Defense Transformation Accountability Challenges
Gao ID: GAO-06-1083CG August 22, 2006This is a Comptroller General presentation given to the Association of Defense Auditors on August 22, 2006. Major topics of this presentation include: the role of Supreme Audit Institutions (SAI), GAO's role, the growing fiscal burden, and 21st Century challenges for National Defense.
GAO-06-1038CG, Keeping America Great
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Presentation by The Honorable David M. Walker: Comptroller General of
the United States:
"Keeping America Great"
Speech before the John F. Kennedy Forum-Leadership Symposium:
JFK School of Government:
Harvard University:
March 6, 2006:
United States Government Accountability Office:
GAO-06-1038CG:
Thank you, David Gergen, for that kind introduction. It's wonderful to
be here this evening. GAO has a special relationship with Harvard and
with the John F. Kennedy School of Government. We're a relatively small
agency, with just over 3,200 employees. Nonetheless, about 50 of them
have degrees from Harvard, and another 50 or so GAO employees,
including me, have received professional certificates from the JFK
School. Fortunately, these numbers have been increasing at a healthy
pace in recent years.
As part of GAO's executive candidate development program, we also
encourage all our new executives to attend the four-week Senior
Managers in Government program here at the Kennedy School. We've found
this has been an excellent way for our new executives to gain exposure
to various leadership styles, skills, and concepts in order to improve
their ability to solve problems and manage change. My special thanks to
the program's director, Pete Zimmerman, who's been a good friend to GAO
and me.
Now more than ever, federal departments and agencies need men and women
who can think critically and creatively. Harvard has delivered on that
score in the past.
I have little doubt that Harvard, in general, and the JFK School, in
particular, will continue to play an important role in shaping what our
government does and how it does business in the 21st century. However,
while getting a degree from Harvard or another top school is an
impressive start, it's not enough. As one of your alums, Theodore
Roosevelt, pointed out, "it's character that counts" and you have to be
"in the arena" of life to make a real and lasting difference.
In 2006, 230 years after our nation declared its independence, the
United States has much to be proud of and much to be thankful for.
Today, we are among the world's oldest democracies and we are the sole
superpower, with unparalleled economic, military, foreign policy, and
cultural influence. Our overall standard of living remains
exceptionally high. Compared to most nations, the United States ranks
well on measures like personal income, public literacy, postsecondary
education, and home ownership, to name a few. The United States is also
a beacon of liberty, and Americans enjoy political and personal
freedoms that are the envy of the world.
At the same time, I'm also reminded of a saying from the Gospel of
Luke, a saying that John F. Kennedy, the namesake of this school,
sometimes quoted: "For of those to whom much is given, much is
required." Just looking around this wonderful room it's clear how much
we as Americans have been given. But it's equally clear that what's
required of us now is action--action that will put our country back on
a prudent and sustainable course, action that will help us discharge
our stewardship responsibilities, and action that will help keep
America great in the 21st century.
In my view, the greatest threat to America's future isn't hiding in a
cave somewhere in Afghanistan or Pakistan; it's right here at home, in
our governments, in our businesses, on our campuses, and in our
neighborhoods. What I'm talking about is declining values and comity
combined with continuing ignorance, apathy, and inaction on a range of
issues that are rapidly reshaping our nation and our world.
These issues include changing demographics, global economic trends, new
security threats, and serious challenges in such areas as education,
energy, health care, and the environment. Several of these challenges
are unprecedented in their size, scope, complexity, and potential
impact. Unfortunately, these issues are getting too little attention,
provoking too little concern, and prompting too little action. No
disrespect to Yogi Berra, but "déjà vu all over again" just isn't going
to cut it anymore.
Today in America, both policymakers and the public need to face the
facts, take a long-term perspective, and recognize the reality that
real reform and some shared sacrifice are called for. After all, if we
believe in the concept of stewardship, when our time on this earth is
nearing an end, we should be able to look our children and our
grandchildren in the eye and say we did everything we could to pass on
an America that's better off and better positioned for the future.
Unfortunately, we aren't anywhere close to being able to do that today.
Tonight, I'm going to talk about some of our challenges to give you a
better sense of where we're headed and why it's so urgent that we
transform government, and do it very soon. I'm then going to talk about
the need for real leadership and what each of us can do to help keep
America great.
21st Century Challenges:
What are these known changes and challenges? Let me start with one of
the most sweeping agents of change, and that's demographics.
Demographics will decisively shape the American and 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
are starting 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.
These developments are going to put huge strains on our pension and
health care systems.
Beyond demographics, the United States confronts a range of other
challenges. Globalization is affecting our international
competitiveness, our trade posture, our capital markets, our jobs, and
our approach to environmental and public health issues. For example,
globalization is a key reason public health experts are so concerned
about the rapid spread of viruses like avian flu.
With the end of the Cold War, we face new security threats, including
transnational terrorist networks and rogue states armed with nuclear
weapons.
Other challenges come from technology. In recent decades, spectacular
advances in technology have transformed everything from how we do
business to how we communicate to how we treat and cure diseases. But
because of technology, we're also struggling with privacy, security,
and other concerns. Unfortunately, the United States--which gave the
world Thomas Edison, the Wright brothers, Jonas Salk, and Bill Gates--
now ranks 25th in the world on math and science testing results.
As I mentioned before, our quality of life in many ways has never been
better. But America also faces a growing and unhealthy gap between the
haves and the have-nots. And as some of you may know firsthand, we're
also facing a range of quality-of-life concerns in our personal lives,
including underachieving public schools, gridlocked city streets, and
the stresses of caring for aging parents and growing children all at
once. At the same time, our nation's health care system is in critical
condition, plagued by growing gaps in insurance coverage, soaring
costs, and below-average results on basic measures like medical error
rates, infant mortality, and life expectancy.
Our Nation's Four Deficits:
Perhaps the most urgent challenge we face is our nation's deteriorating
financial condition and growing fiscal imbalance. The United States now
confronts four interrelated deficits with serious implications for our
role in the world, our economic growth, our standard of living, and
even our national security.
The first deficit is the federal budget deficit, which in 2005 was
around $319 billion on a cash basis. This widely reported number is
somewhat misleading, because without the Social Security surpluses, the
federal cash-based deficit was actually closer to $500 billion.
Moreover, on an accrual basis, our fiscal 2005 deficit was $760
billion, up $144 billion in the last year alone.
Even more troubling, the federal government's long-term liabilities and
unfunded commitments for things like Social Security and Medicare
benefits have risen to more than $46 trillion. That's up from about $20
trillion just five years ago. The new Medicare prescription drug
benefit, which may be one of the most poorly designed, inefficiently
implemented, and fiscally irresponsible government programs of all
time, has added more than $8 trillion to this sea of red ink. And these
numbers don't even take into account the bills that are coming from
rebuilding New Orleans and the Gulf Coast or future costs associated
with Iraq and Afghanistan.
In recent years, we've heard calls to relieve Americans of burdens like
the so-called "death tax," but we need to talk more about the very real
and growing "birth burden." That's what I call the staggering amount of
government commitments that every American, including newborns, will
some day have to pay for.
As a result, every new birth certificate now comes with a bill of
$156,000. With a birth burden like this, it's no wonder that newborn
babies cry! Alternatively, this means that every full-time worker
carries a de facto debt load of $375,000. For a dual-income family,
this is like having a $750,000 mortgage without owning a house!
Unfortunately, these numbers are growing every second of every day
because of continuing deficits, known demographic trends, and
compounding interest costs.
The second deficit is our savings deficit. Too many Americans--from
individual consumers to elected officials--are spending today as if
there's no tomorrow. Consequently, America has the lowest overall
savings rate of any major industrialized nation.
The annual U.S saving rate as a percentage of disposable personal
income has been falling for some time. But last year, for the first
time since 1933, our annual saving rate was in negative territory.
Think about it. We've returned to saving levels not seen since the
depths of the Great Depression. Clearly, many Americans, like the
federal government, are living beyond their means and are deeply in
debt. This trend is particularly alarming in an aging society such as
our own. Those Americans who save more will certainly live better in
retirement.
The bottom line is, those Americans who fail to plan, save, invest, and
preserve their savings for retirement are rolling the dice, and given
the problems with our nation's retirement system, the odds are heavily
stacked against them.
So, if we aren't saving at home, who's been underwriting America's
recent spending spree? The answer is foreign investors. And that brings
me to America's third deficit--our overall balance-of-payments deficit.
America is simply spending more than it's producing. In 2005, the U.S.
trade deficit hit about $726 billion, up more than $100 billion from
the prior year.
While our own saving rates have plummeted, savings rates abroad have
not, and overseas money has been pouring into the United States. Thanks
to the high savings rates in China, Japan, and elsewhere, it's been
relatively cheap for Americans to borrow. But there's a catch, and it's
a big one. Increasingly, we are mortgaging our collective future, and
some of our leading lenders may not share our long-term national
interests. Imagine what would happen to interest rates on Treasury
securities if these foreign investors suddenly decided to buy fewer of
these securities or, worse yet, started to sell off their U.S.
holdings.
Finally, there's our fourth deficit, and it's probably the most
sobering deficit of all. What I'm talking about is America's leadership
deficit.
Not enough key policymakers are concerned about America's growing
fiscal imbalance and the other long-term challenges that I've
mentioned. As a result, there have been pitifully few calls for making
tough choices or fundamental reform.
At both ends of Pennsylvania Avenue, on both sides of the political
aisle, and at all levels of government, there have been too few
champions who have the courage to speak the truth, to make tough
choices, and to bring about real, fundamental, and lasting change.
Instead, the government's continuing lack of fiscal discipline and
business-as-usual attitude have made our long-term situation even
worse. The government's recent spending sprees and tax cuts are nothing
less than a body blow to overall fiscal responsibility. Candidly, "tax
and spend" policies aren't advisable, but enacting tax cuts and
spending hikes at the same time isn't a good idea either. The truth is,
if our nation took a fiscal fitness test today, it would flunk!
Unfortunately, Wall Street and the business community are not being as
vocal on this issue as they have in the past. Stated differently, they
are largely "missing in action." Both government and the private sector
tend to suffer from the dual afflictions of myopia and tunnel vision.
At the same time, the private sector really does have a dog in this
fiscal fight, because if government keeps on as it has, companies are
going to pay a price, such as rising tax burdens, higher interest
rates, and/or the impacts of slower economic growth.
What we've got going are the elements of a perfect storm, a potent mix
of ignorance, apathy, and inaction at all levels and in many sectors of
American society. If we continue on our present course, a fiscal crisis
is not a matter of if but when.
Transforming Government:
If our nation is to be prepared for the challenges and changes that are
coming, government transformation is essential. The challenges I've
discussed aren't partisan issues, and the solutions won't be either.
In my view, the first order of business is to restore fiscal
discipline. We've got to stop digging our fiscal hole deeper. Right
now, we need to set realistic spending caps and re-impose pay-as-you-go
rules on both the spending and the tax sides of the ledger. We also
need to implement some triggers to alert policymakers to excessive
spending and facilitate the long-overdue and much-needed reform of
mandatory spending programs and tax expenditures. Members of Congress
should also have more explicit information on the long-term costs of
spending and tax bills--before they vote on them. The new Medicare
prescription drug benefit has become the poster child for needed
changes in this area.
More broadly, I'd urge both appointed and career officials at every
federal agency and program to give careful thought to their missions
and operations in light of current trends and future realities.
The problem is that way too much of government today remains on
autopilot and is based on social, economic, national security, and
other conditions that existed when Harry Truman, Dwight Eisenhower, and
John F. Kennedy were in the White House.
As a nation, we need to ask what is the proper role of the federal
government in the 21st century? How should it be organized? Should
contractors or federal employees or some combination of the two provide
government services? How much will it cost, and how will we pay for it?
Nothing less than a top-to-bottom review of federal programs and
policies is needed to determine if they are meeting their objectives.
This will also help free up resources for other needs. Congress and the
President need to decide which policies and programs remain priorities,
which should be overhauled, and which have simply outlived their
usefulness.
Entitlement reform is particularly essential. We need to restructure
Social Security, Medicare, and Medicaid and make these programs solvent
and sustainable for future generations. We also need to reengineer the
base of other federal spending and tax policies.
To help in this effort, GAO has published an unprecedented report that
asks a series of probing questions about current mandatory and
discretionary spending programs and tax policies. For example, how can
we better allocate resources across the armed services to address
current and future credible security threats? Should we reconsider some
long-standing tax incentives, such as the health care exclusion? Is it
time for the federal government to update its organizational model and
job classification and compensation systems, both of which date to the
1950s?
Our report is called "21st Century Challenges: Reexamining the Base of
the Federal Government," and you can find it free on our Web site at
www.gao.gov.
I should stress that while GAO doesn't make public policy decisions,
decades of experience and expertise put GAO in a unique position to
help stimulate and inform discussion and debate on a broad range of
issues as a key input into the policymaking process.
I'm also hopeful that GAO's work will encourage the development of a
set of key national indicators. These are quantitative and outcome-
based measures that policymakers can use to better assess the United
States' progress over time and relative to other nations on benchmark
issues like public safety, health care, housing, education, the
economy, and the environment. For years now, foreign governments and
even some U.S. states and localities have been using indicators to
successfully prioritize and target public resources. It's time for the
U.S. government to do so.
Transforming government won't happen overnight. Elected, appointed, and
career officials will need to work together for a sustained period of
time--perhaps a generation or longer. Public officials will need to
reach across institutional and political lines. The federal government
will need to partner with businesses, professional organizations,
nonprofit groups, and other levels of government to develop new
solutions to old problems.
GAO: Leading by Example:
We at GAO are determined to lead by example in the overall
transformation effort. In recent years, we've undertaken a number of
internal changes to enhance our performance, ensure our accountability,
and help better position us for the future. By working together to
create a strategic plan, realign our organizational structure, adopt a
set of core values, and employ a balanced scorecard approach, we've
made dramatic progress in just a few years. We've focused on achieving
results while obtaining feedback from our congressional clients, our
people, and partnerships with other entities both inside and outside of
government. By doing so, we've managed to double our outcomes on many
of the key performance results we've set for ourselves.
No person and no organization will ever be perfect, so we're committed
to a policy of continuous improvement. We're also committed to sharing
our lessons learned and helping others to see their way forward. Our
hope is that other agencies will be able to tailor many of GAO's
efforts to meet their own needs. We also seek to learn from others both
domestically and internationally.
Leading Change to Mitigate Risk:
Many of you in this room are our country's future leaders, and that
brings me to my final point tonight. Today, it's clear that to deal
with America's current and emerging challenges, we need effective
leaders in all sectors of society and at all levels of government. That
means elected, appointed, and career civil servants who are capable,
caring, and committed. Leadership also needs to come from the private
and nonprofit sectors and the media. In the final analysis, leaders in
government and elsewhere need to have four key attributes: courage,
integrity, creativity, and stewardship.
Specifically, we need leaders who have the courage to state the facts,
to speak the truth, and to do the right thing, even when it isn't
popular. We need leaders who understand that our nation's fiscal
challenge is not just about numbers, it's also about values.
We need leaders who have the integrity to lead by example and to
practice what they preach. Those in positions of power and trust must
understand that the law represents the floor of acceptable behavior,
and those individuals should strive to meet higher moral and ethical
standards. We need leaders who are able to innovate and develop new
solutions to old problems and who can help show others the way forward.
Finally, we need leaders who take their stewardship responsibilities
seriously. These individuals understand that their job is not just to
leave things better off when they leave than when they came, but also
to leave things better positioned for the future.
When it comes to our growing fiscal imbalances and other challenges,
effective leadership is essential. After all, history shows that
dramatic and fundamental change typically results from either a crisis
or real leadership. Personally, I prefer real leadership. However, the
truth is that today, meaningful change is more likely to come from the
combined efforts of many individuals, otherwise known as "we the
people."
Candidly, it is the American people who need to start speaking up and
making their views known. After all, why should any elected official
stick his or her neck out on a difficult issue that no one seems to
care about? Younger Americans especially need to become active in this
discussion because, like many of you here tonight, you and your
children will bear the heaviest burden if today's leaders fail to act.
Despite my sobering message here tonight, I don't want you to go away
thinking that things are hopeless. That's far from true. I'm an
optimist by nature and I'm also a student of history, so I know that
the United States has risen to address significant challenges in the
past. Today, we still have a real window of opportunity to turn things
around. For many of the challenges I've discussed, a few meaningful
reforms phased in over time will make a huge difference. And by acting
sooner rather than later, we can minimize the need for drastic measures
down the road and give everyone more time to adjust to the changes.
More of us need to insist on the facts, accept the need for meaningful
change and shared sacrifice, and fulfill our stewardship obligation to
our country, our children, and our grandchildren. If "we the people"
remain silent, our government will remain on autopilot, our burdens
will mount, and our fiscal fuse will only get shorter.
In closing, as President Kennedy said in his 1961 State of the Union
address, "To state the facts frankly is not to despair the future nor
indict the past. The prudent heir takes careful inventory of his
legacies and gives a faithful accounting to those to whom he owes an
obligation of trust—We do have no greater asset than the willingness of
a free and determined people, through its elected officials, to face
all problems frankly."
The time has come for all of us to take these words to heart,
especially when it comes to our nation's growing fiscal imbalance. For
as Teddy Roosevelt said, "Fighting for the right [cause] is the noblest
sport the world affords." Let's work together for a better future and
to help keep America great.
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