Uncle Sam Gets an F in Money Management; Paying the Price for Bipartisan Irresponsibility
Byline: David M. Walker, SPECIAL TO THE WASHINGTON TIMES
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. …