Fiscal Facts and Keeping America Great

This speech was given by the Comptroller General before the John Hazen White Lecture audience at Brown University in Providence, Rhode Island on March 15, 2007. Perhaps the most urgent challenge is our nation's worsening financial condition and growing long-term fiscal imbalance. Largely due to the aging of the baby boomers and rising health care costs, America faces decades of red ink. The facts on this aren't in question. Given our worsening financial outlook, the government's recent spending sprees and deep tax cuts are nothing less than a body blow to overall fiscal responsibility. Despite what some say, deficits do matter--especially if they're large and structural in nature. As a CPA and the federal official who signs off on the audit of the government's consolidated financial statements, I'm here to tell you that our nation's financial condition is worse than advertised. The truth is our country faces not one but four interrelated deficits. Together, these deficits have serious implications for our future role in the world, our future standard of living, and even our future domestic tranquillity and national security. The first is the federal budget deficit. Thanks to a combination of out-of-control federal spending and several major tax cuts, federal budget deficits have returned with a vengeance. Depending on which accounting method you use, the federal deficit last year ranged from $248 billion to $450 billion. While these annual deficit numbers get a lot of press coverage, it's the federal government's mounting liabilities and unfunded commitments that pose the real threats. I'm talking about things like unfunded Social Security and Medicare benefits. In the last six years, the estimated cost of these accumulating burdens has soared from about $20 trillion to about $50 trillion. Let me put it this way: Our government has made a whole lot of promises that, in the long run, it can't possibly keep. And here's why. Fifty trillion dollars translates into an IOU of about $440,000 for every American household. Keep in mind that the median household income in this country is less than $50,000 a year. For the typical family, it's like having a mortgage that's 9? times their annual income. And that mortgage doesn't even come with a house! This burden is rapidly outpacing the net worth of most Americans and the growth rate of our economy. The second deficit is our savings deficit. The savings rate among U.S. consumers has been falling for some time. In 2005, for the first time since 1933, the annual personal savings rate in this country reached negative territory. The savings deficit was even greater in 2006. We've returned to savings levels not seen since the depths of the Great Depression. In fact, America has among the lowest overall savings rates of any major industrialized nation. Clearly, many Americans, like their federal government, are living beyond their means. This trend is particularly alarming in an aging society like ours. Obviously, those people who save more will live better in retirement. And given the problems plaguing our public and private retirement systems, personal investments will be even more critical to your retirement planning. Finally, there's America's leadership deficit, which is probably the most serious and sobering of all. At both ends of Pennsylvania Avenue and on both sides of the political aisle, we need leaders who will face the facts, speak the truth, work together, and make tough choices. We also need leadership from our state capitols and city halls, from businesses, colleges and universities, charities, think tanks, the military, and the media. So far, there have been too few calls for fundamental change and shared sacrifice.