This speech was given by the Comptroller General before the Conference Board audience in New York City, New York on October 6, 2005. In my remarks today, I'd like to address two key concepts - leadership and stewardship. Both are of critical importance in both the public and private sectors and yet we don't hear much about stewardship anymore. That's a big problem which needs to be addressed. Today, our nation faces a series of current and emerging issues with profound implications for our collective future. To successfully address these issues, each of us, no matter whether we are working in the public sector, private sector or not-for-profit sector must do our part. We the people must begin to focus more on the word "we" rather than the word "me." This includes speaking up and demanding meaningful change in our companies, communities, and country. What's at stake is nothing less than America's continuing role as a superpower, the engine of global economic growth, and the envy of the world. What's also at stake is the future quality of life for our children and grandchildren. With the impending retirement of the baby boomers, rising health care costs, and relatively low revenues as a share of the economy, the federal government is facing a fiscal challenge unprecedented in American history. Unfortunately, our public officials have done little to prepare us for this reality. Some policymakers are concerned, but so far there have been few calls for sacrifice or dramatic and fundamental reform. Instead, the government's continuing lack of fiscal discipline in recent years has made our long-term situation much worse. The United States currently has three interrelated deficits. The first is the federal budget deficit, which in fiscal 2004 reached a record $412 billion on a unified basis. But the truth is that every dime of the Social Security and other trust fund surpluses went to pay for other government operating expenses. As a result, the federal on-budget deficit for fiscal 2004 was actually closer to $567 billion of which less than $100 billion related to Iraq, Afghanistan and incremental homeland security costs. Even more troubling, the federal government's long-term liabilities and commitments rose by more than $13 trillion in fiscal year 2004 alone to over $43 trillion, largely because of the new Medicare prescription drug benefit. The second deficit is our savings deficit. Put quite simply, too many of us - from individual consumers to elected officials - are spending today as if there's no tomorrow. At the same time, America has the lowest overall savings rate of any major industrialized nation. So who's been underwriting America's recent spending spree? The answer is foreign investors. That brings me to the third deficit--our overall balance-of-payments deficit. In 2004, the U.S. trade deficit hit a record $618 billion, up $121 billion from the year before. Overseas money has been pouring into the United States. Many of these funds are coming from Asia, where U.S. treasury securities have historically been prized. Thanks to the high savings rate in China, Japan, and elsewhere, it's relatively cheap for Americans to borrow. But there's a catch, and it's a big one. Increasingly, we're mortgaging our collective future, and some of our leading foreign lenders may not share our long-term economic, foreign policy, and national security 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.

While the current deficit numbers are big and bad, I'm much more concerned about the decades of structural deficits that lie ahead. What do I mean by structural deficits? A structural deficit isn't caused by temporary economic cycles or one-time emergencies. Instead, a structural deficit is driven year after year by powerful underlying factors that affect both the spending and the revenue sides of the budget. As I mentioned earlier, these factors include known demographic trends, such as an aging population, longer life spans, and lower birth rates. Another key factor is the rising cost of health care, which is affecting the government, employers, and individuals. We also don't have enough revenue to pay our current bills or deliver on our future promises. Clearly, a crunch is coming, and eventually all levels of government and every sector of the economy will feel its impact. Long-range budget simulations from my agency, the U.S. Government Accountability Office (GAO), show that, without meaningful changes, increasingly drastic actions on spending and taxes will be required to balance the budget. By 2040, if nothing is done, federal revenues may be barely adequate to pay the interest on the national debt. Candidly, absent dramatic change, the day of reckoning will come way before then. Beyond our growing fiscal imbalance, the United States also confronts a range of other emerging challenges. We're seeing globalization on many fronts. Markets, technologies, and businesses everywhere are increasingly linked and geo-political boundaries are becoming less significant. In fact, many elected officials and other individuals have yet to realize that multi-national companies do not have duties of loyalty to a country. Furthermore, with today's international air travel, infectious diseases can spread from one continent to another literally overnight. This is one reason public health experts are so concerned about avian flu. Obviously, we also confront a range of new security threats in the post 9/11/01 world. To keep pace with these changes, our government must also change. It's time to ask a series of basic questions about what government does and how its does business. Nothing less than a top-to-bottom review of federal activities is needed to determine whether they are meeting their objectives and to free up resources. Many current federal programs and policies reflect conditions that existed when Dwight Eisenhower and John Kennedy were in the White House. Congress and the President need to decide which of these programs and policies remain priorities, which should be overhauled, and which have outlived their usefulness. To help in this effort, GAO recently published an unprecedented report that asks a series of basic questions about both mandatory and discretionary spending and tax policy. GAO's report is called "21st Century Challenges: Reexamining the Base of the Federal Government." My hope is that the GAO's 21st Century publication will help policymakers and the public begin to think more strategically about where we are; where we're headed; and, more importantly, what we need to do to get back on a more prudent path.