David Walker: American Nightmare
Former Comptroller General and CRFB Board Member David Walker writes in Public Finance International that the struggles in Detroit are a symbol of fiscal irresponsibility in other areas of government. Particularly with the federal government, lawmakers have put the country on a dangerous fiscal path over the last decade that cannot be sustained without negative consequences. Walker writes:
The US government, and large parts of American society, have strayed from the principles and values on which the country was founded and that helped to make it great. The federal government has also grown too big; both it and many state and local governments have overpromised in relation to what they can actually deliver. The recent budgetary problems besetting Detroit, Chicago and other US cities are a stark reminder of what is at stake.
For most of the initial 200 years of American history, spending was largely balanced with revenues – with the exception of times of war and major national emergencies, after which steps were taken to reduce debt burdens relative to GDP. But more recently, consistent peacetime deficits emerged, and then deficits became unsustainable and debt burdens mounted.
Walker points out that government at all levels face common problems, and Washington in particular must begin dealing with several structural challenges in a comprehensive manner:
Elected officials in government have so far failed to effectively address the four common challenges that all levels of government face: unfunded retirement obligations, escalating health care costs, outdated tax systems and spending more on consumption than investment. Policymakers should be attempting to achieve a grand bargain that tackles these four key issues, which collectively represent the disease that must be addressed to beat our fiscal cancer. It will take great political courage and leadership to address these in a coordinated and integrated fashion.
By far, the largest deficit the US faces is a leadership deficit. Presidents and the Congress, especially in the past 10 years, have not stepped up to the plate to address the structural deficits in a timely manner. The president has the greatest impact on whether or not progress is made at the federal level, but governors, mayors and other chief executives have just as much opportunity and obligation to lead in connection with the finances of their states and municipalities. These officials should step up to the plate and take action, or run the risk of following in Detroit’s footsteps.
The problem is well-known, as are main components of a comprehensive deal. What is missing is political leadership. Today, on day two of the government shutdown, lawmakers must come together to reopen the federal government in a responsible manner, and take steps to address the nation's structural financial challenges.
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"My Views" are works published by members of the Committee for a Responsible Federal Budget, but they do not necessarily reflect the views of all members of the committee.