At all levels of government, we need more men and women who are willing to speak the truth, face the facts, take a long-term perspective, and prepare our country and its citizens. Many of these challenges are unprecedented in size, scope, complexity, and potential impact.
There are both opportunities to capitalize on and serious risks to be managed. It’s a mistake to assume that these challenges are primarily a federal problem. After all, bad news flows downstream, and eventually state and local governments begin to feel the federal government’s fiscal pain.
But so far, there have been few calls for any dramatic change in direction or significant shared sacrifice. If our ship of state continues on its current course, we’re all going to have to fasten our seat belts, because we’re headed for one bumpy ride and possibly a crash.
What we need are leaders who have the courage to put the needs of the next generation ahead of the next election cycle—leaders who will fulfill their stewardship to our nation and its citizens. We should be able to look our children and grandchildren in the eye and say we did everything we could to pass on a country that’s both better off and better positioned for the future. This has been a long-standing tradition in this country, one that we should try to continue.
I’m going to talk about some of these challenges to give you a better sense of where we’re headed and why it’s so urgent that we transform government. As a case study, I’ll briefly describe my efforts to modernize my agency, the U.S. Government Accountability Office (GAO), to better position it to serve Congress and the American people. Finally, I’ll examine the key role ethics and integrity play in public administration and the importance of public service.
21ST CENTURY CHALLENGES
We have entered a world that’s changed dramatically in the last several decades. The generally prosperous and more predictable way of life that came after the Second World War is fast drawing to a close. The signs are everywhere, especially in our economy. The financial problems at GM and the airline industry along with pension freezes at Verizon, Motorola, and IBM are the most recent reminders of how quickly things are changing.
Today, each of us, along with our elected representatives, needs to take greater responsibility for our own and our country’s future. Make no mistake—this will require difficult decisions and involve some degree of sacrifice. But it’s essential that we act and act soon. What’s at stake is nothing less than our future economic growth, standard of living, and even national security.
What are these changes and challenges? Possibly the most sweeping agent of change is demographics. Changing demographics will decisively shape the American and global landscape of 2020 and beyond. Our population is aging. At the same time, U.S. workforce growth is slowing. This means that just when growing numbers of baby boomers like me start to retire and draw benefits, there will be a lower ratio of workers paying taxes and contributing to pension plans. Importantly, retirees are living longer and retiring earlier. This is 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 everything from our international competitiveness and trade to our approach to public health. For example, globalization is a key reason health experts are so concerned about the rapid spread of viruses like the avian flu.
With the end of the Cold War, we face new security threats, including transnational terrorist networks and rogue nations armed with weapons of mass destruction. Other challenges come from technology. In the past one hundred years, particularly the last twenty-five years, spectacular advances in technology have transformed everything from how we do business to how we communicate to how we treat and cure diseases. But we also struggle with privacy, security, and other concerns.
In many respects, our quality of life has never been better. We’re living longer, we’re better educated, and we’re more likely to own our homes. But as many of you already know, we also face a growing gap between the haves and have-nots, and we’re facing a range of quality-of-life concerns. These include underachieving public schools, gridlocked city streets, energy and environmental challenges, increasingly expensive and inadequate health care coverage, and the stresses of caring for aging parents and growing children at the same time.
OUR WORSENING FINANCES
Perhaps the most urgent challenge is our nation’s worsening financial condition and growing long-term fiscal imbalance. Largely due to demographic trends, rising health care costs, and lower federal revenues as a percentage of the economy, 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 federal fiscal responsibility.
As a CPA and the federal official who signs the annual audit report on the federal government’s consolidated financial statements, I’m here to tell you that our nation’s financial condition is worse than advertised. Anyone who says we can grow our way out of the problem doesn’t know history well and probably wouldn’t pass basic math. To grow our way out, we’d have to have sustained economic growth beyond anything we’ve ever seen in our nation’s history. It’s not going to happen, and the sooner we recognize that, the sooner we are likely to act.
Historically, Americans have shrugged off warnings about deficit and debt problems. Low interest rates and modest inflation have given many a false sense of security. It doesn’t help that many politicians say, “Don’t worry—be happy.” This air of unreality has been reinforced by the government’s financial statements and budget projections, which provide an incomplete and even misleading picture of where we are and where we’re headed.
Despite strong economic growth, in fiscal year 2005 the federal unified budget deficit was about $319 billion. The unified deficit dropped from $412 billion in 2004, but it’s still imprudently high given that federal spending is set to rise dramatically when baby boomers begin to retire later this decade. In addition, while the cash-based deficit went down about $90 billion in fiscal year 2005, the accrual-based deficit went up more than $140 billion to $760 billion that year.
Our federal deficit numbers are big and bad, but the government’s long-term liabilities and unfunded commitments are the real problem. By commitments, I mean things like unfunded promises for future Social Security and Medicare benefits. Our total accumulated fiscal burden is more than $46 trillion, up from about $20 trillion at the end of fiscal 2000. The new Medicare prescription drug benefit, which may be one of the most poorly designed, inefficiently implemented, and fiscally irresponsible government benefits of all time, represents more than $8 trillion of this accumulated burden. These numbers don’t even take into account the bills that are coming from rebuilding New Orleans and the Gulf Coast or the future costs associated with Iraq, Afghanistan, and the war on terrorism.
To put things into perspective, $46 trillion translates into a burden of $156,000 for every American alive today, or about $375,000 per full-time worker. Even with the recent run-up in housing prices, the combined net worth of every American, including billionaires like Bill Gates and Warren Buffett, is only about $50 trillion. That means every American would have to hand over more than 90 percent of their net worth to cover the government’s current unfunded promises for future spending.
Clearly, a crunch is coming, and eventually every federal program and service will take a hit. Our growing fiscal imbalance will also begin to take a toll on main street. If we continue as we have, higher interest rates and inflation are inevitable. It is only a matter of when and how high. As government is forced to borrow more and more money to finance its debt, less and less will be available for companies to invest, innovate, improve, and stay competitive. Eventually, long-term economic growth will suffer, and along with it American jobs, prestige, and purchasing power.
The time to start doing something is now. For many of the challenges I mentioned, a few thoughtful reforms phased in over time will make a huge difference. 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 any changes. Importantly, we can also fulfill our responsibility to future generations of Americans.
TRANSFORMING GOVERNMENT
To keep pace with the challenges that are coming, our government must also change. For too long, the political process has been afflicted with myopia and tunnel vision. Nonetheless, the challenges I’ve mentioned aren’t partisan issues. Frankly, in the future, we’re all facing a menu of tough choices.
To help restore fiscal discipline, we need to set realistic spending caps and impose pay-as-you-go rules on both spending and tax. 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 also become the poster child for having more accurate and more complete information before legislation is acted on.
More broadly, I’d urge the leaders and managers of every federal agency and program to give careful thought to their mission and operations given 21st century changes and challenges. The problem is that much of government today remains on autopilot and is based on social, economic, national security, and other conditions that existed when Dwight Eisenhower and John Kennedy were in the White House.
At the same time, government continues to expand, with new federal programs and initiatives added every year. Washington rarely seems to question the wisdom of existing federal activities. Ronald Reagan once said, “The nearest thing to eternal life we’ll ever see on this earth is a government program.”
We need to ask a series of basic questions about what government does and how it does business. For example, 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 basic services? How much will it cost? How should it be financed?
Nothing less than a top-to-bottom review of federal activities is needed to determine whether agencies 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.
In particular, entitlement reform is 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 federal spending and tax policies.
To help in this effort, GAO published a groundbreaking report last year that asks a series of probing, sometimes provocative, questions about both mandatory and discretionary spending and tax policy. The report is called “21st Century Challenges: Reexamining the Base of the Federal Government,” found at www.gao.gov. This is a must-read for anyone who’s interested in public policy and our nation’s future. My hope is that policy-makers and the public will begin to think more strategically about where we are, where we’re headed, and, more importantly, how we can get back on a more prudent path.
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 our nation’s position and progress over time. It is also relative to other nations on benchmark issues like public safety, health care, housing, 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 isn’t something that will 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, and nonprofit groups. It’s going to take patience, persistence, perseverance, and even pain before we prevail in transforming government. But prevail we must.
ETHICS & INTEGRITY IN GOVERNMENT
The simple but powerful truth is that effective government requires a first-rate workforce. Leaders can’t do it alone. Their success depends on hiring a team with up-to-date knowledge, skills, and ability. But character also counts. It’s essential that all team members have a well developed sense of right and wrong. You want people in public service with energy, enthusiasm, and empathy for others. You want people who are more concerned about the public good than personal gain. You also want people who understand that the law represents the floor of acceptable behavior and who set their sights higher.
When I came to GAO in 1998, one of the first things I did was introduce a set of three core values that define the nature of our work, convey the character of our people, and describe the quality of our products. Our three core values are accountability, integrity, and reliability. They’re intended to supplement the requirements of the law and various professional standards. If you come to Washington, you’ll see them over the entrance to GAO’s headquarters. These core values are also in our hearts and minds.
We have recent examples in the private sector that show what happens when individuals and institutions lack or stray from a set of core values. At Enron, Worldcom, and other companies, the unethical behavior of top executives, auditors, and other professionals led to bankruptcies and restatements. They have harmed countless shareholders, employees, and retirees. People lost their investments, jobs, and pensions. Public confidence took a big hit, and it’s going to take years to rebuild trust.
When it comes to improving government performance, strengthening accountability, and enhancing public trust, I take seriously my responsibility as comptroller general to speak out. It’s not always an easy job, and some people don’t like truth and transparency. As Harry Truman once said when asked about his nickname “Give ’em Hell Harry,” “I never did give anybody hell. I just told the truth and they thought it was hell.”
PUBLIC SERVICE: AN OPPORTUNITY TO MAKE A DIFFERENCE
To tackle current and emerging problems, government needs first-rate talent, men and women who are able to think strategically and creatively. I know many of you here are recent or future graduates of the highly regarded Marriott School. I hope you’ll seriously consider public service as a way to make a difference—for your country, community, church, and family. Public service is also a chance to make a difference in yourself and others.
Opting for public service is an honorable choice. It offers a chance to make lives better and futures brighter. Public service is a calling where individuals and organizations help build a better future for this great nation and for our world.
One person can make a difference. My favorite president, Theodore Roosevelt, is proof of that. TR, as he’s often called, was someone with character, conscience, and conviction. As our twenty-sixth and youngest president, he was an optimist who firmly believed in the potential of government to improve the lives of all its citizens. As a trustbuster, TR took on some of the nation’s most powerful and ethically challenged corporate interests. And he won. As an environmentalist, TR left us a legacy of great national parks like Yosemite and Natural Bridges National Monument. As an internationalist, he promoted the building of the Panama Canal and led peace talks to end the Russo-Japanese war. TR is also the only American to have won both the Congressional Medal of Honor and the Nobel Peace Prize.
The truth is that today meaningful change is more likely to come from the combined efforts of many individuals. All of us have to be part of the solution. It’s no accident that the Constitution begins with the words, “We the people.”
My hope is that when you leave here today, you’ll spread the word among your friends and family about the challenges we’re facing. We all need to insist on the facts, speak the truth, lead by example, and help create a more positive future by fulfilling our responsibilities to our country, children, and grandchildren. We can, we must, and if people like you and I join together, I am convinced we will succeed. As TR said, “Fighting for the right [cause] is the noblest sport the world affords.” Let’s join the fight and make a difference!
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Speech by David M. Walker
Illustrations by David M. Walker
ABOUT THE SPEAKER
David M. Walker is comptroller general of the United States. This article is adapted from his address given 2 March 2006 when Walker was named Administrator of the Year by the Romney Institute of Public Management.
