GOOLSBEE: I think there's some conventional wisdom forming among opponents of the administration that the deficit is getting bigger primarily because Obama is spending like crazy, and it's totally wrong.
If you look at the 10-year budget, the reason that 10-year deficit is getting bigger, it's first and foremost because the economy has gotten substantially worse, and as the current economy gets worse, it makes the 10-year deficit numbers significantly worse also. And that's by far the biggest thing driving it.
The second is the President consciously came in and said, "We're going to stop engaging in a series of budget gimmicks that are used to artificially make the 10-year deficit look smaller," so things like, they put in zero dollars for natural disaster cost each year, even though there's a hurricane season. So you would think that this is a somewhat regular expense.
Each year, they say, "Oh, my goodness. How could we have predicted there would be a hurricane hitting South Carolina this year?" And so the president said, "Look, let's take the average cost for natural disasters. Let's put it in the budget every year. Let's stop saying the R&D tax credit is only temporary. Let's make it permanent because they renew it every year. Let's stop saying we're going to go cut all doctors' salary by 20 percent at the end of the year and then, at the end of the year, saying actually we're not going to do it this year, but we promised to do it all future years," thereby keeping the long-run deficit smaller.
None of those are spending. The president is not spending anything that people were not spending before for all of those budget gimmicks. He is instead saying, "Let's be honest about what the situation we're in," and so I would just encourage that people who are agitated about the spending to do two things.
The first is go look at the 10-year budget and ask how much of the increase in the 10-year deficit is actually due to new programs versus just being honest and just the state of the economy, and the second is, for this year and next year, while we're in stimulus and Recovery Act land, in the face of the stiffest recession since 1929, that is not when you try to tighten the belt. It is extremely dangerous to do that. That is exactly what Herbert Hoover did that got us into the Depression.
ROMANO: Well, why not? Now, see, that's counterintuitive for a lot of people listening to you. They're saying, "Well, we should be tightening our belt."
GOOLSBEE: We should tighten our belts in the sense of getting the savings rate up. Getting long-run fiscal responsibility is going to be quite important, but if you go at everybody and the savings rate went to 25 percent in a day and we went and massively cut government spending right now, it would drive the GDP downward. And this may be a paradox, but in a period of crisis, you can't do that. That's what Herbert Hoover did. They faced stiff recession, big financial crisis, and they said, "You know what we should do, we should try to balance the budget, and let's start raising taxes and cutting spending." And by doing that and by letting the financial systems collapse, they started the Great Depression, which was a spiral that they would not fix itself and really stuck with us for more than 10 years until World War II ends up getting us out as you know, as a big stimulus.
We faced a financial crisis bigger than the one in 1929. We faced a recession, the stiffest since 1929. The stage was set that if we engaged in a series of policy missteps, we're in the Great Depression, and the Fed deserves great credit and this administration deserves great credit as taking actions to prevent that. And one of the actions that was absolutely needed to prevent it was loosening the belt, not tightening the belt, in the face of those things.
In his weekly radio address on April 25, Obama promised that the administration would establish a process for every government employee to submit their ideas on how their agency can save money and perform better. "Americans across the country know that the best ideas often come from workers -- not just management," Obama said in the speech.
The "SAVE Award," which stands for Securing Americans Value and Efficiency, is open to all federal employees, and only people with government e-mail addresses will be able to submit suggestions.
Entries will be judged by these questions, according to the Web site: Does the idea reduce costs in a way that is concrete and quantifiable? How does it improve the way that government operates? Does the idea have a tangible impact on citizens' lives or the environment? Is there a clear and practical plan for implementing the idea? Will it be possible to realize savings immediately?
Singapore’s best practices in treasury, tax and customs will be shared with senior policy makers and officials from Lao PDR in a two-year capacity-building programme supported by Temasek Foundation, Singapore Cooperation Enterprise and the World Bank, in partnership with the Ministry of Finance, Lao PDR. There will be policy roundtable discussions and workshops to enable the policy makers and treasury, tax and customs officers to acquire new knowledge and skills.
Ex-senior officials from the Inland Revenue Authority of Singapore, Singapore Customs and the Ministry of Finance of Singapore will be roped in to share their experience, and help Lao’s Ministry of Finance to adapt best practices in policies, systems and processes to the Lao context.
Temasek Foundation is supporting the programme with a S$1.15 million grant, with additional funding by World Bank at S$950,000
This is the first ever tripartite collaboration between SCE, WB and Temasek Foundation. Increasing, International Organisations (IOs) have approached SCE to share Singapore’s developmental experience with their client countries.
Mr. Alphonsus Chia, Chief Executive Officer of SCE added: “We are happy that Singapore’s developmental experience has been recognised by International Organisations (IOs) like the World Bank and Temasek Foundation. SCE is pleased to partner the IOs to participate in more public sector led projects in this region. We hope that this programme will lead to more collaboration between Singapore and Lao PDR. Through greater understanding of the needs of the foreign governments and the types of expertise available, SCE hopes to contribute more meaningfully in development projects.”
Kundra also worked as vice president of marketing for Evincible Software, which provided electronic signatures and identity management for financial services companies and the Defense Department. In addition, he served on the adjunct faculty at the University of Maryland, where he received a bachelor degree in psychology and a master's in information technology.
As administrator of e-government, Kundra will work with the Chief Information Officers Council to formulate policy and help agencies manage IT investments. He could bring a different approach to technology than his predecessor. IT professionals in government and those working for contractors say Evans, who began her post as e-gov chief under the Bush administration in 2003, say she managed information technology as a commodity rather than a strategic asset. Kundra, conversely, brings a more activist approach that emphasizes using the latest technology such as Google applications to affect directly government performance.
One change Kundra may take on immediately is cloud computing, a process that stores all applications on remote servers instead of on laptop and desktop computers as a means to make networks more efficient. "The cloud will do for government what the Internet did in the '90s," Kundra told Nextgov in a November interview. "It's a fundamental change to the way our government operates by moving to the cloud. Rather than owning the infrastructure, we can save millions."
Teresa Bozzelli, managing director and chief operating officer for the technology research firm Government Insight, which worked with the Obama IT transition team, agreed that a shift to cloud computing would be beneficial for federal agencies.
"The government owning everything as opposed to buying infrastructure as a service really needs to change," Bozzelli said. "In the new model, you only buy what you use. The government is paying for no downtime. It's both a short-term approach for cost savings and a long-term strategy for bringing in advantageous technology upgrades more quickly."
Kundra also is a strong proponent of giving the public access to government data. "Why does the government keep information secret?" he rhetorically asked during an interview with Nextgov. "Why not put it all out in the government domain?" [Since arriving in Washington], I've made all the government databases public. Every 311 call, every abandoned automobile, who has responded, etc. It provides high-level oversight of the daily tasks of government."
We are making progress in modernizing public financial management (PFM). The Board of Supreme Audit (BSA) has completed the audit of the final accounts of the federal budget for 2005 and the audit of the final accounts for 2006 is underway. We have submitted the final accounts of the federal budget for 2007 to the BSA in October. The audit reports will be submitted to the Council of Representatives and published. We have also adopted, in consultation with the Fund and the World Bank, a three-year action plan that identifies priority measures to modernize PFM, notably as regards budget preparation, execution and reporting; cash management; public procurement; cash management; and the accounting framework. We will step up our efforts to put in place, in cooperation with USAID, the renewed Iraq Financial Management Information System (IFMIS), in order to make this system fully operational in 2009.
14. We have completed about 25 percent of the data collection for the census of public service employees at end-October, but finalization of the project is being delayed due to technical problems. We will make all efforts to have the census completed by end-January 2009. After completion of the census we will move swiftly to eliminate ghost workers and adopt an action plan to computerize the payroll, as a first step for a comprehensive civil service reform. In parallel, the BSA has begun a project to verify the personnel records in line ministries, in order to clean up the existing payroll.
“The Improved Public Financial Management Program will assist Tuvalu with fiscal stability, improve public enterprise performance, and boost business and public confidence in the government’s financial management and governance systems,” said ADB Country Specialist Emma Ferguson.
ADB is providing a grant of $3.24 million sourced from the concessional Asian Development Fund (ADF).
The Government of Tuvalu (the Government) has adopted a set of five performance benchmark indicators (PBIs) developed jointly by it, the Asian Development Bank, the Australian Agency for International Development, and New Zealand International Aid and Development. The PBIs track the achievement of the stated social outcomes with a focus on improved financial management and fiscal consolidation. The PBIs are as follows:
(i) Benchmark 1.1. The Government’s recurrent expenditure each year should not exceed the total of its recurrent revenue plus a sustainable Tuvalu Trust Fund (TTF) distribution (consolidated investment fund drawdown).
(ii) Benchmark 1.2. The target minimum value of funds retained in the consolidated investment fund should not be less than 16% of the maintained value of the TTF at the beginning of the TTF year, to ensure that sustainable distribution is available to help finance annual budgets.
(iii) Benchmark 1.3. The Government’s total debt liability, both domestic and external, should not at any time exceed 60% of the gross domestic product, as specified in Te Kakeega II.
(iv) Benchmark 2.1. In 2008, the Government will increase its budgeted non-salary expenditure on basic education by at least 5%.
(v) Benchmark 2.2. In 2008, the Government will increase its budgeted non-salary expenditure on primary and preventative health services by at least 5%.
While significant progress has been made in improving financial management since the federal government began preparing consolidated financial statements 12 years ago, three major impediments have continued to prevent us from rendering an opinion on the accrual basis consolidated financial statements over this period of time: (1) serious financial management problems at the Department of Defense, (2) the federal government’s inability to adequately account for and reconcile intragovernmental activity and balances between federal agencies, and (3) the federal government’s ineffective process for preparing the consolidated financial statements. In addition to the material weaknesses underlying these major impediments, we noted three material weaknesses involving the federal government’s inability to (1) determine the full extent to which improper payments occur and reasonably assure that appropriate actions are taken to cost-effectively reduce improper payments, (2) identify and resolve information security control deficiencies and manage information security risks on an ongoing basis, and (3) effectively manage its tax collection activities.
Leontief believed that the economy could be broken down into sectors, like farming, steel manufacturing, retailing, and so forth. Each sector uses material and services from other sectors to produce material or a service, which it supplies to those other sectors. This interrelationship can be described in the form of a mathematical matrix. It is often called an “input-output analysis.” When he first began investigating this model at the end of World War II, Leontief went to the Bureau of Labor Statistics to help gather the data he needed. To assist him, the bureau assigned a young analyst who was working there at the time, Jerome Cornfield.
Leontief could break the economy down into a few broad sectors, such as putting all manufacturing in one sector, or he could subdivide the sectors into more specific ones. The mathematical theory of input-output analysis requires that the matrix that describes the economy have a unique inverse. That meant that the matrix, once assembled, had to be subjected to a mathematical procedure called “inverting the matrix.” At that time, before the widespread availability of computers, inverting a matrix was a difficult and tedious procedure on a calculator. When I was in graduate school, each of us had to invert a matrix- I suspect as a kind of rite of passage “for the good of our souls.” I remember trying to invert 5 x 5 matrix and taking several days, most of which I spent locating my mistakes and redoing what I had done wrong.
Leontief’s initial set of sectors led to a 12 x 12 matrix, and Jerry Cornfield proceeded to invert that 12 x 12 matrix to see if there was a unique solution. It took him about a week, and the end result was the conclusion that the number of sectors had to be expanded. So, with trepidation, Cornfield and Leontief began subdividing the sectors until they ended with the simplest matrix they thought would be feasible, a 24 x 24 matrix. They both knew this was beyond capacity of a single human being. Cornfield estimated that it would take him several hundred years of seven-day work weeks to invert a 24 x 24 matrix.
During World War II, Harvard University had developed one of the first, very primitive computers. It used mechanical relay switches and would often jam. There was no longer any war work for it, and Harvard was looking for applications for its monstrous machine. Cornfield and Leontief decided to send their 24 x 24 matrix to Harvard where its Mark I computer would go through the tedious calculations and compute the inverse. When they sought to pay for this project, the process was stopped by the accounting office of the Bureau of Labor Statistics. The government had a policy at the time; it would pay for goods but not for services. The theory was that the government had all kinds of experts working for it. If something had to be done, there should be someone in government who could do it.
They explained to the government accountant that, while this was theoretically something that a person could do, no one would be able to live long enough to do it. The accountant was sympathetic, but he could not see a way around the regulation. Cornfield then made a suggestion. As a result, the bureau issues a purchase order for capital goods. What capital goods? The invoice called for the bureau from Harvard “one matrix, inverted.”
The CSO has four staff positions dedicated to the compilation of annual GFS for the general government sector and in cooperation with the MOFED the functional classification of budgetary central government expenditure on a quarterly basis. These staff also are assigned to compile quarterly general government statistics for the national accounts. Resources are limited; in particular staff resources are constrained taking into account the current migration from the methodology described in the GFSM 1986 to the methodology described in the Government Finance Statistics Manual, 2001 (GFSM 2001). While computer resources seem adequate at the moment, any additional demands could over-extend these resources.
On-the-job and external training have been available to the MOFED and CSO staff. Formal internal training has not been provided. Some staff have attended external training on the GFSM 1986 and on the GFSM 2001.
Significant progress to automate government finance compilation procedures has been achieved recently through the implementation of the Treasury Accounting System (TAS) used by the Accountant-General to follow the cash flows of the budgetary central government. However, this process needs to be extended to other areas of the general government. Data for non-budgetary central government and local governments are input manually. A new chart of accounts, based on the GFSM2001, is currently being prepared and is expected to be implemented as from the financial year 2008/09.
Even when developed to the ultimate stage of perfection, governmental accounting cannot become a guaranty of good government. At best, it can never be more than a valuable tool for promotion of sound financial management. It does not offer a panacea for all the ills that beset representative government; nor will it fully overcome the influence of disinterested, uninformed citizens. It cannot be substituted for honesty and moral integrity on the part of public officials; it cannot eliminate the demands of selfish interests, whether in the form of individual citizens, corporations, or the pressure groups which always abound to influence government at all levels.
