Congress, New President Must Put Our Fiscal House in Order
Special to Roll Call
Great challenges can bring great opportunities, and the current economic crisis is no different. As President-elect Barack Obama considers how best to turn the economy around, he needs to focus not only on today, but also on how to return the country to a more fiscally responsible and sustainable path over time.
Our nation’s short-term budget deficits will unavoidably get worse before they get better, due in large part to the current recession, recent and future “bailout packages,” and a likely dose of additional economic stimulus that hopefully will be targeted, temporary, and reasonably sized and structured.
As a result, Obama will need to juggle competing demands in a much tougher budget environment than he and his economic team anticipated during the campaign.
Last month, the Congressional Budget Office announced that the unified budget deficit for the fiscal year ending Sept. 30 was about $455 billion, up from $162 billion in fiscal 2007. To these amounts, add another $180 billion from the Social Security surplus that was spent each year on other government initiatives, and you get an idea of our nation’s true operating deficits.
This fiscal year could bring the nation’s first trillion-dollar deficit — and that’s before we feel the impact of the tidal wave of spending associated with the retirement of the baby boom generation.
The fact is, most of our federal government’s resources are pre-committed. Current official government figures show that for the first time in our nation’s history, the federal government’s total liabilities and unfunded commitments for Medicare and Social Security now exceed the total net worth of all American households!
Regardless of the specific figures, one key point is clear: To create more future flexibility, Obama will have to take steps to better align federal revenues and spending, reform our outdated entitlement programs and tax policies, and bring soaring health care costs under control.
Some ominous parallels exist between our current mortgage-related subprime crisis and the government’s finances. Both share a disconnect between who benefits from current policies and who will pay the price, a lack of transparency between the nature and extent of the related financial risks, too much leverage and not enough emphasis on cash flow, and a failure of related oversight and risk management mechanisms despite clear and compelling warning signals.
Yet, as disturbing as the similarities are, there are several important differences. The government’s own financial crisis is not as immediate, raising the odds that it will not be taken as seriously as it should. However, the government’s challenge is far larger, with much greater potential adverse economic implications than the current challenge.
Most importantly, no one is going to bail out America the way the government is bailing out others. We must start to take steps to put our own house in order.
As President Obama addresses the current crisis, there are steps he and his administration should take toward addressing this looming and even larger one.
First, even as they seek to effectively and equitably implement the new financial assistance bill, get our economy back on track and restore public confidence, they should implement lessons learned from the recent market failures to strengthen related regulatory, oversight and enforcement actions in connection with a wide range of financial services firms.
Second, they should signal to the new Congress their support for the establishment of a credible commission to defuse the ticking time bomb associated with the government’s deteriorating finances. This commission should be designed consistent with the “best practices” of past successful commissions that the Government Accountability Office developed when I was Comptroller General. It should be bipartisan; include elected officials, new administration officials and nongovernment representatives; and engage citizens through field hearings around the country.
Schumer Advocates for Many on Panel
Nov. 16, 12 a.m.
As Senate Majority Leader, Lyndon Johnson once said of the Joint Economic Committee, “It’s as useless as tits on a bull.” But as that panel’s chairman during the 110th Congress, Sen. Charles Schumer (D-N.Y.) seized the opportunity to elevate the traditionally low-profile post to the forefront of shaping policy. Read Full Article
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