Twelve years ago today, when I was comptroller general of the United States and head of the Government Accountability Office, I presented testimony to the Senate Finance Committee, “Moving From Balancing the Budget to Balancing Fiscal Risk.”
Unfortunately, the concerns I expressed on behalf of the Government Accountability Office went largely unheeded. We are now paying a huge price for the shortsightedness and imprudent actions of elected officials of both major parties.
Back in February 2001, the United States had just experienced its first true operating budget surplus (excluding the Social Security surplus) and had actually paid down some of its public debt for the first time in decades. The country was also facing projected budget surpluses for the next 10 years and the possibility of paying off all outstanding public debt within that period. Washington was concerned about what to do with the budget surplus and the prospect of being debt-free.
Candidly, there was no real possibility of a debt-free U.S. government for the first time since Andrew Jackson was president. Washington politicians would never let that happen. Of far greater concern was the way the surplus was burning a hole through Congress’ pocket. The fear was it might burn a hole through the fiscal floor. In reality, the surpluses were projected and based on various assumptions that might prove not to be valid. Also, due to known demographic trends and rising health care costs, we were projected to return to large and growing budget deficits beyond the 10-year budget horizon.
Given the above, I suggested a range of possible fiscal actions based on modern portfolio theory used to make investment decisions. Fiscal policy decisions should balance the wants and needs of today with the fiscal realities of tomorrow. The most prudent action 12 years ago would have been to pay down debt, providing a tangible benefit then and more fiscal flexibility later. I also noted then that the most imprudent actions would be to expand “entitlement benefits” or engage in permanent tax cuts.
A dozen years later, it’s clear our elected officials ignored all the low-risk actions and engaged in a range of high-risk actions for which both political parties are responsible. For example, Medicare has been expanded to cover prescription drugs, and Obamacare further expanded health care coverage for more than 30 million Americans. In addition, most of the tax cuts enacted in 2001 and 2003 were made permanent as a result of the “fiscal cliff” deal in early 2013. These actions, when combined with unexpected funding of domestic emergencies and international conflicts, have caused us to have deficits of more than a trillion dollars for four straight years. They also resulted in an explosion of our national debt and a deepening of our federal financial hole.
Since 2000, we have been experiencing a recurring case of Democratic big-spending policies and Republican low-tax policies, combined with additional spending for a range of contingencies. The result has been huge deficits, rapidly mounting debt, and a total liability and unfunded debt burden of $71.2 trillion, up from $20.6 trillion at the end of fiscal 2000, and growing by $8.2 million a minute. Considering all of these developments, what fiscal grade do the Congresses and the presidents of both parties who have held power since 2001 deserve? In my view, they deserve an F.
The hard and cold reality is that due to the failure of elected officials to heed professional, nonpartisan and nonideological advice, we are all paying a price — and that price will increase over time unless we change our fiscal policy. It’s time to recognize reality and change course.
What should our fiscal goal be? We need to engage in a range of reforms that will result in a reduction of debt-to-gross domestic product to about 60 percent by 2024. Moreover, we need to do so in a manner that is pro-growth, pro-opportunity, fiscally responsible and socially equitable.
Mr. Obama’s State of the Union address next week could provide an excellent opportunity to speak the truth to the American people. We need to recapture control of the budget and take steps to create a better future. This includes spending more on investments and less on consumption, including premium and tax subsidies for Americans who are well above the average income level. We need to reform social insurance programs to make them sustainable, address escalating health care costs, reduce spending, and engage in comprehensive tax reform that will make our system simpler, fairer and more competitive while generating more revenues. We also need to put a process in place that will make government economical, efficient and effective over time. We should do all of these things in 2013 as part of a fiscal “grand bargain.” After all, our economic and debt clocks are ticking, and next year is an election year.
I have traveled to all 50 states, engaging with the American people. They can handle the truth and are willing to accept tough choices if they are part of a comprehensive and principles-based plan they deem to be fair. They are starved for truth, leadership and solutions. All of this is possible with truth, transparency and leadership.
David M. Walker is former U.S. comptroller general and CEO of the Comeback America Initiative.