1 Impact of Financial Crisis on U.S. Public Debt INTOSAI Public Debt Working Group Kyiv, Ukraine October 2009 Jose Oyola, PhD, CPA U.S. Government Accountability Office

2 Outline U.S. Federal Debt – Past Performance and Projections U.S. Long-Term Fiscal Outlook Oversight Roles of GAO

3 US Federal Debt Held by the Public, 2001 to 2019

4 US Treasury Marketable Securities by Year of Maturity, (as of June 30, 2009, US$6.6 trillion)

U.S. Federal Net Interest Costs, 2000 to 2019

GAO Study on Treasury Inflation Protection Securities (TIPS): Issuance, Announcements & Relative Costs,

7 Long-Term Fiscal Challenges Today’s focus—understandably—is on dealing with financial system stress & addressing the economic downturn BUT…. long-term fiscal challenge still need to be addressed: Driving factors: demographics and health care costs As the baby boom generation retires, federal spending on retirement and health programs—Social Security, Medicare, and Medicaid—will grow dramatically (

8 Long-Term Fiscal Outlook in the United States Revenues and Spending as a Share of Gross Domestic Product Under GAO’s Alternative Simulation Source: GAO’s March 2009 analysis.

Long-Term Fiscal Outlook in the United States Interpreting Long-term Simulations Long-term simulations provide illustrations--not precise forecasts--of the relative fiscal outcomes associated with alternative policy paths. These simulations are not predictions of what will happen in the future as policymakers would likely take action to prevent damaging out-year fiscal consequences.

Long-Term Fiscal Outlook in the United States Debt Held by the Public as a Share of GDP under Two Different Fiscal Policy Simulations Baseline Extended Source: GAO’s analysis of Social Security Administration and Medicare data. (See GAO, The Nation’s Long-Term Fiscal Outlook March 2009 Update, GAO SP (Washington, D.C.: April 30, 2009). Alternative Historical High 109 percent in 1946

11 Roles of GAO Enhancing Transparency & Supporting Accountability Oversight US $700B Troubled Asset Relief Program (TARP) US $787B American Recovery and Reinvestment Act (ARRA) Financial Audits U.S. Government Financial Statements & major programs (deposit & mortgage insurance) Preventing Future Crises Produce framework to analyze proposals to change financial regulatory system Participate in INTOSAI Task Force on Global Financial Crisis

12 Enhancing Transparency & Supporting Accountability

13 Preventing Future Crises: Modernize the U.S. Financial Regulatory System Financial Regulation: A Framework for Crafting and Assessing Proposals to Modernize the Outdated U.S. Financial Regulatory System Clearly defined regulatory goals in statute (protection of consumers) Comprehensive (close gaps in oversight over mortgage lenders, rating agencies and derivatives (credit default swaps)) Consistent oversight (over firms, products and service that pose similar risks) Sufficient authority to take prompt corrective actions to reduce systemic risks (e.g., creation of clearinghouse of derivatives, regulation of too-large-to-fail firms) (GAO , Jan. 8, 2009)

14 Preventing Future Crises: Global Financial Crisis Task Force of Supreme Audit Institutions (SAIs) Created by INTOSAI Governing Board in November 2008 Purpose: Enhance the knowledge base of SAIs on financial and economic matters related to the crisis Provide a source of information to help governments and the global community respond to the crisis Membership: AustriaFinlandMexicoSlovakia CanadaHungaryMoroccoSpain ChileIndonesiaNetherlandsSweden ChinaItalyPolandUnited Kingdom CyprusJapanRussiaUnited States (Chair) DenmarkKoreaSaudi ArabiaVenezuela Estonia