-

IFAC Annual Council Seminar

November 17, 2009

David M. WalkerPresident and CEO

The Peter G. Peterson Foundationand

Former Comptroller General of the United States

1969 1989 2009

Source: PGPF analysis of Office of Management and Budget data.

Composition of Federal SpendingComposition of Federal Spending

Defense Social Security Medicare & Medicaid

2

Interest All Other Spending

1969 1989 2009

Source: PGPF analysis of Office of Management and Budget data.

Federal Spending for Mandatory and Federal Spending for Mandatory and Discretionary ProgramsDiscretionary Programs

Net Interest Discretionary Mandatory

3

Major Fiscal Exposures($ trillions)

2000 2008

Explicit liabilities $6.9 $12.2 Publicly held debt Military & civilian pensions & retiree

health Other

Commitments & contingencies 0.5 1.3 E.g., PBGC, undelivered orders

Implicit exposures 13.0 42.9 Future Social Security benefits 3.8 6.6

Future Medicare Part A benefits 2.7 12.7

Future Medicare Part B benefits 6.5 15.7

Future Medicare Part D benefits -- 7.9

Total $20.4 $56.4Source: PGPF analysis of 2000 and 2008 Financial Report of the United States Government.Note: Estimates for Social Security and Medicare are at present value as of January 1 of each year and all other data are as of September 30. 2009 Social Security and Medicare Trustees’ reports show implicit exposures totaling $45.8 trillion

4

5

$56.4

Trillion

=

BURDEN per

BURDEN per

CAPITA

CAPITA

6

Potential Fiscal Outcomes Potential Fiscal Outcomes Under Alternative Simulation Under Alternative Simulation

Revenues and Composition of Spending as a Share of GDPRevenues and Composition of Spending as a Share of GDP

Revenue

Source: GAO Fall 2009 analysis.

Percent of GDP

7

8

Common DenominatorsCommon Denominators

The parallels between our current financial crisis and the federal government’s finances:

–Disconnect between those who benefit and those who pay the price

–Inadequate transparency regarding the nature and magnitude of risks

–Too much leverage, not enough focus on cash flow,and over-reliance on credit ratings

–Failure of normal oversight and risk management mechanisms

The Way Forward

10