When former Microsoft CEO Steve Ballmer retired in 2014, a lot of media attention was focused on his new passion as the owner of a professional basketball team, after he bought the L.A. Clippers for a reported $2 billion. Far less attention went to his creation of USAFacts, a nonprofit, nonpartisan organization that strives to shine a light on the U.S. government’s financial status and report the findings to its stakeholders, the American people.
Ballmer founded the group last year based on a conversation with his wife right after he retired. “My wife grabbed me immediately and said, ‘OK man, it’s time. You’ve got to help me now with our philanthropic stuff,’” he said at the first annual Spring Policy Forum of The Penn Wharton Budget Model, whose data powers USAFacts. “It’s time to ramp up. We’ve been blessed with a lot, and it’s time to make a difference.” She told him she wanted to help economically disadvantaged kids move up in the world.
Ballmer’s response: “Don’t worry about it.” He told her that the government takes care of these social issues. “There’s really not much for philanthropy to do because in the grand scale of [all the money] that gets spent, philanthropy is just a drop in the bucket. So let’s happily pay our taxes and feel good about it.” Her reply? “What? Come on, we can do better than that,” he told the forum audience. So Ballmer agreed, but “secretly in the back of my mind, I still said to myself: Government really does all this stuff.”
Then, when he was in Washington, D.C., he met with some legislators and repeated his belief that there was “no reason” to do philanthropy but instead give money to the government to solve social ills. “They looked at me, and their eyes [bulged] big in their heads and they said, ‘You want to give your money to the government? You can certainly do better than that.’”
So Ballmer decided to do some digging if he was going to get involved. “I really was trying to get to the bottom of whether I was right about where government money goes,” he said. “If we don’t believe that the government’s going to solve many problems, we have to understand why, and if it’s something that can be addressed, let’s … address it.” He asked the following questions: “How much has the government raised? Whom did they raise it from? What do they spend it on?”
Ballmer began searching for government data and he found a lot of figures, but they weren’t always organized coherently. Government agencies tend to be siloed and their figures don’t always fit with each other. Because of how the data is kept, he pointed out, politicians can rattle off an isolated figure devoid of context to support their agendas. “Government data is not always timely or accessible, or frankly, it doesn’t always agree with itself,” he said. “How does anybody make a decision with data which sometimes doesn’t reconcile and isn’t out on a timely basis?”
“They looked at me, and their eyes [bulged] big in their heads and they said, ‘You want to give your money to the government? You can certainly do better than that.’”
Ballmer’s first task was to organize government data in a better way. “For me, the sensible way was to look at it through the same kind of lens that a business person would look at their business,” he said. He was determined to use only the government’s numbers — not forecasts, estimates or data from outside organizations. “A business has to use its own numbers, and the government has to use its own numbers,” he noted. “Government decision makers should work off government numbers. Otherwise, fire everybody and get the numbers right.”
Government, by the Numbers
First, Ballmer had to come up with a “logical” structure of government. Companies organize themselves into “lines of business.” “What are the lines of business of government? What is the mission of government? How do you think about that?” he posited. “After a while, it became clear that we look at the Preamble of the Constitution.” Here, Ballmer found the following goals: to establish justice and ensure domestic tranquility, to provide for the common defense, to promote the general welfare and secure the blessings of liberty for ourselves and our posterity. “That’s the mission of government” in the U.S., he said.
Under these four goals, his team organized various government functions.
- Establishing justice and ensuring domestic tranquility: crime and disaster, consumer and employee safeguards, child safety and miscellaneous social services.
- Providing for a common defense: national defense and support for veterans, foreign affairs and foreign aid, immigration and border security.
- Promoting general welfare: the economy and infrastructure, health, standard of living and aid to the disadvantaged, and government-run businesses (post office, hospitals, transit systems and others).
- Securing the blessings of liberty: education, wealth and savings, sustainability and self-sufficiency and the American Dream (civil rights, economic mobility and community participation).
In each of these areas, key sub-segments were further identified. For example, under “crime and disaster” would fall the police, prisons, federal courts and others. Under “securing the blessings of liberty to ourselves and our posterity” would fall public education, conservation, Social Security and Medicare, financial aid and others. “This is to me a logical view of government,” Ballmer said. “It’s not organized like … cabinet departments, it’s not organized like the Senate or House committees … it’s not organized by categories in the budget” nor by political platform.
With this framework in mind, Ballmer went to work. USAFacts’ partners include the Penn Wharton Budget Model, the Stanford Institute for Economic Policy Research and Lynchburg College. The Penn Wharton Budget Model expands and maintains the data used by the nonprofit. USAFacts collects and presents publicly available data on federal, state and local government revenue, expenses and other metrics. “It really is a comprehensive look at the government by the numbers,” Ballmer said. (He added that some local government data can only be accessed by visiting public officials’ offices in person.)
USAFacts presents government data in the form of an annual report and a 10-K — a detailed, historical and contextual filing of a company’s operations and financial standing for a fiscal year. It is a filing that the Securities and Exchange Commission requires of U.S. publicly traded companies. (The annual report is a simpler and more visual version of the 10-K.) “Companies … have to report to external partners,” Ballmer said. “They report through shareholder meetings, annual reports and the granddaddy of them all — the 10-K.” He said 10-Ks have to be “rigorous, they have to be absolutely correct, factual. They can show no bias.
“Government data is not always timely or accessible, or frankly, it doesn’t always agree with itself. How does anybody make a decision with data which sometimes doesn’t reconcile and isn’t out on a timely basis?”
“Your 10-K can’t say, ‘Well, we’re going to do better next year,’” Ballmer continued. “The SEC shuts that down. Just the facts. Just tell us the history.” The 10-Ks have to be comprehensive. “It’s not like you can say, ‘We’re going to tell you about the part of the business that’s going well, but we’re going to skip other things.’ They have to be contextual.… It shows how the all the numbers roll up into a common place” in a consolidated report.
What did Ballmer find? In 2015, the latest year for which USAFacts has comprehensive figures, the federal, state and local governments brought in total revenue of $5.2 trillion. About 91% of the revenue came from taxes and the rest from non-tax revenue such as portfolio investment gains from state and local governments. Ballmer noted an accounting quirk: Revenue does not include fees that the government charges, such as what a family pays to visit a national park. Instead, those fees offset the cost of running the park. So their expenses show up as smaller.
While the government hauled in $5.2 trillion, it spent $5.7 trillion in 2015, according to the country’s 10-K created by USAFacts. The deficit is at $484 billion. Total assets were $21.1 trillion and total liabilities were $25.7 trillion. America’s net worth was a negative $4.6 trillion. (USAFacts has figures going back to 1980.) In the section describing the country’s performance, the 10-K states that the U.S. made progress in areas such as the economy, reducing overall crime and making environmental gains. But it retreated in health metrics for Americans and homeownership, among others. Safeguarding of children also had a setback, with more fatalities due to poverty, maltreatment and homelessness.
For folks who think the government employs too many paper-pushing bureaucrats, Ballmer has surprising news. The government employs 23.3 million people, but nearly half of them are teachers from kindergarten to universities. The second biggest bloc comprises hospital workers at 1.9 million. Active duty military, police and firefighters also count towards the total. It turns out there are 1.6 million actual bureaucrats in federal, state and local governments, out of 23.3 million government workers. That’s about 7%. “It’s not significantly different than you’ll find in most companies,” which runs around 4% to 5%, he said.
Overall, the 10-K concludes that “our government’s operations are financially unsustainable. It continues to spend more than it takes in each year, accumulating an overall deficit that reached $10.8 trillion at September 30, 2015.” It noted that expenditures rose 48% between 2005 and 2015, when they reached a record high of $5.7 trillion annually. The good news: The government lowered its annual deficit by nearly 80% from its peak of $2.3 trillion in 2009. How? Through higher revenue. This revenue bump came from increased prosperity and tax policy changes.
“Government decision makers should work off government numbers. Otherwise, fire everybody and get the numbers right.”
To grow the GDP, Ballmer said, three factors are in play: inflation, productivity gains and population growth. If inflation is a non-starter, and productivity growth is lackluster, that leaves the U.S. with population growth. He said the U.S. population increases by two million a year — half of the growth is from births exceeding deaths and the other half from immigration. “You can drive up inflation, you can drive up productivity, which has not been at an accelerating pace, or you can drive up population, which is primarily an immigration matter.”
When it comes to jobs, Ballmer said USAFacts shows that 69% of people of working age are actually employed. “It’s the highest it has ever been,” he said. “One of the big boons that drove that higher was the number of women in the workforce.” So if a politician were to say that some policy can drive that 69% number to 80%, he is amused. “I look at the trend line — I fall out of my chair, laughing,” Ballmer said.
More Automation in Government?
Ballmer also had figures to back up the contention that there is a hollowing out of the middle class. USAFacts defines middle class as households landing in the middle 20% of income. What he found was that it in 2000, it took $38,000 to get into the middle 20%, adjusted for inflation. “That shocked me by itself,” he said. But by 2016, the figure had fallen to $33,000. “It is true the middle income is shrinking,” Ballmer said.
There is mixed news on the education front. Spending is up dramatically — from $10,100 per child in 1998 to $12,500 in 2013. High school graduation rates are up and the teacher-student ratio has risen as well, Ballmer said. However, math and reading proficiency is largely flat around 33% of eighth graders, he said. How likely will a child move up in the world? There are still stark differences by race. He said three times as many white kids stay in the bottom as move up, while for African-Americans, the number soars to 10 times. “I don’t think that’s OK,” he said.
“[The] general prevailing sentiment that says if we just had more [money] our numbers would be better — I don’t buy that.”
As for foreign aid, Ballmer said nearly 40% of the funds are used to help military allies and partners, including Afghanistan and Iraq. Israel is one of the biggest beneficiaries, he added. “That’s not what I think about when I think foreign aid,” Ballmer said. Most people probably think much of U.S. foreign aid goes to sub-Saharan Africa. But America gives in the single billions to Africa. “It’s a rounding error in our defense budget, for example,” he said. “You can decide whether it’s too much or too little.”
In immigration, border arrests are down dramatically and the number of agents are up significantly, Ballmer said. “One caused the other? Maybe, maybe not.” He added that most immigrants actually are family members of existing residents, who petition for them to enter the United States. About 11% to 13% of the U.S. population is foreign born. Ballmer said that level has been consistent for decades.
All of these figures are available from the government, but they could be better. Ballmer said one way to improve the quality of government data is timely reporting and double-checking of figures across agencies. Also, there should be an agency that is chartered to assemble the figures and cross-check them. “There’s nobody chartered right now,” he said. “Apparently, there’s no pressure in Congress to get the numbers on a timely basis.”
Ballmer doesn’t think throwing more money at the problem is necessarily a solution. “Just like working at Microsoft, more money in a function doesn’t mean you’re going to get better work,” he said. “Maybe you need fewer people and more automation. Maybe you’d get a better result. So I’m not arguing one way or another. But I think the general prevailing sentiment that says if we just had more [money] our numbers would be better — I don’t buy that. I don’t think that’s necessarily the case.”
Going back to Ballmer’s conversation with his wife that started him on this journey to find out whether the government does take care of disadvantaged kids, he found out that 23%, or $1.3 trillion, of the government’s $5.7 trillion budget goes to poor kids and their families, including $128.7 billion to education, $99.3 billion to welfare, $103.5 billion to nutrition, $80.1 billion to housing and community development and $572.5 billion for health care (Medicaid), and others.
“The facts are the facts, and what we’re trying to do, in the most … neutral way through numbers, is to explain where the country is and bring [the data] together.”
So it turns out that “we don’t make a negligible investment in kids who need opportunities,” Ballmer said. But he conceded that “philanthropy does have a role.” While the government pays for many things, “philanthropy has to fill in around the edges for things the government programs don’t fund and stitch things together across communities.” In the end, Ballmer and his wife are both right. “She is right that philanthropy matters, and I’m right that government mostly pays for these things.”
In the end, America is best served if politicians base public policy on indisputable, historical and timely facts. “I think it was [Democratic Senator Patrick] Moynihan who said we can all disagree about what to do but we should not disagree about what the facts are,” Ballmer said. “The facts are the facts, and what we’re trying to do, in the most … neutral way through numbers, is to explain where the country is and bring [the data] together. Ultimately, government should do that job for itself.”