Comeback America: The Nation’s Fiscal Challenge and A Way Forward

Dallas CPA Society Member Conference Dallas CPA Society

Dallas, TXMay 26, 2011

Hon. David M. WalkerFounder and CEO

The Comeback America Initiativeand

Former Comptroller General of the United States

Growth of Government

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Federal Spending & the Political Party in Power

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Composition of Federal Spending(% of Total Outlays)

1970

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More on Autopilot

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Fiscal Gap 2011

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Historical Receipts & Outlays

Projected Surplus?

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Historical Debt Burdens

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Growing Foreign Dependency

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Comparative Debt Burdens

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Rank Country

                  

Rank Country

                  

1 Australia 18 Mexico2 New Zealand 19 Israel3 Estonia 20 Slovenia4 Sweden 21 Austria5 China 22 Finland6 Luxembourg 23 France7 Chile 24 Spain8 Denmark 25 Germany9 United Kingdom 26 Belgium

10 Brazil 27 Italy11 Canada 28 United States12 India 29 Hungary13 Poland 30 Ireland14 Netherlands 31 Japan* 15 Norway 32 Iceland**16 Slovakia 33 Portugal

17 Korea 34 Greece

Fiscal Fitness Index: Overall Results

Source: Sovereign Fiscal Responsibility Index. Note: *Japan’s debt was downgraded by Moody’s 1/29/11. ** Iceland’s Sustainable Fiscal Path reflects reforms enacted after an IMF bailout and there is a legal case pending in regard to foreign losses incurred due to the failure of Landsbanki.

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Rank Country

                  

Rank Country

                  

1 Australia 18 Slovakia2 New Zealand 19 Korea3 Estonia 20 Mexico4 Sweden 21 Austria5 China 22 Slovenia6 Luxembourg 23 Finland7 Chile 24 France 8 US under NFRRC plan 25 Spain9 Denmark 26 Germany

10 Brazil 27 Belgium11 United Kingdom 28 Italy12 India 29 Hungary13 Canada 30 Ireland14 Netherlands 31 Japan* 15 Poland 32 Iceland**16 Norway 33 Portugal

17 Israel 34 Greece

Fiscal Fitness Index: Overall Results with U.S. Under NFRRC Plan

Source: Sovereign Fiscal Responsibility Index. Note: *Japan’s debt was downgraded by Moody’s 1/29/11. ** Iceland’s Sustainable Fiscal Path reflects reforms enacted after an IMF bailout and there is a legal case pending in regard to foreign losses incurred due to the failure of Landsbanki.

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Our Fiscal Future

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CBO’s Public Debt Projections

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Impact of Health Reform

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Federal Revenues & the Political Party in Power

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Federal Revenue Composition

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Tax Burden

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Progressive Tax System

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Individual Tax Expenditures

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Effective Tax Rates

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Corporate Tax Expenditures

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Statutory Corporate Tax Rates

Key Systemic Challenges

• Expansion of government at all levels

• Health Care Costs

• Retirement Income Costs

• Disability and Welfare Related Costs

• Critical Infrastructure Needs

• Education Costs

• Corrections Costs

• Outdated and Inadequate Revenue Systems

• Myopia, Tunnel Vision, Special Interests and Self-Interest.

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Federal:• Implement statutory budget controls that address discretionary and mandatory

spending as well as tax preferences in order to stabilize our debt/ GDP at a reasonable level

• Achieve Social Security reform that makes the program solvent, sustainable, secure and more savings oriented

• Reduce the rate of increase in health care costs and more effectively target related taxpayer subsidies and tax preferences

• Ensure that all future health care reforms adequately consider coverage, cost quality and personal responsibility

• Pursue comprehensive tax reform that makes the system more streamlined, understandable, equitable and competitive while also generating adequate revenues

A Way Forward

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A Way Forward - Continued

• Review, re-prioritize and re-engineer the base of the federal government, including national security strategies, to focus on the future, eliminate waste, generate real results and ensure sustainability

• Ensure that we have process that will enable us to achieve the above objectives within a reasonable period of time

State and Local:• Reform pension and health systems to make them reasonable, affordable and

sustainable

• Review, re-prioritize and re-engineer the base of government.

• Pursue comprehensive tax reform in coordination with the federal government.

• Consider an exchange of primary roles, functions and revenue sources as part of a new federalism or devolution effort (e.g., health care, education, infrastructure)

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Statutory Debt Ceiling

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We must raise the debt ceiling. The Real Questions are:

• How much it should be raised?, and

• What conditions should be attached to any increase in the debt ceiling limit?

The Debt Ceiling Debate

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Given the deteriorating financial condition of the federal government and rising concern regarding spending , deficits and debt, the following conditions are illustrative of the types of conditions that should be considered:

• Short-term Spending: Agreeing to cut discretionary spending, excluding war costs, to fiscal 2008 levels adjusted

for population growth over 2-3 years.

• Structural Deficits: Enacting tough but realistic statutory budget controls that could include:

meaningful PAYGO rules on the spending and tax side; tough but realistic discretionary spending caps, and; specific debt/GDP targets that begin in 2013-2014 with automatic enforcement mechanisms (e.g.,

spending cuts and temporary tax surcharges or preference reduction).

Authorize and fund a major citizen education and engagement effort that will occur during late 2011 and 2012 to prepare the way for tough choices beginning in 2013.

The Debt Ceiling Debate - Continued

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• Calendar 2011

Tough 2011 and 2012 Budgets (Short-Term) Earmarks Moratorium (Short-Term) Selected Pay and Hiring Freezes (Short-Term) Leading By Example (Short-Term) Statutory Budget Controls (Structural) Transformation and Accountability Task Force (Structural)

• 2011 – 2013

Congressional Hearings Citizen Education/Engagement

• 2013 -?

Comprehensive Social Security Reform (Structural) Role and Size of Government (Structural) Health Care Coverage Reform and Cost Controls (Structural) Comprehensive Tax Reform (Structural)

A Phased Approach

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• The policy should make economic sense, be socially equitable and culturally acceptable

• The math behind the policy must work

• The policy must be politically feasible

A Three Pronged Test for Policy Creation

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Comeback America Initiative (CAI)Bridgeport, CTwww.TCAII.org

No LabelsWashington, DCwww.nolabels.org

New Players on the Fiscal Responsibility Field

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