GovExpert is a biweekly interview of high-level authorities on government and government practices.
This week’s GovExpert is David Nummy, former US Assistant Secretary of the Treasury for Finance and Administration. (see full bio below)
Questions:
On everyone’s mind lately is the current economic crisis, which has created tighter belts across the board for all levels of government. What are the biggest financial challenges the government faces?
From an overall perspective, the greatest challenge facing government is the lack of understanding about the facts of the fiscal challenges facing the US Federal Government and the difficulty that poses in formulating a credible policy to stabilize Federal finances.
The basics are that the Federal government is currently collecting about 15% of total GDP as tax revenue compared to an historical average of about 18%. The reasons for this are many and the result of both economics and policy choices made by our elected leaders but the fact remains that the US Government takes in less revenue today than at any time in decades. Few people seem to comprehend that.
On the spending side, one-third of Federal spending pays for entitlement programs for the elderly in America, a part of our population that is growing dramatically as a percentage of the total population. Another 30% covers other mandatory spending including interest on the national debt, Medicaid, and other programs that cannot be adjusted annually unless a change in authorizing legislation is made outside the appropriations process. Defense spending accounts for 20% of the budget which leaves only about 17% for everything else that the Federal government does and which is subject to annual appropriations.
It is this relatively small 17% of spending that gets most of the attention among the public and the media and that is frequently portrayed as the space in which solutions to the Federal deficit can be found. In fact, reductions in this area of Federal spending can do almost nothing to address the fundamental imbalances between an historically low rate of tax collection and an unprecedented growth of an aged population.
Nonetheless, reductions in the 17% of spending which covers “everything else” will continue to occur and every Federal financial manager will continue to have to find ways to manage across-the-board cuts whether they make sense or not for a given program.
Many argue that due to our financial concerns here in the United States, we should be spending less on economic development overseas. What’s one thing the average US Citizen doesn’t understand about what we are doing with our money in the Middle East and elsewhere in regards to economic development?
One fact that most US citizens probably understand but do not think about to a great extent is that promoting economic development in less developed or unstable parts of the world is a core tool of our foreign policy as well as a key strategic pillar of our national security. History and recent events characterized as the “Arab Spring” demonstrate quite unequivocally that populations with little prospect of economic opportunity are more likely to create instability and even violence and war.
Given the global interdependences of our economy, it is not in our national interest to have instability in almost any part of the world and, especially, in the oil producing regions of the world such as the Middle East. We know it is certainly more expensive to the US to get involved militarily in a region mired in conflict than it is to prevent conflict.
The challenge that economic development investment faces is that it is impossible to precisely quantify the cost-benefit as one cannot prove with certainty where economic development has prevented instability and what the cost to the US would have been if instability had emerged.
What we do know is that states with rapidly growing economies rarely initiate conflict. Looking to history again, it is generally states with stagnant or degenerating economies that foment war and violence.
What is most interesting to note is that one of the strongest proponents of funding to promote economic growth and economic opportunity in unstable parts of the world has been the leadership of the Department of Defense, most notably the recently departed Secretary of Defense, Robert Gates. They understand quite well that economic development is a key pillar of national security.
Finally on a more personal/reflective note, what was/is the most rewarding of your career in public service? Do you have any advice for the next generation of government professionals?
The majority of my career has been associated with the Federal government in some way. In college, I was an intern in the finance office of a Federal penitentiary, I served as a legislative staffer at the US Senate Budget Committee, became a Presidentially appointed and Senate confirmed official at the US Treasury Department, have been a contractor to the US Government, and spent many years helping to execute US foreign assistance policy. I’ve never lost my sense that the basic function of government is to provide services to our citizens and that a job well done has a positive impact on my family, neighbors, friends, and millions of people that I will never know, regardless of how indirect that impact is or how conscious they may be of the benefit.
For the next generation of government professionals, I would draw their attention to the phrase you used in your question– “public service”. The next generation should never lose sight of the fact that they are serving their country when they work for government and they have both an obligation and a privilege to serve it honorably and in the best manner possible. If they keep this foremost in their mind, they will generally know the right answer to vexing questions during any given day of how to handle any problem or challenge they face.
David M. Nummy
During his career of 30 years in public financial management, Mr. Nummy has held a variety of positions with the US Government, including service as the Chief Financial Officer of the U.S. Treasury Department, a Senate confirmed position with the premiere financial institution of the United States government.
The last fifteen years of his career has focused on providing technical assistance to governments around the world in the area of public financial management and he has worked in over 35 countries, including transitioning and developing countries in eastern Europe and the Former Soviet Union, Asia, Africa, and Latin America.
As the Senior Advisor for the US Treasury Department’s Office of Technical Assistance, Mr. Nummy built and managed a worldwide program focused on public sector financial management reform from 1995 to 2004. As one of the first members of the management team of the Millennium Challenge Corporation, a multi-billion U.S. foreign assistance program created in 2004, he conceived and implemented the financial and procurement accountability framework that governed the program. He has worked in many post-conflict countries helping to re-establish the financial functions of government and was one of the first civilians to enter Iraq in 2003 with the objective of getting the Iraqi Ministry of Finance operational.
Mr. Nummy has spoken at numerous international conferences on public financial management and is prominent in the International Consortium on Governmental Financial Management.
He is a Certified Public Accountant and holds a Masters degree in Accounting from Oklahoma State University.
This was very enlightening and informative and written in a language that I could follow when discussing the intricacies of our country’s finance. Thank you.