The U.S. government's unsustainable long-term fiscal path and cybersecurity challenges are critical issues for policymakers and the private sector, U.S. Comptroller General Gene Dodaro said Tuesday during a "fireside chat" at the fall AICPA governing Council meeting.
Dodaro is head of the U.S. Government Accountability Office (GAO), which provides nonpartisan information to Congress and scrutinizes federal spending and performance. He sounded the alarm Tuesday over the federal fiscal outlook — the continuing growth in the U.S. federal debt held by the public as a share of GDP even during periods of economic growth. Publicly held debt stood at around 100% of nominal gross domestic product (GDP) at the end of fiscal year 2020 and is projected to keep growing.
Some models project the ratio will increase to 200% by 2048 unless a course correction occurs. Dodaro called the current track "unsustainable."
"I've been very concerned for a number of years about the long-term path we're on," he said.
The government is fortunate that it has been able to borrow large amounts at low interest rates in recent years, he said. In each of the last five years he has issued a report on the fiscal health of the federal government.
He has called for the federal government to come up with a financial plan that includes debt-to-GDP targets as guardrails for spending and revenue.
"By definition, a situation where your debt is growing faster than your GDP is unsustainable and cannot go on forever," he said. "There are some big decisions that are on the horizon."
Cybersecurity, meanwhile, remains a huge challenge for the federal government. Dodaro designated cybersecurity as a high-risk area across the whole government in 1997 because he saw an increasing reliance on technology that had few security measures built in.
He said the federal government each year spends $100 billion for IT systems, 70% of which goes to continue legacy systems.
"Some of these systems have been in place for decades," Dodaro said. "They are a millstone around our necks from a security standpoint in addition to not being responsive to today's needs and service expectations."
He said the government needs to replace the obsolete legacy systems as soon as possible to improve security and services.
"We need a national and a global cybersecurity strategy here," he said. "We need more cyber diplomacy. This is a global issue, not just a U.S. issue. There are some norms, but they're not being enforced."
Artificial intelligence and quantum computing will provide some solutions to the problem, he said, but they will bring their own complications. Dodaro would like to see problems solved through a cohesive partnership along the lines of the one that the government and the private sector forged to solve the Y2K technology challenges in the years heading up to 2000.
He said cybersecurity information currently is compartmentalized too much between the public and private sectors.
"There's not enough sharing, and because you don't have that, you're not going to have a complete picture of the risk or a strategy for dealing with the risk," he said.
- Asked about CPAs' frustrations with IRS services, Dodaro said that every year the GAO does a review of the filing season and reveals how many phone calls and how much correspondence the IRS can answer given its available resources; how long it takes to get an answer; and whether the right answers were given. "They need to do that to certain standards," he said.
- The "tax gap" between what is owed to the government and what the IRS collects has grown to an estimated $381 billion per year. Meanwhile, he said federal agencies made an estimated $206 billion in improper payments. "You're talking about a half-trillion dollars that either should have come in the door and didn't, or went out the door and shouldn't have," Dodaro said. Getting those problems under control would solve a lot of the government's fiscal problems, he said.
- Financial management problems at the Department of Defense and challenges at Treasury in preparing the financial statements continue to prevent the federal government from being able to get an audit opinion on its financial statements, Dodaro said. "Everybody is working on this, and I'm working mightily on it," he said.
— Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA's editorial director.