The federal government’s fiscal failures

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After 223 years as a republic, it’s time that the US complied with the basic elements of good governance. Washington must wake up and start taking steps to create a better future

It has become evident that governments at all levels in the United States and in many other countries have grown too big, promised too much and lost control of their budgets. While recent attention has focused on current deficits and debt/GDP burdens, in many cases, these are just a precursor of the much greater fiscal challenges that lie ahead without a course correction.

For example, in the US, the federal government has grown from less than 5% of the economy in 1900 to about 24% in 2011. In addition, it’s on a path to reach 37% of the US economy in 2040. This growth is driven largely by off-balance obligations for social insurance programmes (such as Social Security and Medicare) that are affected by known demographic trends and rising health care costs.

While the US government has grown, the nature of what it is doing has changed dramatically as well. For example, in 1900 the overwhelming majority of federal spending was related to the express and enumerated responsibilities envisioned by the nation’s founders and was subject to annual limits set by the Congress.  In 2011, it was about 37% and declining.

The US tax system is far too complex and way out-of-date. Among other things, it provides for over $1.1 trillion in tax preferences that are outside the budget, not in the financial statements, and not subject to periodic review and re-evaluation. These tax preferences represent ‘back-door spending’ and need to be subjected to the same level of review, re-examination and reconsideration as direct spending programmes.

Shockingly, the US government does not have three fundamental components that are essential to help ensure any entity’s economy, efficiency, effectiveness and sustainability. These are:

  • A comprehensive strategic planning framework
  • A budget that controls a vast majority of all spending
  • Outcome-based performance metrics to assess the country’s position, progress and ranking as compared to other major nations

After 223 years as a republic, it’s time that the US complied with these three basic elements of good governance. After all, according to the Comeback America Initiative’s fiscal fitness index, the US ranks behind Spain, Italy and Portugal in fiscal sustainability. In addition, the political stalemate in Washington is a bad as it has ever been.

The time for Washington to wake up and start taking steps to help create a better future is now. Other countries and levels of government need to do the same.

About David M Walker

David M. Walker is the founder and chief executive officer of the Comeback America Initiative and was comptroller general of the United States from 1998 to 2008

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