
time workers to pay taxes and contribute to social insurance programs 
to support growing numbers of older individuals, many of whom are going 
to require expensive medical care. 

Another shared challenge is changing security threats. With the end of 
the Cold War, we face new security threats, including transnational 
terrorist networks and rogue states armed with weapons of mass 
destruction. This is a threat that affects each and every one of us, as 
was made clear by the attacks in the United States in 2001, the train 
blasts outside Madrid in 2004, and the bombings in London last summer. 

Other challenges come from technology. In recent decades, spectacular 
advances in technology have transformed everything from how we do 
business to how we communicate to how we treat and cure diseases. This 
has produced many benefits, including significant productivity gains in 
the workforce. However, because of technology, our countries are also 
struggling with privacy, information security, and other concerns. 
Sadly, the United States--which gave the world Thomas Edison, the 
Wright brothers, Jonas Salk, and Bill Gates--now ranks 25th in the 
world on math and science test scores. 

As I mentioned before, the quality of life of Americans and others has, 
in many ways, never been better. But America and many other countries 
also face a growing and unhealthy gap between the haves and the have- 
nots. We in the United States are also facing a range of quality-of- 
life concerns in our personal lives, including underachieving public 
schools; gridlocked city streets; as well as mounting energy, 
environmental, and health care concerns. 

On a per capita basis, the United States spends about double what the 
United Kingdom spends on health care. Today, nearly one out of every 
seven dollars in the U.S. economy goes for health care. Unfortunately, 
it's not at all clear that we Americans are getting a very good return 
on our health care investment. America's health care system is plagued 
by growing gaps in coverage, increasing numbers of uninsured 
individuals, and mediocre outcomes on basic measures like medical error 
rates, infant mortality, and life expectancy. If there is one thing 
that could swamp our ship of state, it's escalating health care costs. 
Health care reform won't be easy, but it's essential. What's needed are 
incentives for doctors and patients to make prudent choices about 
medical coverage and treatment, greater transparency on the quality and 
cost of care, and more accountability from health care plans and 

America's Four Deficits: 

While the United States and other countries confront many shared 
challenges, perhaps the most urgent issue for America is our 
deteriorating financial condition and worsening long-term fiscal 
outlook. I should point out that a long-term fiscal imbalance isn't 
just a U.S. problem. A 2005 European Commission report warned that 
because of the growing old-age dependency ratio in the EU, there is, 
and I quote, "a risk of unsustainable public finance emerging in about 
half of the EU Member States." Fortunately, the UK is not one of the 
referenced countries. In fact, the latest long-term finance report 
published by the Treasury, shows that the UK does not face the same 
challenges as the U.S. and selected EU countries. The difference is in 
the scope and potential impact of the U.S. situation. The truth is that 
the United States now confronts four interrelated deficits with serious 
implications for our standard of living at home and our role in the 

The first deficit we face is the federal budget deficit, which in 2005 
was around $319 billion on a cash basis. This widely reported number is 
somewhat misleading because it fails to take into account all the 
expenses the federal government incurred during the year. When these 
costs are included, using accrued accounting concepts, the federal 
government's net operating cost (or accrual based deficit) was actually 
$760 billion--the highest ever recorded in the United States. I should 
point out that, contrary to widespread belief, the incremental costs 
for homeland security and our war on terrorism equal only about $100 
billion of America's fiscal 2005 deficit. 

Even more troubling is that at the end of fiscal year 2005, the U.S. 
government's liabilities and unfunded commitments reached over $46 
trillion, up from about $20 trillion just five years ago. Among other 
things, this includes unfunded promises for future Social Security and 
Medicare benefits, military and civilian retirement benefits, 
environmental cleanups, and potentially large payouts for federal 
commitments under the Pension Benefit Guaranty Corporation or the 
National Flood Insurance Program. The new Medicare prescription drug 
benefit, which may be one of the most poorly designed, inefficiently 
implemented, and fiscally irresponsible government programs of all 
time, has added almost $9 trillion to our mounting burden. And these 
numbers don't even take into account the bills that are coming from 
rebuilding New Orleans and the Gulf Coast or future costs associated 
with Iraq and Afghanistan. 

The second deficit is our savings deficit. Too many Americans--from 
individual consumers to elected officials--are spending today as if 
there's no tomorrow. 

Last year, for the first time since 1933, our annual personal savings 
rate was negative. Think about it--the United States has returned to 
savings levels not seen since the depths of the Great Depression. 

Clearly, many Americans, like their government, are living beyond their 
means and are deeply in debt. This trend is particularly alarming in an 
aging society such as our own. Those Americans who save more will 
certainly live better in retirement. Those Americans who save less are 
rolling the dice, and given the problems plaguing our nation's social 
insurance and other retirement systems, the odds are stacked heavily 
against these individuals. Recent cutbacks in retirement benefits and 
pension freezes at major U.S. corporations like General Motors, 
Verizon, Motorola, and IBM underscore the seriousness of the situation 
for the typical American worker. 

So, who's been underwriting America's recent spending spree? The answer 
is foreign investors. And that brings me to America's third deficit-- 
our overall balance-of-payments deficit. America is simply spending 
more than it's producing. In 2005, the current account deficits and 
U.S. trade deficits hit all-time records, $805 billion and $724 
billion, respectively, twice what they were only four years earlier. 

Overseas money has been pouring into the United States. Thanks to the 
high saving rate in China, Japan, Korea, and elsewhere, it has been 
relatively cheap for America and Americans to borrow. But there's a 
catch, and it's a big one. Increasingly, we are mortgaging our 
collective future, and some of our leading lenders may not share our 
long-term economic and strategic interests. Imagine what would happen 
to the stock and bond markets if these foreign investors suddenly lost 
confidence in U.S. securities and decided not to buy or, worse yet, 
started to sell off their holdings. Candidly, we would likely face some 
adverse effects if they simply decided to further diversify their 
future acquisitions of various government securities. 

Finally, there's our fourth deficit, and it's probably the most 
sobering deficit of all. What I'm talking about is America's leadership 
deficit. Myopia and tunnel vision are now an epidemic in both 
government and private industry. At both ends of Pennsylvania Avenue in 
Washington, D.C., which runs from the White House to our Capitol 
building, both sides of the political aisle, and at all levels of 
government, there have been few champions for real and fundamental 
change. Instead, the government's continuing lack of fiscal discipline 
has made our long-term situation even worse. The government's recent 
spending sprees and deep tax cuts are nothing less than a body blow to 
overall fiscal responsibility. The truth is, if the U.S. government 
took a fiscal fitness test today, it would flunk. 

At the same time, Wall Street and the American business community have 
not been as vocal on this issue as they should be. In fact, many 
business leaders have essentially been "missing in action." But the 
private sector really does have a strong stake in this situation, 
because if government keeps on its present course, companies are going 
to pay a price, whether it's higher borrowing costs, rising tax 
burdens, or slower revenue growth. 

What we've got going are the elements of a perfect storm, a potent mix 
of ignorance, apathy, and inaction at all levels and all sectors of 
American society. If we continue on our present course, a fiscal crisis 
is only a matter of time. 

This should be a matter of concern to the rest of the world. The 
continuing health of the U.S. and other major economies helps to 
promote global stability and provide economic opportunities for both 
the developed and the developing worlds. As the old saying goes, in 
today's world, if America catches a bad cold, the rest of the world 
will eventually get the flu. In this case, prevention really is the 
best medicine. 

Restoring Fiscal Discipline: 

Although I may be one of the few voices back in the United States 
leading the charge on fiscal sanity, I try to do more than just explain 
the problem. I also suggest concrete ways to turn things around. This 
includes improving overall transparency and enhancing debate regarding 
what the U.S. government does and how it does business. The challenges 
I've discussed aren't partisan issues, and the solutions aren't either. 
Part of the problem is that too many U.S. politicians prefer to see 
things through a partisan prism. Issues are viewed in terms of how they 
will affect the next election cycle rather than the next generation. 

In my view, the first order of business for the U.S. government is to 
restore fiscal discipline. Greater transparency and accountability in 
government are essential. The important thing to remember is that if 
you're in a hole, you need to stop digging. 

For years, Americans have shrugged off warnings about America's deficit 
and debt problems. This response isn't surprising. Interest rates 
remain relatively low, inflation is modest, "official" budget 
projections don't seem unduly alarming, and some politicians continue 
to claim that "deficits don't matter" or that "we'll grow our way out 
of the problem." 

As a certified public accountant and the federal official who signs the 
audit report on the U.S. government's financial statements, I'm here to 
tell you that America's finances are far worse than advertised. 
Furthermore, deficits do matter, especially if they are large, 
structural, and growing in nature. 

Every year, the U.S. government issues a comprehensive financial 
statement. For a ninth year, my agency, the U.S. Government 
Accountability Office (GAO), could not express an opinion on the 
reliability and completeness of the financial information in these 
statements. We also found a number of significant material control 
weaknesses. Furthermore, we included an "emphasis paragraph" noting 
that the U.S. government has a broken business model and that dramatic 
and fundamental change is essential to restore our long-term fiscal 

A major problem is the government's escalating liabilities and unfunded 
promises for social insurance and other programs, which, as I said 
before, now top $46 trillion. This amounts to $156,000 per American or 
$375,000 per full-time worker. These numbers deserve far more 
prominence and discussion in the government's financial statements. We 
also need to explain the intergenerational implications of this burden, 
which is growing every second of every day because of continuing 
deficits, demographic destiny, and compounding interest costs. 

Clearly, a crunch is coming, and all of the federal government will 
eventually feel its impact. Long-range simulations from my agency show 
that if we continue on our present path, increasingly drastic measures 
on spending and/or taxes will be required to balance the budget. If 
nothing is done, by 2040, federal government revenues may be enough to 
pay only partial Social Security benefits and interest on the national 

Under such scenarios, higher interest rates and inflation are 
inevitable. As the U.S. government is forced to borrow more money to 
finance its debt, less money will be available for U.S. companies to 
innovate, improve, and stay competitive. Eventually, long-term economic 
growth will suffer, and along with it American jobs, our standard of 
living, and, over the long term, even our national security. 

So as you can see, it does matter how a nation keeps score. After all, 
if a government cannot be honest with itself and with its citizens 
about its finances, how can a government ever make the difficult policy 
choices needed to help secure a nation's future? 

Federal Accountability Reforms: 

Ironically, America tends to be more open and transparent than much of 
the world when it comes to government finances. Even so, the United 
States needs to modify its federal accounting and reporting model to 
more accurately reflect America's true financial condition and long- 
term fiscal outlook. 

For example, there should be more explicit discussion about the 
relationship of the federal government's existing commitments and 
responsibilities, including social insurance, to measures like the 
gross domestic product and various per capita figures. There should be 
more explicit discussion about the federal government's long-term 
financial imbalance relative to measures like GDP, which is now used by 
the EU and their intergenerational complications. There should also be 
more explicit discussion about the size of tax increases or spending 
cuts needed to bring the government's finances into balance. 

Accurate, timely, and useful information on federal operations is 
vital, but policymakers and the public also need information in a 
format that they are likely to read and understand. That's why my 
agency, the U.S. Government Accountability Office, strongly advocates 
creating a summary annual report for the federal government, a document 
that would be not only useful but used. 

Existing budget processes also need to be reformed. Right now, we need 
to set realistic spending caps and impose pay-as-you-go rules on both 
the spending and the tax sides of the ledger. Members of Congress 
should have more explicit information on the long-term costs of 
spending and tax bills--before they vote on them. Our new Medicare 
prescription drug benefit has become the poster child for much-needed 
changes in this area. 

Transforming Government: 

Today much of the U.S. government's spending programs and tax policies 
remain on autopilot and are based on social, economic, national 
security, and other conditions straight out of the 1950s and 1960s. 

It's time we started asking what the proper role of the government 
should be in the 21st century. How should it be organized? How much 
will it cost, and how will we pay for it? 

Nothing less than a top-to-bottom review of federal activities is 
needed to determine which agencies are meeting their objectives and 
which agencies aren't. This will also help free up resources for other 
needs. Congress and the President need to decide which policies and 
programs remain priorities, which should be overhauled, and which have 
simply outlived their usefulness. 

Entitlement reform is particularly essential. We need to restructure 
our Social Security, Medicare, and Medicaid programs and make them 
solvent and sustainable over the long run. We also need to reengineer 
the base of federal spending and tax policies. 

To help in this effort, GAO has published an unprecedented report that 
asks a series of probing questions about both mandatory and 
discretionary spending and tax policy. For example, can we better 
allocate resources across the armed services to address current and 
future security threats? Is it time to reconsider some long-standing 
tax incentives, such as the health care income and payroll tax 

I should stress that while GAO isn't a policymaking institution, 
decades of experience and expertise put GAO in a unique position to 
help stimulate discussion and debate. Our report is called "21st 
Century Challenges: Reexamining the Base of the Federal Government," 
and you can find it free on our Web site at 

I'm also hopeful that GAO's work will encourage the development of a 
set of key national indicators. These are quantitative and outcome- 
based measures that policymakers can use to better assess the United 
States' position and progress over time in relation to other nations on 
benchmark issues like public safety, health care, housing, and the 
environment. For years now, several foreign governments have been using 
indicators to successfully prioritize and target public resources. It's 
time the U.S. government did so as well. 

Transforming the U.S. government won't happen overnight. Elected, 
appointed, and career officials will need to work together for a 
sustained period of time--perhaps a generation or longer. Government 
also needs to look outward and reach across institutional and political 
lines. In the coming years, businesses, professional organizations, 
universities, and nonprofit groups will be important sources of new 
ideas to address old problems. And American politicians will need to 
start caring more about what's right for our country rather than what's 
right for their party. In the end, it'll take patience, persistence, 
perseverance, and even pain before we finally prevail in our overall 
transformation efforts. But prevail we must. 

The New GAO: 

Supreme Audit Institutions (SAIs) are dedicated to speaking truth, 
promoting transparency, fighting corruption, improving government 
performance and assuring accountability to the people. Like the NAO in 
the U.K. and GAO in the U.S., SAIs have a vital role to play in drawing 
attention to serious fiscal and other problems in government. Insulated 
from day-to-day political pressures and with a reputation for 
professionalism, independence, and integrity, SAIs are uniquely 
positioned to make a difference in a range of government operational 
areas. SAIs can also play a key role in helping to evaluate government 
programs and policies and develop possible solutions to many of the 
public policy challenges I've discussed this evening. 

Increasingly, this process will need to be collaborative. Progress will 
depend on a willingness to partner with one's peers. Ultimately, the 
goal should be global convergence on major accounting and audit 
standards, reporting models, and audit reports. This is why GAO has 
been working so closely with our overseas counterparts and with 
accountability organizations around the world, notably the 
International Organization of Supreme Audit Institutions (INTOSAI). 
Other areas of significant progress include the development of ethical 
codes for government auditors and the establishment of best practices 
on vital issues like public debt management, environmental auditing, 
and privatization. 

In this context, I think it's worth discussing briefly some of the 
changes we've made at GAO to lead by example and better position 
ourselves for the future. GAO is sometimes called the "investigative 
arm of Congress" or the "Congressional watchdog." We're in the business 
of helping government work better and holding it accountable to the 
American people. To this end, GAO provides Congress with oversight of 
agency operations, insight into ways to improve government services, 
and foresight to help address emerging challenges before they reach 
crisis proportions. 

Most GAO reports go beyond the question of whether federal money is 
being spent appropriately. Instead, we typically look at whether 
federal programs and policies are meeting their objectives and the 
needs of society. GAO also typically looks at the results that 
departments and agencies are getting with the taxpayer dollars they 
spend. After all, the public is always interested in whether they're 
getting good value for their money. 

The scope of GAO's work includes virtually everything the federal 
government is doing or thinking about doing anywhere in the world. You 
might be surprised to learn that GAO teams have been in Iraq recently 
looking at everything from military logistics to contracting costs to 
the U.N.'s oil-for-food programs. We've also been down in New Orleans 
and the Gulf Coast looking at the government's emergency response 
efforts in the wake of Hurricane Katrina. 

Our work has impact because politicians can count on GAO to get the 
facts and conduct professional and nonpartisan analysis. Unlike most 
players in the nation's capital, GAO has no hidden agenda and we're 
objective. That's why both Democrats and Republicans alike use GAO 
reports as the basis for hearings, floor statements, and legislation. 
In news stories, GAO continues to be one of the most cited sources 
anywhere in the United States and the world. 

When I became Comptroller General and head of the GAO more than seven 
years ago, I made GAO's own transformation a top priority. As 
Comptroller General, I serve a 15-year term of office, the longest 
appointed term in the U.S. government. This long term helps insulate 
GAO from day-to-day political pressures, and it's also allowed me to 
oversee a range of internal changes to enhance GAO's performance, 
ensure our accountability, and help better position us for the future. 

In just seven years, by attempting to lead by example and working 
together internally and with Congress, we've taken GAO from an "at- 
risk" federal agency to a "model federal agency." We're much more in 
step with the information needs of policymakers and the public, and 
we're well prepared to take on Congress' toughest audit assignments. 

The keys to our success are straightforward: 

* We seek to lead by example in all major operational areas. 

* We focus on outcome-based results. 

* We meet the legitimate needs of our congressional clients. 

* We hire great people, empower them, listen to their concerns and 
suggestions, invest in them, and reward their performance. 

* We continually invest in new technology. 

* And we partner with other organizations, both at home and abroad, on 
issues of mutual interest and concern. 

GAO now has a strategic plan in place to help guide and coordinate the 
agency's efforts. Incredibly, this is an idea that is only now 
beginning to take hold in the U.S. government. In the case of GAO, the 
strategic plan defines our mission, incorporates our core values, lays 
out the key trends and themes we plan to look at, and outlines the 
agency's goals and objectives. We update the plan every couple of years 
to reflect changing congressional needs and national priorities. 

GAO's own strategic goals are ambitious but straightforward. We seek to 
produce positive and measurable results for Congress and the American 
people. We try to meet Congress' information needs. We want to help 
reinvent government to ensure that it keeps pace with the current and 
emerging challenges. And finally, we seek to be a world-class 
professional services organization that just happens to be in the 
federal government. 

Getting and reporting on results has been central to GAO's 
transformation efforts. Since 2000, GAO has issued annual performance 
and accountability reports that inform Congress and the American people 
about GAO's accomplishments and its plans for the coming year. Our 
progress in meeting each strategic goal is also highlighted. For 
example, in fiscal year 2005, GAO's work produced nearly $40 billion in 
measurable financial benefits. That's an $83 return on every dollar 
invested in GAO. 

We also made thousands of recommendations to improve government 
operations. And as our most recent annual report notes, a record 85 
percent of these recommendations are being acted on by Congress or the 
relevant agency. Frankly, this sort of straightforward cost/benefit 
reporting needs to become standard throughout the U.S. government. In 
my view, the American people have a right to know what federal 
departments and agencies have been doing with the taxpayer dollars 
they've been given. 

Internally, GAO is now a flatter, more flexible, more results-oriented, 
and more cooperative organization. We've modernized our technologies. 
We've also transformed our human capital policies and practices to 
attract top talent and reward outstanding performance. I'm proud to say 
that we're now a recognized leader in these and other areas. 
Externally, GAO regularly partners with other government agencies and 
outside organizations dedicated to good government. If GAO can do it, 
others can too. 

Leading Change to Mitigate Risk: 

I'm a big believer in three basic principles of good government. Those 
principles are truth, transparency, and accountability. Sound public 
policy is based on solid facts and unbiased analysis, not spin. That's 
one reason GAO exists and why I take seriously my responsibility to 
speak out on a range of complex and sometimes controversial issues, 
issues that cry out for attention and action. 

I strongly believe that with objective, fair, and balanced information 
on government activities, the U.S. Congress is better positioned to 
make reasoned and responsible policy decisions that are in the best 
interests of the nation and its citizens. Solid information on 
government activities also helps ensure that no one is above the law 
and that every public office holder must answer to the American people. 

Being the head of GAO isn't always an easy job, and some people don't 
value truth and transparency. But as Harry Truman once said about his 
nickname of "Give 'Em Hell Harry," "I never give anybody hell. I just 
tell them the truth and they think it's hell." I can assure you that 
GAO and I will continue to speak truth to power and tell it like it is. 

Sometimes the folks over on my side of the Atlantic can seem to dither 
and delay until they're fully convinced of the need to act. Time and 
again, under far more dire circumstances, Winston Churchill had to make 
the case for greater American involvement in the war effort. 
Thankfully, Churchill was persistent and persuasive. But the truth is 
that once we Americans get behind an issue, watch out! 

The difficulty right now is a lack of clear and sustained leadership to 
show us the way forward. Today, it's clear that to deal with America's 
current and emerging challenges, we're going to need effective leaders 
in all sectors of society and at all levels of government. Leadership 
also needs to come from the private and nonprofit sectors, academia, 
and the media. 

In the final analysis, these leaders are going to need to have four key 
attributes: courage, integrity, creativity, and stewardship. 

We're going to need leaders who have the courage to state the facts, to 
speak the truth, and to do the right thing, even when it isn't popular. 
It's critical that those in positions of power and trust set their 
sights higher than what's prescribed by law or regulation, which 
generally represents the "floor," or minimal standard of acceptable 
conduct, and not the desired state. We need individuals who strive to 
meet a higher set of moral and ethical standards. 

We're going to need leaders who have the integrity to lead by example 
and to practice what they preach. We're going to need leaders who are 
able to innovate and develop new solutions to old problems and help 
show others the way forward. Finally, we're going to need leaders who 
take their stewardship responsibilities seriously. These individuals 
understand that their job is not just to leave things better off when 
they leave than when they came but also to leave things better 
positioned for the future. 

Recent history provides two examples of countries who leaders took very 
different approaches to looming challenges. Before World War II, 
Argentina was one of the most prosperous nations in Latin America. 
Today, largely because of a combination of poor policy choices and 
outright inaction, Argentina has serious economic problems. In 2001, 
Argentina experienced the largest public debt default in history, and 
its standard of living has steadily declined. 

On the other hand, there's the example of New Zealand. Like the United 
States and Europe, New Zealand has an aging population. Unlike the 
United States, New Zealand has taken steps to deal with the growing 
burden associated with its government pension system and other public 
benefits. New Zealand is a work in progress, but at least its leaders 
have acknowledged the challenges at hand and have begun to address 

It's time the United States and many other nations faced up to the 
challenge of our changing world. Because the truth is, thanks to the 
forces of globalization and other long-term trends, whether we live in 
Washington, London, or Beijing, we're increasingly in the same boat. As 
I said before, no country can or should go it alone. We're going to 
have to partner with each other to develop shared solutions to these 
problems. The choice is simple. We can start rowing together or we can 
risk sinking separately. 

As a republic, the United States has existed for a little more than 200 
years. In the context of both English and world history, I know that's 
not a long time. For example, the Roman Republic endured for about 500 
years, before it finally fell--more than twice as long as the American 
experiment in representative government has lasted so far. The Roman 
Republic ended for many reasons, but three seem particularly relevant 
to today. The first reason was a decline in moral values and political 
comity at home. The second reason was overconfidence and overextension 
abroad. The third reason was fiscal irresponsibility on the part of the 
central government. 

As I pointed out earlier, by learning from history, we can avoid 
repeating the mistakes of the past. We can and we must address the 
challenges I've discussed. And we need to do it sooner rather than 
later, while there's still a window of opportunity to act. 

For many of the challenges I've mentioned, a few substantive reforms 
phased-in over time will make a huge difference. That way, we can 
minimize the need for drastic measures down the road and give all of 
our citizens more time to adjust to any changes. 

In closing, America has faced great challenges in the past and we have 
always risen to face the challenge. I am convinced that we can, we must 
and eventually we will ultimately rise to meet this challenge. My 
efforts are designed to help to ensure that we do so sooner rather than 
later not just for our country's sake, but for the sakes of our 
children, grandchildren, and others who will suffer in the wake of our 
problems if we fail to act. The time for action is now! 

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