Budget and Spending:
America At A Crossroads
GAO-07-171CG, Oct 23, 2006
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This speech was given by the Comptroller General before the Independent Sector's CEO Summit in Minneapolis, Minnesota on October 23, 2006. America faces a range of current and emerging challenges, many of which know no geopolitical borders or sectoral boundaries. I'm sure that many of these issues will be familiar to you and to your organizations. Let me start with possibly the most sweeping agent of change, and that's demographics. Our fiscal challenge overarches every major public policy spending and tax issue. In my view, America now faces not one but four interrelated deficits. These deficits have serious implications for our role in the world, our future standard of living, and even our long-term national security. To meet the changes and challenges that are coming, government transformation is essential. The challenges I've been discussing aren't partisan issues, and the solutions won't be either. More than ever, our government needs a strategic plan to help guide its efforts not just over the coming years but over the coming decades. Such a strategic plan needs to have meaningful goals and metrics that both members of Congress and the public can readily understand. Our government can't go it alone. Public officials have to show a greater willingness to partner for progress not just with their colleagues across government but also with their counterparts in the private, academic, and independent sectors, both domestically and internationally. What role can the independent sector play? Fortunately, we have a long and proud history in this country of private citizens who have committed themselves to the greater good by endowing universities, underwriting medical research, establishing museums and cultural institutions, and creating and funding foundations. Today, nonprofits have an opportunity to contribute to the "greater good" in several ways: By conducting or funding research, educating the public, promoting constructive engagement, performing certain functions in cooperation with government, and other activities.
Demographics will decisively shape both the American and the global landscape in the future. Our population is aging. At the same time, U.S. workforce growth is slowing. This means that just when increasing numbers of baby boomers start to retire and draw benefits, there will be fewer workers paying taxes and contributing to social insurance programs. Importantly, retirees are living longer but wanting to retire earlier, even if they can't afford to. These developments are going to put huge strains on our pension and health care systems as well as our nation's labor supply, which is critical for future economic growth in a knowledge-based economy. The first deficit is the federal budget deficit. As you probably know, federal budget deficits have reappeared in recent years. It's no mystery why: Spending is out of control, and we've seen a series of major tax cuts. While this year's deficit was lower than last year's, it's premature to start rejoicing. Our unified and operating budget deficits are still imprudently high given our approaching demographic tsunami of spending. And both the Office of Management and Budget (OMB) and the Congressional Budget Office (CBO) have predicted next year's deficit will rise sharply. The second deficit is our savings deficit. The savings rate for U.S. consumers has been falling for some time. In calendar year 2005, for the first time since 1933, the annual personal savings rate in the United States sank to negative territory. Think about it. We've returned to savings levels not seen since the depths of the Great Depression. America now has the lowest overall savings rate of any major industrialized nation. The third deficit is our country's balance-of-payments deficit. America is simply spending more than it's producing. In 2005, our trade deficit hit $726 billion, up more than $100 billion from a year earlier. Finally, there's our fourth deficit, and it's probably the most serious and sobering deficit of all. What I'm talking about here is America's leadership deficit. We've got to stop digging our fiscal hole deeper. For starters, Washington needs to face facts and improve transparency over where we are, where we're headed, and why change is essential. Current federal budgets and financial information often provide policymakers and the public with a misleading picture of our government's true financial health and long-range fiscal outlook. It's crucial that we impose meaningful budget controls on both the tax and the spending sides of the ledger. Members of Congress should also have more explicit information on the long-term costs of spending and tax bills--before they vote on them. 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 timely and informed discussion and debate. Government transformation is a slow process, and it's going to take the sustained effort of a lot of players over many years before we're likely to see substantive and sustainable changes. Turning things around won't be easy, and it's not going to happen overnight. But we all need to be part of the solution. By applying our collective energy, expertise, and experience to looming problems; by making some difficult decisions; and by accepting some degree of shared sacrifice, we can ensure a brighter future for this great nation, for our children and grandchildren, and for those who will follow them.