Arthur S. Flemming Awards Ceremony

This speech was given by the Comptroller General before the Arthur S. Flemming Awards Ceremony audience at George Washington University in Washington, D.C. on June 6, 2005. This evening, I'm going to talk a little about the broad challenges facing the federal government and our nation. I'm also going to talk about the need for and importance of leadership to address these challenges and capitalize on related opportunities. Much of GAO's work focuses on day-to-day government operations, but GAO also seeks to alert policymakers and the public to a range of emerging and long-term challenges. It's not always an easy job, and some people don't like to hear the facts, but I can assure you that GAO will continue to speak out on key issues of concern to Congress and the nation. Perhaps the most urgent challenge is our nation's worsening financial condition and growing fiscal imbalance. Primarily due to the aging of the baby boomers, rising health care costs, and inadequate federal revenues, America faces a rising tide of red ink. Despite what some say, deficits do matter--especially if they are large and structural in nature. Today, our nation's financial condition is far worse than advertised. Candidly, the federal government's business model is broken and it's time we started to fix it. Anyone who says that we can grow our way out of the problem probably wouldn't pass economics or basic math. To grow our way out of the problem, we'd have to have sustained economic growth way beyond what we saw during the boom years of 1990s. It's just not going to happen--and the sooner we recognize that reality, the sooner we can do something about it. While the deficit numbers are big and bad, it's the government's long-term liabilities and unfunded obligations that are the real problem. I'm talking about promises for Social Security and Medicare along with civilian and military retirement plans, future environmental cleanups, and potentially costly bailouts of government-sponsored enterprises like the Pension Benefit Guaranty Corporation. These items now total about $45 trillion, or roughly $365,000 for every full-time worker, and that burden's growing every day. In the last year alone, this amount rose by over $13 trillion, largely because of the new Medicare prescription drug benefit. Clearly, a crunch is coming, and eventually all of government--including the Department of Defense and the Department of Homeland Security--will feel its impact. GAO's longterm simulations show that without meaningful changes, increasingly drastic actions on both the spending and tax sides of the ledger will be required to balance the budget. By 2040, it's entirely plausible that the federal government could be reduced to doing little more than paying interest on the national debt.