A finance lesson from this crisis
The coronavirus is a public health crisis that we need to continue to take seriously. While we still have a long way to go before we prevail over this pandemic, it is fitting to review some lessons that we can learn based on recent events. The coronavirus reaffirms the fact that the world has now become much more interconnected. As a result, addressing a range of medical, financial, security, migration, environmental, and other issues will require increased coordination, cooperation, and execution across both international and domestic boundaries in the future.
Believe it or not, the United States was rated number one in the world in preparedness for a pandemic. Yet demand for ventilators and protective equipment illustrates the lack of adequate national planning. The federal government shockingly still does not have a comprehensive strategy that is risk based, future focused, and resource constrained. The absence of such national planning results in crisis management approaches being employed “all too frequently” by our leaders here at home.
The coronavirus highlights a need to examine our current stockpiles and “just in time” inventory practices. The federal government and American companies need to reconsider how dependent we are on China and other countries for critical items. There are clear economic and national security reasons to increase production capabilities and sourcing strategies in the United States rather than keep relying on foreign sources.
The party line vote that defeated the first stimulus bill demonstrates how partisan Congress has become. This shameful action proves that George Washington was right when he claimed the duty of loyalty to faction might one day override the duty of loyalty to country. When the final bill passed by a unanimous margin, the price tag had doubled to more than $2 trillion and items unrelated to the response were added. That is how Washington has been operating in recent years. Spend more dollars, cater to special interests, and pass on the financial burden to our children and to future generations. This is irresponsible, unethical, and immoral.
The unprecedented economic responses to the coronavirus clearly show the unsustainability of our fiscal and monetary policy over the years. The Federal Reserve has now employed extraordinary measures far beyond its normal toolbox. With regard to fiscal policy, the federal government was projected to have a $1 trillion deficit in fiscal 2020 before the stimulus bill passed, and it is likely to be more than triple that amount.
The debt to gross domestic product ratio has risen significantly, will likely grow at least 15 points this year alone, and is projected to continue rising dramatically thereafter. Will Congress and the president work together to make the difficult but necessary tax and spending choices to restore fiscal sanity and responsibility after this crisis? The goal for our leaders should be to ensure that the debt does not exceed a reasonable and sustainable level that provides flexibility to deal with future crises. The expected and projected debt levels of the country do not meet that test.
The United States is a great nation that will prevail over this public health challenge. In the final analysis after we defeat the coronavirus, economic growth, personal liberty, and a normal way of life will be restored. We will also be in a far better position to address future public health challenges. These things can be counted on. We will hopefully learn important lessons from this experience and take steps to better plan for the future in a broad range of areas, become less reliant on foreign sources, and improve both our international and domestic coordination and cooperation.
Our leaders need to improve national planning, make our republic more representative, and restore fiscal sustainability in ways that will discharge our stewardship responsibility and create a better future for all Americans. While the coronavirus needs our immediate attention, our growing fiscal imbalance and increasing debt are much greater threats to our collective future than any disease. It is time to take this matter seriously.
David Walker served as former comptroller general of the United States.
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