Comptroller Walker: Fiscal woes threaten defense transformation

If left unchecked, the government’s present fiscal path will provoke a crisis by the year 2040 that will have grave effects on the country’s ability to ensure national security, according to David Walker, comptroller general at the Government Accountability Office.

“Our country is now the world’s largest debtor nation,” Walker said in a March 8 speech at the U.S. Naval Academy. “And our mounting debt is undermining our ability to deal with a range of current and emerging challenges in the 21st century.”

Although the nation's economy now seems fine, retiring baby boomers, spiraling health care costs,and dwindling personal savings rates constitute a looming fiscal disaster, Walker said. “If we stay on our present path, the United States faces a prolonged period of debt and decline,” he said.

Financial burdens caused by entitlements rose from about $20 trillion to $50 trillion over the past six years, equaling a $440,000 obligation for each American household, Walker said. In 2005, personal savings rates dipped to negative numbers for the first time since the Depression, he added. The federal trade deficit hit a record $763 billion in 2006.

“The meaning is clear: A crunch is coming,” Walker said.

Defense transformation must mobilize to address fiscal concerns that affect the military, he added. “As budgets grow tighter, the military is going to have to distinguish unlimited wants from true needs based on credible current and future threats,” he said. Also, military health care costs are unsustainable, Walker added.

The Defense Department would receive a "D" grade for economy, efficiency, transparency and accountability, Walker said. Extensive waste is the result of mismanagement, poor judgment, inappropriate directions and weak oversight, he added.

In the GAO’s recent listing of high-risk programs, DOD, at least partially, had 15 of the 27 troubled areas. Cost overruns in the Pentagon’s $1.5 trillion investment budget plan are siphoning needed funds from other areas. Also, the department often rushes to production despite underdeveloped technologies, GAO has said.

DOD must do more to attract and retain a high-quality workforce, Walker added. The stress of war operations has caused DOD to employ contractors in unprecedented and unclear ways. “The time has come to review and reconsider the role of contractors and best to contract with, compensate and oversee them,” Walker said.

Walker also renewed his call for a chief management officer for DOD to lead and coordinate business transformation departmentwide.

Although he focused on defense transformation in his speech, Walker emphasized that the entire federal government in skating on fiscal thin ice. “As the federal officer who signs the audit report on the government’s financial statements, I’m here to tell you our government’s financial situation is worse than advertised,” he said.

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