In Washington, if you want to make something public while minimizing press attention, you should release it on a Friday. The current Administration topped that by issuing the consolidated financial statements of the U.S. Government, which included the Government Accountability Office's (GAO) related independent audit report on the Friday before Christmas when the public was focused on the holiday season and key policymakers were either headed out of town or already gone.
The report was simply posted on the Internet and provided to the press on request and without any press briefing. Thus, on December 23, 2011, federal policymakers once again demonstrated their lack of desire to promote public awareness and understanding regarding the federal government's deteriorating financial condition and bleak longer-term fiscal outlook.
In fairness, previous Administrations have not given the release of the federal government's annual financial report as much attention as it deserves, but this year's action was unparalleled. As a result, the press and the media have been "Missing in Action" with regard to reporting on this year's dismal annual report.
The federal government's total liabilities, unfunded obligations,
and commitments and contingencies grew to over $65 trillion,
an increase of over $4 trillion in one year!
Just what did the federal financial report for the fiscal year ended September 30, 2011 reveal? An informed review of the report showed that the federal government had a $1.3 trillion deficit in fiscal 2011 and a negative net worth of $14.8 trillion as of the end of the fiscal year. If that's not bad enough, a close review of the Statement of Social Insurance and the footnotes to the financial statements disclosed that the federal government's total liabilities, unfunded obligations, and commitments and contingencies grew to over $65 trillion, an increase of over $4 trillion in one year!
This $65 trillion plus federal financial hole amounts to over $550,000 per household, and median household income in America is only about $50,000 a year. Importantly, this $65 trillion hole will get deeper by at least $3-$4 trillion a year absent meaningful social insurance program reforms and other transformational changes in government.
If the U.S. Government were a public company, the CEO
would have conducted emergency conference calls
to calm investors.
Once again, the GAO declined to express an opinion on the federal government's financial statements. This means that the American people cannot rely on the fairness and accuracy of the financial information contained in the report. GAO reached this conclusion primarily because of accounting problems at the Defense Department and a $12 trillion difference of opinion between Medicare's Trustees and the Office of the Chief Actuary of Medicare on the amount of underfunding in the Medicare program. The GAO also noted that the federal government continues to have a number of major systems and control problems and is on an imprudent and unsustainable fiscal path.
If the U.S. Government were a public company, the CEO would have conducted emergency conference calls immediately after the report's release to calm investors. In addition, the Board would have called for a special meeting to discuss a plan of action to strengthen the company's financial condition. However, the key elected and appointed officials in Washington evidently decided that it wasn't even worth worrying about.
The time has come to give the information in this important annual financial report the attention it truly deserves. This is one of many critical steps that will help make a clear and compelling case to the American public that federal elected officials must achieve significant budget process, social insurance, defense/other spending, and tax reforms within the next 2 to 3 years if we want to a avoid a debt crisis in the United States.
Given the above, it seems appropriate that several key players make New Year’s Resolutions in connection with our federal government's finances.
• First, the Treasury Secretary, the Director of OMB, and the Comptroller General should commit to hold a joint press briefing on the federal government's annual report each year. This briefing should highlight the key points, include distribution of a concise and user-friendly summary pamphlet, and provide the press an opportunity to ask questions.
• Second, as the nation's CEO, the President should include some high level remarks in his annual State of the Union regarding the nation's finances and any major related proposals that he plans to include in his annual budget submission to the Congress.
• Third, as the group No Labels has suggested, the Congress, as the nation's de-facto Board of Directors, should hold a joint session to hear from the Comptroller General and/or another appropriate nonpartisan professional regarding the annual report and the nation's fiscal outlook.
• Fourth, the Federal Accounting Standards Board (FASAB) should require the federal government to record the trillions of dollars in bonds owed to the Social, Medicare and other so-called "Trust Funds" as a liability of the federal government. In addition, it should accelerate adoption of a fiscal sustainability and inter-generational equity statement. Finally, it should move to require reporting of key outcome-based performance information and comparative sovereign debt/GDP levels as part of the annual report.
• Finally, the press needs to cover these important financial and fiscal issues to a much greater extent than it has in the past.
The above actions are no panacea; however, combined with other fact-based, non-partisan and non-ideological citizen education* and engagement efforts, they can help to accelerate much needed and long overdue fiscal reforms. This is of critical importance since our debt clock is ticking and time is not currently working in our favor.
David M. Walker is Founder and CEO of the Comeback America Initiative and former U.S. Comptroller General
* Readers can access CAI's Fiscal IQ Quiz at www.fiscaliq.net. As of last Thursday about 20,000 people had taken the 5-10 minute quiz from all 50 states and 60 countries. CAI also conducted a 1,000-person nationwide phone poll to get relevant and representative benchmarking results.