With Social Security reform the domestic cornerstone of President Bush's second term, the American Institute of CPAs was on point when it issued its recent white paper providing lawmakers with a nonpartisan and comprehensive analysis of the factors to evaluate in reforming the system. Not only did the report contain valuable and objective perspectives, but it also gave CPAs a place at the table as the discussion continues.
Combining financial knowledge with a reputation for objectivity, the CPA profession has much to offer on initiatives such as this. Contributing to the dialogue puts CPAs in an important spotlight with policy-makers, the press, businesses and clients - and diffuses the harsh light that the profession has found itself in over the past several years.
So what's next? Social Security reform is only a very small part of a much larger dialogue that CPAs can and should be part of.
At a roundtable in March, Comptroller General David Walker painted a gloomy picture of our nation's worsening financial condition and its long-range fiscal outlook. He talked about three large and interrelated national deficits that now consume the country: the large federal budget deficit, the growing balance-of-payments deficit, and an alarming personal savings deficit.
Walker, who heads up the Government Accountability Office, also said that his agency couldn't vouch for the accuracy and completeness of the federal government's 2004 fiscal report - for the eighth year in a row. Can the CPA profession have a role in helping to determine an accurate assessment of the government's financial situation?
The AICPA's white paper on Social Security has played a role in pushing the reform dialogue to a higher level. It has served as a springboard for media talking to CPAs. They are asking different kinds of questions, broadening the dialogue, marching past the politics that have confined the debate. Can the profession play a similar role on this much broader topic?
According to the GAO, last year the government's deficit averaged more than $1 billion every day. Including commitments to programs such as Social Security and Medicaid, the government's obligations total more than $43 trillion.
To borrow from the definition that humorist Evan Esar applied to statistics, too often our government has resorted to the science of producing unreliable facts from reliable figures. CPAs have the training to methodically sort through the figures that political debate may manipulate. CPAs could be a very vital part of this analysis.
Even though the federal government isn't required to undergo an audit, CPAs can play a role in identifying questions to be asked and in identifying potential problems that lie ahead for fiscally driven initiatives. From farming subsidies to home-ownership programs to international trade policies, CPA voices can foster greater accountability at all levels of government.
One major area where the profession can get involved is the serious examination of health care. Health care spending rose from just under $700 billion to $1.3 trillion between 1990 and 2000, according to the GAO. Both Medicare and Medicaid programs have been on the GAO's high-risk list for years. Medicaid costs represent the fastest growing budget items for states, second overall only to education costs, and are projected to double in the next decade. Medicare's prescription drug benefit, passed in 2004, came with an estimated cost to the federal government of $8.1 trillion in today's dollars to pay for the benefit over the next 75 years. The GAO has concerns about fiscal oversight for both programs, partly due to their complex structure.
It's not hard to see the health care slippery slope continue, as rising health care costs discourage additional pension coverage, wage increases are constrained and the tax base is shrunk by more and more employee compensation being granted in the form of nontaxable benefits such as health insurance. Why aren't these long-term problems grabbing more of the spotlight? CPAs should be involved in the debate about whether Medicare and Medicaid are sustainable in the long term, and whether or not there's a better, more efficient way for health care to be delivered and funded in this country
Walker said that a crucial first step is to insist on truth and transparency in government financial reporting. From there, the country should be able to develop a way of measuring its progress on a variety of economic, security, environmental and social issues. Right now, the government is spending more than $2 trillion on programs and policies, and isn't able to objectively gauge if that outlay is making a difference.
Improving the nation's fiscal responsibility does not begin and end with Social Security. Our way of life is inextricably linked to the country's financial well-being, and every citizen needs to become more informed and involved in the coming debate. CPAs, with their financial background and their connections to individuals, banks, small businesses and major corporations, must take on a higher-profile role, ensuring that the public is kept informed and focused on all of the issues that matter to our future.
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