Fiscal Stewardship: A Critical Challenge Facing Our Nation

The title of this document from the GAO says it all.

Here are some words from the preface:

The federal government’s financial condition and fiscal outlook are worse than many may understand. Despite an increase in revenues in fiscal year 2006 of about $255 billion, the federal government reported that its costs exceeded its revenues by $450 billion (i.e., net operating cost) and that its cash outlays exceeded its cash receipts by $248 billion (i.e., unified budget deficit). Further, as of September 30, 2006, the U.S. government reported that it owed (i.e., liabilities) more than it owned (i.e., assets) by almost $9 trillion. In addition, the present value1 of the federal government’s major reported long-term “fiscal exposures”—liabilities (e.g., debt), contingencies (e.g., insurance), and social insurance and other commitments and promises (e.g., Social Security, Medicare)—rose from $20 trillion to about $50 trillion in the last 6 years.

The federal government faces large and growing structural deficits in the future due primarily to known demographic trends and rising health care costs. These structural deficits—which are virtually certain given the design of our current programs and policies—will mean escalating and ultimately unsustainable federal deficits and debt levels. Based on various measures—and using reasonable assumptions—the federal government’s current fiscal policy is unsustainable. Continuing on this imprudent and unsustainable path will gradually erode, if not suddenly damage, our economy, our standard of living, and ultimately our domestic tranquility and national security.

And from the concluding chapter

Although the long-term fiscal outlook is driven by rising health care costs and known demographics, we cannot ignore other government programs and activities. There is a need to engage in a fundamental review, reprioritization, and reengineering of the base of government. Aligning the federal government to meet the challenges and capitalize on the opportunities of the 21st century will require a fundamental review of what the federal government does, how it does it, and how it is financed. Many of the federal government’s current policies, programs, functions, and activities are based on conditions that existed decades ago, are not results-based, and are not well aligned with 21st century realities.

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Meeting our nation’s large, growing, and structural fiscal imbalance will require a multipronged approach:

increasing transparency in financial and budget reporting and in budget and legislative processes to highlight our long-term fiscal challenges;

reinstituting and strengthening budget controls for both spending and tax policies to deal with both near-term and longer-term deficits;

strengthening oversight of programs and activities including creating approaches to better facilitate the discussion of integrated solutions to crosscutting issues; and

reengineering and reprioritizing the federal government’s existing programs, policies, and activities to address 21st century challenges and capitalize on related opportunities.