GAO-09-572CG

GAO: PROMOTING ACCOUNTA

TRANSPARENCY IN GOVER

Before the Women’s Philanthropy Boa

7th Annual Spring Symposium

Auburn University 

Auburn, Alabama

April 6, 2009

By Gene L. Dodaro

Acting Comptroller General
GAO-09-572CG

Outline

• About GAO• Financial Markets and Economic Recovery• Transition– New President and Congress• Long-Term Fiscal Outlook and Challenges 
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About GAO

GAO’s mission is to support Congress and imp

• An independent, nonpartisan agency in the 

branch of the federal government.

• 3,200 employees, i.e., economists, account

policy analysts, attorneys and computer exp

• Issues hundreds of reports, congressional t

other products each year on breadth of federesponsibilities.
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About GAO

GAO’s Strategic Plan ensures that Congress angovernment receive timely, quality service. The 

• Highlight current and emerging challenges t

being and financial security of the American 

• Respond to changing security threats and th

of global interdependence

• Help transform the federal government’s rol

does business to meet 21st century challeng

• Maximize the value of GAO by being a mod

agency and world-class professional service
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Our Core Values

Accountability Help the Congress oversee federal programs, operations to ensure accountability to the AmeIntegrityEnsure that our work is professional, objectivefact-based, nonpartisan, nonideological, balancReliabilityProvide high-quality, timely, accurate, useful, ccandid information
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Financial Markets a

Economic Recover

• Financial Regulatory System• GAO Role in Financial Rescue • Auditors of Bank Insurance Fund, FHFA, TARP

Government Financial Statements

• American Recovery and Reinvestment Act
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Modernizing the U.S. Fin

Regulatory System

Financial Regulation: A Framework for Crafting 

Proposals to Modernize the Outdated U.S. FinRegulatory System

• Explains the origins of the current fi

regulatory system

• Describes market developments an

pose challenges to the current syste

• Presents an evaluation framework t

and others can use to craft or evaluregulatory reform efforts

(GAO-0
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Outdated Regulatory S

Risks posed by:• Emergence of large, complex, and inter

financial conglomerates

• Less-regulated entities are playing incre

roles in the financial system

• New and complex products pose challe

stability and consumer protection
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For Crafting or Assessing Re

Reform Proposals: GAO Fram

9 Essential Characteris

• Clearly defined regulatory goals in statute • Appropriately comprehensive• Systemwide focus• Flexible and adaptable• Efficient and effective• Consistent consumer and investor protectio• Regulators provided with independence, pr

authority, and accountability

• Consistent financial oversight• Minimal taxpayer exposure
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Financial Institutions and 

• Emergency Economic Stability Act of 2008 

billion TARP in October 2008 

• GAO given statutory oversight role• GAO’s TARP reports recommendations fo

• Monitoring the use of funds to meet the • Articulating a better communication stra• Ensuring effective Treasury manageme
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Global Financial Crisis Ta

• Created by International Governing Board in No• Purpose: 

• enhance the knowledge base of NAOs on f

economic matters related to the crisis

• be a source of information to help governm

community respond to the crisis 

• Membership: U.S.A. is lead, other countries inc

Austria Estonia Mexico SCyprus Hungary Morocco SCanada Indonesia Netherlands UChile Italy Poland VChina Japan RussiaDenmark Korea Slovakia
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American Recovery & Reinve• Signed February 17, 2009• Purposes:

• preserve and create jobs and promote • assist those most impacted by the rece• invest in science and health-care techn• invest in infrastructure• stabilize state and local government bu

• Total cost, tax and spending: $787 billion, i

over $580 billion in additional spending (CB
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American Recovery & Reinvestment 

• Inspectors General review federal progra

implementation 

• Recovery Accountability and Transparen• GAO responsibilities include:

• conducting bimonthly reviews of sele

localities 

• commenting on the estimates of the n• reviewing areas such as trade adjus

assistance, new education incentive efforts to increase small business len
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American Recovery & Reinvest
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Transition: Assisting Th

Administration & The New 
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Other Urgent Issue

Timely Action Critic

• U.S. Efforts in Iraq, Afghanistan, and Pakistan• Defense Readiness, Spending, and Care for Se• Protecting the Homeland and Preparing for Pub

Emergencies

• Improving U.S. Image Abroad• Food Safety • Transition to Digital TV
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Long-Term Challeng

• Today’s focus—understandably—is on

• Dealing with financial system stress • Addressing the economic downturn

• BUT.... Underlying long-term fiscal challen

addressed
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Long-Term Fiscal Chal

-20-15-10

-5

05

2005 2010 2015 2020 2025 2030 2035 

Fiscal year

Percent of GDP

Combined 

Surplus/Deficit

Source: GAO January 2009 analysis.aFederal surplus/deficit is from GAO’s Alternative Simulation using the Trustees’ assumptions.
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Long-Term Fiscal Challe

Driven by Health Care Spe

05

1015202530

2008 2020 2030 2040 2050 2060 

Social Security

Medicaid

Medicare

Source: GAO analysis of data from the Office of the Chief Actuary, Social Security Administration, Office of the Services, and the Congressional Budget Office.Note: Social Security and Medicare projections based on the intermediate assumptions of the 2008 Trustees’ RCBO’s January 2009 short-term Medicaid estimates and CBO’s December 2007 long-term Medicaid projections consistent with the 2008 Trustees intermediate assumptions.

Percent of GDP
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Growth in Health Care Sp

Cumulative Growth in Real Health Ca

Per Capita and Real GDP Per Capita

Percentage

0

100200300400500600700800

19601962196419661968197019721974197619781980198219841986198819901992199419961998

Real health care spending per capita Real GDP 

Source: GAO analysis of data from the Centers for Medicare & Medicaid Services, OffiBureau of Economic Analysis.Note: The most current data available on health care spending per capita are for 2007.

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Social Security

• Important program in need of change:

• Provides retirement benefits to millions 

families. 

• Provides benefits to survivors, other de

disabled workers. 

• Faces significant and growing long-term 

shortfall.
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Percentage of Elderly Househ

Receiving Each Type of Inco

89

55

41

0

102030405060708090

100

Social Security Savings Pension

Percentage of elderly households

Source: Income of the Population 55 or Older, 2004 (Washington, D.C.: SSA, Office o
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Cash Flow and Trust Fund Balanin the Combined Social Security 

-1,000

-500

0

500

1,0001,5002,0002,5003,0003,5004,000

2008 2015 2020 2025 2030 

Calendar year

Cash flow Trust fund balanc

Billions of 2008 dollars

Cash deficits begin 

2017

Source: GAO analysis of data from the Office of the Chief Actuary, Social Security Administration.Note: Projections based on the intermediate assumptions of the 2008 Trustees’ Report. The CPI is usedollars.
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Addressing long-term fiscal im

will require changes in federal sp

tax policies

0

1020304050

2008 2019 2030 

Fiscal year

Percent of GDP

Net interest Social Security Medicare & Medicaid 

Revenue

Source: GAO’s March 2009 analysis based on the Trustees’ assumptions for Social Security and Medicare.Notes: Discretionary spending other than stimulus provisions grows with GDP after 2009; stimulus provisions are provisions are extended, except for expiring provisions enacted in the Recovery Act. After 2019, revenue as a shhistorical average of 18.3 percent of GDP plus expected revenues from deferred taxes, (i.e. taxes on withdrawals 

spending is adjusted based on the assumption that physician payments are not reduced as specified under curre
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Tax Issues

• Narrowing the tax gap• Reviewing tax expenditures• Weighing tax reform
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On the Web

Web site: www.gao.gov/cghome.htm

Contact

Chuck Young, Managing Director, Public AffairsYoungC1@gao.gov (202) 512-4800 

U.S. Government Accountability Office441 G Street NW, Room 7149Washington, D.C. 20548

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