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260CG entitled '21st Century Transformation Challenges and
Opportunities' which was released on October 31, 2007.
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United States Government Accountability Office:
GAO:
21st Century Transformation Challenges and Opportunities:
The Honorable David M. Walker:
Comptroller General of the United
States:
The Coast Guard Innovation Expo:
New Orleans, LA:
October 30, 2007:
GAO-08-235CG:
The Case for Change:
The federal government is on a “burning platform,” and the status quo
way of doing business is unacceptable for a variety of reasons,
including:
* Past fiscal trends and significant long-range challenges;
* Selected trends and challenges having no boundaries;
* Additional resource demands due to Iraq, Afghanistan, incremental
homeland security needs, and recent natural disasters in the United
States;
* Numerous government performance/accountability and high risk
challenges;
* Outdated federal organizational structures, policies, and practices;
* Rising public expectations for demonstrable results and enhanced
responsiveness.
Composition of Federal Spending:
[See PDF for image] - graphic text:
There are three pie charts, containing the following compositions of
spending by category:
Year: 1966;
Defense: 43%;
Social Security: 15%;
Medicare and Medicaid: 1%;
Net Interest: 7%;
All Other: 34%.
Year: 1986;
Defense: 28%;
Social Security: 20%;
Medicare and Medicaid: 10%;
Net Interest: 14%;
All Other: 29%.
Year: 2006;
Defense: 20%;
Social Security: 21%;
Medicare and Medicaid: 19%;
Net Interest: 9%;
All Other: 32%.
Source: Office of Management and Budget and the Department of the
Treasury.
Note: Numbers may not add to 100 percent due to rounding.
[End of figure]
Federal Spending for Mandatory and Discretionary Programs:
[See PDF for image] - graphic text:
There are three pie charts, containing the following compositions of
spending by category:
Year: 1966;
Discretionary: 67%;
Mandatory: 26%;
Net Interest: 7%.
Year: 1986;
Discretionary: 44%;
Mandatory: 42%;
Net Interest: 14%.
Year: 2006;
Discretionary: 38%;
Mandatory: 53%;
Net Interest: 9%.
Source: Office of Management and Budget.
[End of figure]
Table: Fiscal Year 2005 and 2006 Deficits and Net Operating Costs:
On-Budget Deficit, Fiscal Year 2005 ($ Billion): (494);
On-Budget Deficit, Fiscal Year 2006 ($ Billion): (434);
Unified Deficit[a], Fiscal Year 2005 ($ Billion): (318);
Unified Deficit[a], Fiscal Year 2006 ($ Billion): (248);
Net Operating Cost[b], Fiscal Year 2005 ($ Billion): (760);
Net Operating Cost[b], Fiscal Year 2006 ($ Billion): (450);
Sources: Office of Management and Budget and Department of the
Treasury.
[a] Includes $173 billion in Social Security surpluses for fiscal year
2005 and $185 billion for fiscal year 2006; $2 billion in Postal
Service surpluses for fiscal year 2005 and $1 billion for fiscal year
2006.
[b] Fiscal year 2005 and 2006 net operating cost figures reflect
significant but opposite changes in certain actuarial costs. For
example, changes in interest rates and other assumptions used to
estimate future veterans’ compensation benefits increased net operating
cost by $228 billion in 2005 and reduced net operating cost by $167
billion in 2006. Therefore, the net operating costs for fiscal years
2005 and 2006, exclusive of the effect of these actuarial cost
fluctuations, were ($532) billion and ($617) billion, respectively.
[End of table]
Table: Major Fiscal Exposures ($ trillions):
Explicit liabilities (Publicly held debt, Military & civilian pensions
& retiree health, Other):
2000: $6.9;
2006: $10.4;
Percent increase: 52.
Commitments & contingencies (e.g., PBGC, undelivered orders):
2000: 0.5;
2006: 1.3
Percent increase: 140.
Implicit exposures, 2000: 13.0;
Implicit exposures, 2006: 38.8;
Implicit exposures, Percent increase: 197;
Future Social Security benefits, 2000: 3.8;
Future Social Security benefits, 2006: 6.4;
Future Social Security benefits, Percent increase: [Empty];
Future Medicare Part A benefits, 2000: 2.7;
Future Medicare Part A benefits, 2006: 11.3;
Future Medicare Part A benefits, Percent increase: [Empty];
Future Medicare Part B benefits, 2000: 6.5;
Future Medicare Part B benefits, 2006: 13.1;
Future Medicare Part B benefits, Percent increase: [Empty];
Future Medicare Part D benefits, 2000: 0;
Future Medicare Part D benefits, 2006: 7.9;
Future Medicare Part D benefits, Percent increase: [Empty];
Total, 2000: $20.4;
Total, 2006: $50.5;
Percent increase: 147.
Source: 2000 and 2006 Financial Report of the United States
Government.
Note: Totals and percent increases may not add due to rounding.
Estimates for Social Security and Medicare are at present value as of
January 1 of each year and all other data are as of September 30.
[End of table]
Table: How Big is Our Growing Fiscal Burden?
This fiscal burden can be translated and compared as follows:
Total major fiscal exposures: $50.5 trillion; Total household net
worth[1]: $53.3 trillion; Burden/Net worth ratio: 95 percent.
Burden[2]:
Per person: $170,000;
Per full-time worker: $400,000;
Per household: $440,000.
Income:
Median household income[3]: $46,326;
Disposable personal income per capita[4]: $31,519.
Source: GAO analysis.
Notes: (1) Federal Reserve Board, Flow of Funds Accounts, Table B.100,
2006:Q2 (Sept. 19, 2006); (2) Burdens are calculated using estimated
total U.S. population as of 9/30/06, from the U.S. Census Bureau; full-
time workers reported by the Bureau of Economic Analysis, in NIPA table
6.5D (Aug. 2, 2006); and households reported by the U.S. Census Bureau,
in Income, Poverty, and Health Insurance Coverage in the United States:
2005(Aug. 2006); (3) U.S. Census Bureau, Income, Poverty, and Health
Insurance Coverage in the United States: 2005(Aug. 2006); and (4)
Bureau of Economic Analysis, Personal Income and Outlays: October 2006,
table 2, (Nov. 30, 2006).
[End of table]
Potential Fiscal Outcomes Under Baseline Extended (January 2001);
Revenues and Composition of Spending as a Share of GDP.
[See PDF for image] - graphic text.
This is a line/stacked bar graph with one line (revenue) and four
stacked bars containing four spending items (Net interest, Social
Security, Medicare and Medicaid, and All other spending). The vertical
axis represents Percent of GDP and the horizontal axis represents
fiscal years 2005, 2015[a], 2030[a], and 2040[a].
The following data is depicted:
Fiscal year 2005:
Net interest: 0.8%;
Social Security: 4.3%;
Medicare & Medicaid: 3.7%;
All other spending: 7.994%;
Revenue: 20.3%.
Fiscal year 2015:
Net interest: 0%;
Social Security: 5.1%;
Medicare & Medicaid: 4.9%;
All other spending: 5.574%;
Revenue: 20.4%.
Fiscal year 2030:
Net interest: 0%;
Social Security: 6.6%;
Medicare & Medicaid: 9.4%;
All other spending: 3.991%;
Revenue: 20.4%.
Fiscal year 2040:
Net interest: 0%;
Social Security: 6.7%;
Medicare & Medicaid: 9%;
All other spending: 4.361%;
Revenue: 20.4%.
Source: GAO’s January 2001 analysis.
[a] All other spending is net of offsetting interest receipts.
[End of graph]
Potential Fiscal Outcomes Under Alternative Simulation; Revenues and
Composition of Spending as a Share of GDP.
[See PDF for image] - graphic text.
This is a line/stacked bar graph with one line (revenue) and four
stacked bars containing four spending items (Net interest, Social
Security, Medicare and Medicaid, and All other spending). The vertical
axis represents Percent of GDP and the horizontal axis represents
fiscal years 2006, 2015, 2030, and 2040.
The following data is depicted:
Fiscal year 2006:
Net interest: 1.7%;
Social Security: 4.2%;
Medicare & Medicaid: 3.9%;
All other spending: 10.6%;
Revenue: 18.4%.
Fiscal year 2015:
Net interest: 2.3%;
Social Security: 4.8%;
Medicare & Medicaid: 5.7%;
All other spending: 9.6%;
Revenue: 18%.
Fiscal year 2030:
Net interest: 5.8%;
Social Security: 6.6%;
Medicare & Medicaid: 8.8%;
All other spending: 9.6%;
Revenue: 18.6%.
Fiscal year 2040:
Net interest: 11.6%;
Social Security: 7.2%;
Medicare & Medicaid: 10.8%;
All other spending: 9.6%;
Revenue: 18.6%.
Source: GAO’s August 2007 analysis.
Notes: AMT exemption amount is retained at the 2006 level through 2017
and expiring tax provisions are extended. After 2017, revenue as a
share of GDP returns to its historical level of 18.3 percent of GDP
plus expected revenues from deferred taxes, i.e. taxes on withdrawals
from retirement accounts. Medicare spending is based on the Trustees
April 2007 projections adjusted for the Centers for Medicare and
Medicaid Services alternative assumption that physician payments are
not reduced as specified under current law.
[End of graph]
State and Local Governments Face Increasing Fiscal Challenges:
[See PDF for image] - graphic text.
This is a line graph with two lines (Operating Surplus/Deficit Measure
and Net-lending/Net-borrowing). The vertical axis represents Percent of
GDP from -6 to +2 and the horizontal axis represents fiscal years 1980
through 2050.
The following data is depicted:
1980:
Operating Surplus/Deficit Measure: 0.35873454;
Net-lending/Net-borrowing: -0.236601541.
1981:
Operating Surplus/Deficit Measure: 0.34624089;
Net-lending/Net-borrowing: -0.169415676.
1982:
Operating Surplus/Deficit Measure: 0.363124424;
Net-lending/Net-borrowing: -0.387096774.
1983:
Operating Surplus/Deficit Measure: 0.774990811;
Net-lending/Net-borrowing: -0.138547233.
1984:
Operating Surplus/Deficit Measure: 0.8152395;
Net-lending/Net-borrowing: 0.223736398.
1985:
Operating Surplus/Deficit Measure: 0.810172263;
Net-lending/Net-borrowing: 0.035542497.
1986:
Operating Surplus/Deficit Measure: 0.820186878;
Net-lending/Net-borrowing: -0.103074303.
1987:
Operating Surplus/Deficit Measure: 0.348462918;
Net-lending/Net-borrowing: -0.346028062.
1988:
Operating Surplus/Deficit Measure: 0.415329754;
Net-lending/Net-borrowing: -0.289980015.
1989:
Operating Surplus/Deficit Measure: 0.461047699;
Net-lending/Net-borrowing: -0.302676683.
1990:
Operating Surplus/Deficit Measure: 0.12076304;
Net-lending/Net-borrowing: -0.649652772.
1991:
Operating Surplus/Deficit Measure: -0.002324922;
Net-lending/Net-borrowing: -0.823896329.
1992:
Operating Surplus/Deficit Measure: 0.105991132;
Net-lending/Net-borrowing: -0.675323856.
1993:
Operating Surplus/Deficit Measure: 0.17518701;
Net-lending/Net-borrowing: -0.573797579.
1994:
Operating Surplus/Deficit Measure: 0.15154266;
Net-lending/Net-borrowing: -0.429852097.
1995:
Operating Surplus/Deficit Measure: 0.226784;
Net-lending/Net-borrowing: -0.446084594.
1996:
Operating Surplus/Deficit Measure: 0.382430375;
Net-lending/Net-borrowing: -0.292955008.
1997:
Operating Surplus/Deficit Measure: 0.540310442;
Net-lending/Net-borrowing: -0.225184543.
1998:
Operating Surplus/Deficit Measure: 0.711478221;
Net-lending/Net-borrowing: -0.113181662.
1999:
Operating Surplus/Deficit Measure: 0.528375987;
Net-lending/Net-borrowing: -0.240602477.
2000:
Operating Surplus/Deficit Measure: 0.51757156;
Net-lending/Net-borrowing: -0.309666904.
2001:
Operating Surplus/Deficit Measure: 0.213052923;
Net-lending/Net-borrowing: -0.800750395.
2002:
Operating Surplus/Deficit Measure: -0.212758845;
Net-lending/Net-borrowing: -1.20443952.
2003:
Operating Surplus/Deficit Measure: -0.034231078;
Net-lending/Net-borrowing: -1.04098241.
2004:
Operating Surplus/Deficit Measure: 0.03822412;
Net-lending/Net-borrowing: -0.899039488.
2005:
Operating Surplus/Deficit Measure: 0.262769152;
Net-lending/Net-borrowing: -0.762696896.
2006:
Operating Surplus/Deficit Measure: 0.21944499;
Net-lending/Net-borrowing: -0.788126765.
2007:
Operating Surplus/Deficit Measure: 0.412715768;
Net-lending/Net-borrowing: -0.638191188.
2008:
Operating Surplus/Deficit Measure: 0.345168264;
Net-lending/Net-borrowing: -0.630180116.
2009:
Operating Surplus/Deficit Measure: 0.333020741;
Net-lending/Net-borrowing: -0.603351831.
2010:
Operating Surplus/Deficit Measure: 0.302656141;
Net-lending/Net-borrowing: -0.605141837.
2011:
Operating Surplus/Deficit Measure: 0.257109542;
Net-lending/Net-borrowing: -0.630946404.
2012:
Operating Surplus/Deficit Measure: 0.206218592;
Net-lending/Net-borrowing: -0.658720463.
2013:
Operating Surplus/Deficit Measure: 0.16406332;
Net-lending/Net-borrowing: -0.681176041.
2014:
Operating Surplus/Deficit Measure: 0.119677687;
Net-lending/Net-borrowing: -0.707576964.
2015:
Operating Surplus/Deficit Measure: 0.076206951;
Net-lending/Net-borrowing: -0.734940534.
2016:
Operating Surplus/Deficit Measure: 0.026942361;
Net-lending/Net-borrowing: -0.769406462.
2017:
Operating Surplus/Deficit Measure: -0.032335263;
Net-lending/Net-borrowing: -0.814653671.
2018:
Operating Surplus/Deficit Measure: -0.109446599;
Net-lending/Net-borrowing: -0.878965311.
2019:
Operating Surplus/Deficit Measure: -0.19227354;
Net-lending/Net-borrowing: -0.950160744.
2020:
Operating Surplus/Deficit Measure: -0.28349272;
Net-lending/Net-borrowing: -1.030954125.
2021:
Operating Surplus/Deficit Measure: -0.386388384;
Net-lending/Net-borrowing: -1.123450085.
2022:
Operating Surplus/Deficit Measure: -0.483216203;
Net-lending/Net-borrowing: -1.211277239.
2023:
Operating Surplus/Deficit Measure: -0.557423995;
Net-lending/Net-borrowing: -1.275859781.
2024:
Operating Surplus/Deficit Measure: -0.667104614;
Net-lending/Net-borrowing: -1.376919803.
2025:
Operating Surplus/Deficit Measure: -0.781500085;
Net-lending/Net-borrowing: -1.482014441.
2026:
Operating Surplus/Deficit Measure: -0.866176187;
Net-lending/Net-borrowing: -1.558258502.
2027:
Operating Surplus/Deficit Measure: -0.971014018;
Net-lending/Net-borrowing: -1.654401786.
2028:
Operating Surplus/Deficit Measure: -1.059403133;
Net-lending/Net-borrowing: -1.733838263.
2029:
Operating Surplus/Deficit Measure: -1.167739726;
Net-lending/Net-borrowing: -1.833479877.
2030:
Operating Surplus/Deficit Measure: -1.259948277;
Net-lending/Net-borrowing: -1.916759702.
2031:
Operating Surplus/Deficit Measure: -1.372065386;
Net-lending/Net-borrowing: -2.020169149.
2032:
Operating Surplus/Deficit Measure: -1.467520327;
Net-lending/Net-borrowing: -2.107108096.
2033:
Operating Surplus/Deficit Measure: -1.596865114.
Net-lending/Net-borrowing: -2.227702996.
2034:
Operating Surplus/Deficit Measure: -1.728257684;
Net-lending/Net-borrowing: -2.350527637.
2035:
Operating Surplus/Deficit Measure: -1.829728717;
Net-lending/Net-borrowing: -2.443203659.
2036:
Operating Surplus/Deficit Measure: -1.964429157.
Net-lending/Net-borrowing: -2.569286091.
2037:
Operating Surplus/Deficit Measure: -2.100986709;
Net-lending/Net-borrowing: -2.697381312.
2038:
Operating Surplus/Deficit Measure: -2.205225568;
Net-lending/Net-borrowing: -2.7928813.
2039:
Operating Surplus/Deficit Measure: -2.325201615;
Net-lending/Net-borrowing: -2.904115765.
2040:
Operating Surplus/Deficit Measure: -2.430489372;
Net-lending/Net-borrowing: -3.00097328.
2041:
Operating Surplus/Deficit Measure: -2.569712106;
Net-lending/Net-borrowing: -3.131648373.
2042:
Operating Surplus/Deficit Measure: -2.709424661;
Net-lending/Net-borrowing: -3.262966376.
2043:
Operating Surplus/Deficit Measure: -2.818508477;
Net-lending/Net-borrowing: -3.363795891.
2044:
Operating Surplus/Deficit Measure: -2.947568546;
Net-lending/Net-borrowing: -3.484450067.
2045:
Operating Surplus/Deficit Measure: -3.058317306;
Net-lending/Net-borrowing: -3.58693672.
2046:
Operating Surplus/Deficit Measure: -3.188512473;
Net-lending/Net-borrowing: -3.709010629.
2047:
Operating Surplus/Deficit Measure: -3.300350183;
Net-lending/Net-borrowing: -3.812861884.
2048:
Operating Surplus/Deficit Measure: -3.432143889;
Net-lending/Net-borrowing: -3.936539309.
2049:
Operating Surplus/Deficit Measure: -3.545556545;
Net-lending/Net-borrowing: -4.041974237.
2050:
Operating Surplus/Deficit Measure: -3.686995315;
Net-lending/Net-borrowing: -4.175627129.
Sources: Historical data from National Income and Product Accounts.
Historical data from 1980–2006, GAO projections from 2007–2050 using
many CBO projections and assumptions, particularly for next 10 years.
[End of graph]
State and Local Fiscal Challenges Add to the Federal Government’s
Fiscal Challenge:
[See PDF for image] - graphic text.
This is a line graph with two lines (Federal Surplus/Deficit and
Combined Surplus/Deficit). The vertical axis represents Percent of GDP
from -20 to +5 and the horizontal axis represents fiscal years 2000
through 2050.
The following data is depicted:
Fiscal year: 2000:
Federal Surplus/Deficit: 2.4;
Combined Surplus/Deficit: 2.141.
Fiscal year: 2001:
Federal Surplus/Deficit: 1.3;
Combined Surplus/Deficit: 0.596.
Fiscal year: 2002:
Federal Surplus/Deficit: -1.5;
Combined Surplus/Deficit: -2.624.
Fiscal year: 2003:
Federal Surplus/Deficit: -3.5;
Combined Surplus/Deficit: -4.577.
Fiscal year: 2004:
Federal Surplus/Deficit: -3.6;
Combined Surplus/Deficit: -4.516.
Fiscal year: 2005:
Federal Surplus/Deficit: -2.6;
Combined Surplus/Deficit: -3.389.
Fiscal year: 2006:
Federal Surplus/Deficit: -1.9;
Combined Surplus/Deficit: - 2.677.
Fiscal year: 2007:
Federal Surplus/Deficit: -1.2;
Combined Surplus/Deficit: -1.8.
Fiscal year: 2008:
Federal Surplus/Deficit: -1.6;
Combined Surplus/Deficit: -2.2.
Fiscal year: 2009:
Federal Surplus/Deficit: -2;
Combined Surplus/Deficit: -2.6.
Fiscal year: 2010:
Federal Surplus/Deficit: -2.6;
Combined Surplus/Deficit: -3.2.
Fiscal year: 2011:
Federal Surplus/Deficit: -2.9;
Combined Surplus/Deficit: -3.5.
Fiscal year: 2012:
Federal Surplus/Deficit: -2.8
Combined Surplus/Deficit: -3.5.
Fiscal year: 2013:
Federal Surplus/Deficit: -3.3;
Combined Surplus/Deficit: -4.
Fiscal year: 2014:
Federal Surplus/Deficit: -3.6;
Combined Surplus/Deficit: -4.3.
Fiscal year: 2015:
Federal Surplus/Deficit: -3.8;
Combined Surplus/Deficit: -4.5.
Fiscal year: 2016:
Federal Surplus/Deficit: -4.2;
Combined Surplus/Deficit: -4.9.
Fiscal year: 2017:
Federal Surplus/Deficit: -4.4;
Combined Surplus/Deficit: -5.2.
Fiscal year: 2018:
Federal Surplus/Deficit: -4.8;
Combined Surplus/Deficit: -5.7.
Fiscal year: 2019:
Federal Surplus/Deficit: -5.2;
Combined Surplus/Deficit: -6.1.
Fiscal year: 2020:
Federal Surplus/Deficit: -5.6;
Combined Surplus/Deficit: -6.6.
Fiscal year: 2021:
Federal Surplus/Deficit: -6.1;
Combined Surplus/Deficit: -7.2.
Fiscal year: 2022:
Federal Surplus/Deficit: -6.7;
Combined Surplus/Deficit: -7.8.
Fiscal year: 2023:
Federal Surplus/Deficit: -7.2;
Combined Surplus/Deficit: -8.4.
Fiscal year: 2024:
Federal Surplus/Deficit: -7.8;
Combined Surplus/Deficit: -9.2.
Fiscal year: 2025:
Federal Surplus/Deficit: -8.5;
Combined Surplus/Deficit: -9.9.
Fiscal year: 2026:
Federal Surplus/Deficit: -9;
Combined Surplus/Deficit: -10.6.
Fiscal year: 2027:
Federal Surplus/Deficit: -9.7;
Combined Surplus/Deficit: -11.3.
Fiscal year: 2028:
Federal Surplus/Deficit: -10.3;
Combined Surplus/Deficit: -12.
Fiscal year: 2029:
Federal Surplus/Deficit: -10.9;
Combined Surplus/Deficit: -12.7.
Fiscal year: 2030:
Federal Surplus/Deficit: -11.5;
Combined Surplus/Deficit: -13.4.
Fiscal year: 2031:
Federal Surplus/Deficit: -12.2;
Combined Surplus/Deficit: -14.2.
Fiscal year: 2032:
Federal Surplus/Deficit: -12.8;
Combined Surplus/Deficit: -14.9.
Fiscal year: 2033:
Federal Surplus/Deficit: -13.5;
Combined Surplus/Deficit:-15.7.
Fiscal year: 2034:
Federal Surplus/Deficit: -14.2;
Combined Surplus/Deficit: -16.6.
Fiscal year: 2035:
Federal Surplus/Deficit: -14.8;
Combined Surplus/Deficit: -17.3.
Fiscal year: 2036:
Federal Surplus/Deficit: -15.5;
Combined Surplus/Deficit: -18.1.
Fiscal year: 2037:
Federal Surplus/Deficit: -16.3;
Combined Surplus/Deficit: -18.9.
Fiscal year: 2038:
Federal Surplus/Deficit: -16.9;
Combined Surplus/Deficit: -19.7.
Fiscal year: 2039:
Federal Surplus/Deficit: -17.6;
Combined Surplus/Deficit: -20.5.
Fiscal year: 2040:
Federal Surplus/Deficit: -18.3;
Combined Surplus/Deficit: -21.3.
Fiscal year: 2041:
Federal Surplus/Deficit: -19;
Combined Surplus/Deficit: -22.1.
Fiscal year: 2042:
Federal Surplus/Deficit: -19.8;
Combined Surplus/Deficit: -23.
Fiscal year: 2043:
Federal Surplus/Deficit: -20.4;
Combined Surplus/Deficit: -23.8.
Fiscal year: 2044:
Federal Surplus/Deficit: -21.2;
Combined Surplus/Deficit: -24.6.
Fiscal year: 2045:
Federal Surplus/Deficit: -21.9;
Combined Surplus/Deficit: -25.5.
Fiscal year: 2046:
Federal Surplus/Deficit: -22.7;
Combined Surplus/Deficit: -26.4.
Fiscal year: 2047:
Federal Surplus/Deficit: -23.4;
Combined Surplus/Deficit: -27.2.
Fiscal year: 2048:
Federal Surplus/Deficit: -24.2;
Combined Surplus/Deficit: -28.1.
Fiscal year: 2049:
Federal Surplus/Deficit: -24.9;
Combined Surplus/Deficit:- 29.
Fiscal year: 2050:
Federal Surplus/Deficit: -25.8;
Combined Surplus/Deficit: -29.9.
Source: Historical data from National Income and Product Accounts, GAO
Analysis.
Note: Historical data from 2000–2006, projections from 2007–2050; state
and local balance measure is similar to the federal unified budget
measure. Federal Simulation Assumptions: Discretionary spending grows
with GDP after 2007. AMT exemption amount is retained at the 2006 level
through 2017 and expiring tax provisions are extended. After 2017,
revenue as a share of GDP returns to its historical level of 18.3
percent of GDP plus expected revenues from deferred taxes, i.e. taxes
on withdrawals from retirement accounts. Medicare spending is based on
the Trustees’ April 2007 projections adjusted for the Centers for
Medicare and Medicaid Services’ alternative assumption that physician
payments are not reduced as specified under current law.
[End of graph]
Current Fiscal Policy Is Unsustainable:
The “Status Quo”is Not an Option:
* We face large and growing structural deficits largely due to known
demographic trends and rising health care costs.
* GAO’s simulations show that balancing the budget in 2040 could
require actions as large as:
- Cutting total federal spending by 60 percent or;
- Raising federal taxes to 2 times today's level.
Faster Economic Growth Can Help, but It Cannot Solve the Problem:
* Closing the current long-term fiscal gap based on reasonable
assumptions would require real average annual economic growth in the
double digit range every year for the next 75 years.
* During the 1990s, the economy grew at an average 3.2 percent per
year.
* As a result, we cannot simply grow our way out of this problem. Tough
choices will be required.
The Way Forward: A Three-Pronged Approach:
1. Improve Financial Reporting, Public Education, and Performance
Metrics.
2. Strengthen Budget and Legislative Processes and Controls.
3. Fundamentally Reexamine & Transform for the 21st Century (i.e.,
entitlement programs, other spending, and tax policy).
Solutions Require Active Involvement from both the Executive and
Legislative Branches.
Key National Indicators:
* What: A portfolio of economic, social, and environmental outcome-
based measures that could be used to help assess the nation’s and other
governmental jurisdictions’ position and progress;
* Who: Many countries and several states, regions, and localities have
already undertaken related initiatives (e.g., Australia, New Zealand,
Canada, United Kingdom, Oregon, Silicon Valley (California) and
Boston);
* Why: Development of such a portfolio of indicators could have a
number of possible benefits, including;
- Serving as a framework for related strategic planning efforts;
- Enhancing performance and accountability reporting;
- Informing public policy decisions, including much needed baseline
reviews of existing government policies, programs, functions, and
activities;
- Facilitating public education and debate as well as an informed
electorate;
* Way Forward: Consortium of key players housed by the National
Academies domestically and related efforts by the OECD and others
internationally.
Key National Indicators: Where the United States Ranks:
The United States may be the only superpower, but compared to most
other OECD countries on selected key economic, social, and
environmental indicators, on average, the U.S. ranks 16 out of 28.
OECD Categories for Key Indicators (2006 OECD Factbook):
* Population/Migration;
* Energy;
* Environment;
* Labor Market;
* Education;
* Public Finance;
* Science & Tech.;
* Quality of Life;
* Macroeconomic Trends;
* Economic Globalization
* Prices.
Serving The Congress And The Nation Gao's Strategic Plan Framework
Mission:
GAO exists to support the Congress in meeting its constitutional
responsibilities and to help improve the performance and ensure the
accountability of the federal government for the benefit of the
American people.
Themes:
* Changing Security Threats;
* Sustainability Concerns;
* Economic Growth & Competitiveness;
* Global Interdependency;
* Societal Change;
* Quality of Life;
* Science & Technology.
Goals and Objectives:
Provide Timely, Quality Service to the Congress and the Federal
Government to Address Current and Emerging Challenges to the Well-being
and Financial Security of the American People related to:
* Health care needs;
* Lifelong learning;
* Work benefits and protection;
* Financial security;
* Effective system of justice;
* Viable communities;
* Natural resources use and environmental protection;
* Physical infrastructure.
Respond to Changing Security Threats and the Challenges of Global
Interdependence involving:
* Homeland security;
* Military capabilities and readiness;
* Advancement of U.S. interests;
* Global market forces.
Help Transform the Federal Government's Role and How It Does Business
to Meet Twenty-first Century Challenges by assessing:
* Roles in achieving federal objectives;
* Government transformation;
* Key management challenges and program risks;
* Fiscal position and financing of the government.
Maximize the Value of GAO by Being a Model Federal Agency and a World-
Class Professional Services Organization in the areas of:
* Client and customer satisfaction;
* Strategic leadership;
* Institutional knowledge and experience;
* Process improvement
* Employer of choice.
Core Values:
* Accountability;
* Integrity;
* Reliability.
Selected Sustainability Challenges:
* Fiscal Deficits and Debt Burdens;
* Health Care Quality, Access, and Costs;
* Defense and Homeland Security Strategies;
* Social Insurance Commitments;
* Tax Gaps and Policies;
* Energy, Environment, and Resource Protection;
* Immigration Policies;
* Infrastructure Needs.
Twenty-first Century Challenges Report:
* Provides background, framework, and questions to assist in
reexamining the base.
* Covers entitlements & other mandatory spending, discretionary
spending, and tax policies and programs.
* Based on GAO’s work for the Congress.
* Issued February 16, 2005.
{Source: GAO.]
Twelve Reexamination Area:
Mission Areas:
* Defense;
* Education & Employment;
* Financial Regulation & Housing;
* Health Care;
* Homeland Security;
* International Affairs;
* Natural Resources, Energy & Environment;
* Retirement & Disability;
* Science & Technology;
* Transportation.
Crosscutting Areas:
* Improving Governance;
* Reexamining the Tax System.
Illustrative 21st Century Questions: Homeland Security:
Homeland security & defense questions relate to:
* Homeland Security Risk: What is an acceptable level of risk to guide
strategies and funding?
* Critical Infrastructure: Are existing incentives and initiatives
sufficient to support private sector protection of critical
infrastructure they own?
* Information Sharing: How can intelligence and information on threats
be shared with other levels of government and other stakeholders?
Table: GAO's High-Risk List 2007:
Addressing Challenges in Broad-based Transformations:
* Strategic Human Capital Management[a]: Year Designated: 2001;
* Managing Federal Real Property[a]: Year Designated: 2001;
* Protecting the Federal Government’s Information Systems and the
* Nations’ Critical Infrastructures: Year Designated: 1997;
* Implementing and Transforming the Department of Homeland Security:
Year Designated: 2003;
* Establishing Appropriate and Effective Information-Sharing Mechanisms
to Improve Homeland Security: Year Designated: 2005;
* DOD Approach to Business Transformation[a]: Year Designated: 2005;
- DOD Business Systems Modernization: Year Designated: 1995;
- DOD Personnel Security Clearance Program; Year Designated: 2005;
- DOD Support Infrastructure Management; Year Designated: 1997;
- DOD Financial Management; Year Designated: 1995;
- DOD Supply Chain Management; Year Designated: 1990;
- DOD Weapon Systems Acquisition; Year Designated: 1990;
* FAA Air Traffic Control Modernization; Year Designated: 1995;
* Financing the Nation’s Transportation System[a] (New); Year
Designated: 2007;
* Ensuring the Effective Protection of Technologies Critical to U.S.
National Security Interests[a] (New): Year Designated: 2007;
* Transforming Federal Oversight of Food Safety[a] (New): Year
Designated: 2007;
Managing Federal Contracting More Effectively:
* DOD Contract Management: Year Designated: 1992;
* DOE Contract Management: Year Designated: 1990;
* NASA Contract Management: Year Designated: 1990;
* Management of Interagency Contracting: Year Designated: 2005;
Assessing the Efficiency and Effectiveness of Tax Law Administration:
* Enforcement of Tax Laws[a]: Year Designated: 1990;
* IRS Business Systems Modernization: Year Designated: 1995;
Modernizing and Safeguarding Insurance and Benefit Programs:
* Modernizing Federal Disability Programs[a]: Year Designated: 2003;
* Pension Benefit Guaranty Corporation Single-Employer Pension
Insurance Program: Year Designated: 2003;
* Medicare Program[a]: Year Designated: 1990;
* Medicaid Program[a]: Year Designated: 2003;
* National Flood Insurance Program[a]: Year Designated: 2006.
[a] Legislation is likely to be necessary, as a supplement to actions
by the executive branch, in order to effectively address this high-risk
area.
Source: GAO.
[End of table]
Definition of Waste:
Waste involves the taxpayers as a whole not receiving reasonable value
for money in connection with any government funded activities due to an
inappropriate act or omission by players with control over or access to
government resources (e.g., executive, judicial, or legislative branch
employees, contractors, grantees, or other recipients).
Importantly, waste represents a transgression that is less than fraud
and abuse and most waste does not involve a violation of law. Rather,
waste relates primarily to mismanagement, inappropriate actions, or
inadequate oversight.
Examples of Waste:
Illustrative examples of underlying causes of waste in the acquisitions
and contracting area could include:
* Unreasonable, unrealistic, inadequate, or frequently changing
requirements;
* Failure to use competitive bidding in appropriate circumstances;
* Failure to engage in selected pre-contracting activities for
contingent events (e.g., hurricanes, military conflicts);
* Congressional directions (e.g., earmarks), and agency spending
actions where the action would not otherwise be taken based on an
objective value and risk assessment and considering available
resources.
Systemic Acquisition Challenges:
1. Service budgets are allocated largely according to top line
historical percentages rather than comprehensive strategic assessments
and current and likely resource limitations.
2. Capabilities and requirements are based primarily on individual
service wants versus collective national needs (i.e. based on current
and expected future threats) that are both affordable and sustainable
over time.
3. Defense consistently over-promises and under-delivers in connection
with major weapons, information, and other systems (i.e. capabilities,
costs, quantities, schedule).
4. Defense often employs a “plug and pray approach” when costs escalate
(i.e. divide total funding dollars by cost per copy, plug the number
that can be purchased, then pray that Congress will provide more
funding to buy more quantities).
5. Congress sometimes forces the department to buy items (e.g. weapons
systems) and provide services (e.g. additional health care for non-
actives) that the department does not want and we cannot afford.
6. DOD tries to develop high risk technologies after programs start
instead of setting up funding, organizations, and processes to conduct
high risk technology development activities in low cost environments
(i.e.technology development is not separated from product development).
Program decisions to move into design and production are made without
adequate standards or knowledge.
7. Program requirements are often set at unrealistic levels, then
changed frequently as recognition sets in that they cannot be achieved.
As a result, too much time passes, threats may change, and/or members
of the user and acquisition communities may simply change their mind.
The resulting program instability causes cost escalation, schedule
delays, fewer quantities and reduced contractor accountability.
8. Contracts, especially service contracts, often do not have
definitive or realistic requirements at the outset in order to control
costs and facilitate accountability.
9. Contracts typically do not accurately reflect the complexity of
projects nor appropriately allocate risk between the contractors and
the taxpayers (e.g. cost plus, cancellation charges).
10. Key program staff rotate too frequently thus promoting myopia and
reducing accountability (i.e. tours based on time versus key
milestones).Additionally, the revolving door between industry and the
Department presents potential conflicts of interest.
11. The acquisition workforce faces serious challenges (e.g. size,
skills, knowledge, succession planning).
12. Incentive and award fees are often paid based on contractor
attitudes and efforts versus positive results (i.e. cost, quality,
schedule).
13. Inadequate oversight is being conducted by both the Defense
Department and the Congress which results in little to no
accountability for recurring and systemic problems.
14. Some individual program and funding decisions made within the
Department and by the Congress serve to undercut sound policies.
15. Lack of a professional, term-based CMO at DOD serves to slow
progress on defense transformation and reduce the chance of success in
the acquisitions/contracting and other key business areas.
Challenges Faced by the Coast Guard:
* Increasing demands upon all resources to conduct more maritime
security missions;
* Need to continue legacy missions, such a fisheries protection, law
enforcement, search and rescue, marine safety, and polar ice breaking;
* Need to maintain aging fleet of ships and aircraft while at the same
time move forward with plans to replace them through Deepwater
acquisition program.
Coast Guard Deepwater Acquisition Challenges:
Coast Guard’s Deepwater modernization program experienced problems in:
* Program management, including ineffective management and oversight
teams, inadequate staffing, and ill-defined roles and responsibilities;
* Contractor accountability and linking contractor performance to
awards;
* Control of costs through competition.
Coast Guard Deepwater Acquisition Actions(cont’d):
Coast Guard has announced and begun to implement actions to address
these challenges, including:
* Taking over leadership of program management from the contractor;
* Hiring acquisition staff and developing human capital improvements;
* Revising award criteria to include incentives for performance;
* Conducting business case analyses to ensure competition for future
asset acquisitions.
DHS Acquisition Management Challenges:
DHS has struggled to provide adequate support and oversight of its
acquisition function. It remains important that it:
* Integrate the acquisition functions of component organizations more
effectively across the department;
* Develop clear and transparent acquisitions policies and procedures,
along with an acquisitions workforce trained to implement and monitor
them;
* Evaluate and work to mitigate risks associated with contracts for
services that support inherently governmental functions.
DHS Progress Report: Acquisition Management:
* DHS reported acquiring $15.6 billion in goods and services in FY
2006;
* DHS has made modest progress in achieving the following acquisition
management performance expectations:
- Organizing acquisition functions to meet agency needs;
- Developing clear and transparent policies and processes;
- Developing an acquisition workforce to implement and monitor
acquisitions;
* Improved assessment and oversight needed to manage risks of
contractors performing tasks closely supporting governmental functions.
Transformation:
Webster's Definition:
An act, process, or instance of change in structure, appearance, or
character.
A conversion, revolution, makeover, alteration, or renovation.
Four Key Transformation Dimensions:
Key Actions: 1. To make prudent budget & long-term fiscal decisions;
Primary Responsibility: The President and the Congress;
Secondary Responsibility: Agency leadership (both political and
career).
Key Actions: 2. To enable key transformation efforts while providing
protection from abuse of authority;
Primary Responsibility: The Congress and the President.
Secondary Responsibility: Agency leadership (both political and
career).
Key Actions: 3. To lead key transformation efforts with existing
authorities and within existing resource levels;
Primary Responsibility: Agency leadership (both political and career);
Secondary Responsibility: OMB and other selected government-wide
agencies.
Key Actions: 4. To evaluate reform efforts and conduct continuous
improvement initiatives;
Primary Responsibility: Agency leadership (both political and career);
Secondary Responsibility: Congress, OMB and selected government-wide
agencies.
Effective Management of Services Requires Both Strategic and
Transactional Efforts:
Strategic Level: Effective service acquisition requires the leadership,
processes, and information necessary for mitigating risks, leveraging
buying power, and managing outcomes.
Transactional Level: Individual service transactions must focus on
buying the right thing, the right way, while getting the desired
outcomes.
A comprehensive approach would use the strategic and transactional
factors in a complementary manner to tailor management activity to
ensure preferred outcomes.
Source: GAO (analysis).
The Objective of Transformation for the Coast Guard:
From the Commandant:
* Making the force structure more responsive to mission execution;
* Making support system more responsive to the operators;
* Making Coast Guard more responsive to the nation.
Commandant Directed Coast Guard Next Steps:
* Take immediate steps to reorganize operational forces;
* Improve service and support systems;
* Better align with departmental and interagency partners;
* Make logistics and financial systems more efficient and accountable.
Three Key Illnesses:
* Myopia;
* Tunnel Vision;
* Self-Centeredness.
Four National Deficits:
* Budget;
* Balance of Payments;
* Savings;
* Leadership.
Five Leadership Attributes Needed for These Challenging and Changing
Times:
* Courage;
* Integrity;
* Creativity;
* Stewardship;
* Partnership.
[End of presentation]
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