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Presentation Premise For America to remain the great country it has been for the past 235 years, it must determine the best ways to honor the government’s fundamental mission derived from the Constitution: ...to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare and secure the blessings of liberty to ourselves and our posterity. To this end, government should aim to help create a vibrant environment for economic growth and productive employment. It should manage its operations and programs as effectively and efficiently as possible, improve its financial position by driving the federal government's income statement to long-term break-even, and reduce the unsustainable level of debt on its balance sheet. KP BSF owe poo com USA Inc. | Introduction 7 USA Inc. Concept Healthy financials and compelling growth prospects are key to success for businesses (and countries). So if the US federal government — which we call USA Inc. — were a business, how would public shareholders view it? How would long-term investors evaluate the federal government's business model, strategic plans, and operating efficiency? How would analysts react to its earnings reports? Although some 45%1 of American households own shares in publicly traded companies and receive related quarterly financial statements, not many “stakeholders” look closely at Washington’s financials. Nearly two-thirds of all American households? pay federal income taxes, but very few take the time to dig into the numbers of the entity that, on average, collects 13%? of all Americans’ annual gross income (not counting another 15-30% for payroll and various state and local taxes). We drill down on USA Inc.’s past, present, and (in some cases) future financial dynamics and focus on the country’s income statement and balance sheet and related trends. We isolate and review key expense and revenue drivers. On the expense side, we examine the major entitlement programs (Medicare, Medicaid and Social Security) as well as defense and other major discretionary programs. On the revenue side, we focus on GDP growth (driven by labor productivity and employment in the long run) and tax policies. We present basic numbers-driven scenarios for addressing USA Inc.'s financial challenges. In addition, we lay out the type of basic checklists that corporate turnaround experts might use as starting points when looking at some of USA Inc.’s business model challenges. Source: 1) 2008 ICI (Investment Company Institute) / SIFMA (Securities Industry and Financial Markets Association) Equity and Bond Owners Survey; 2) Number of tax returns with positive tax liability (91MM) divided by total number of returns filed (142MM), per Tax Foundation calculations based on IRS data; 3) Total federal income taxes (ex. payroll taxes) paid divided by total adjusted gross income, per IRS 2007 data. www.kpcb.com USA Inc. | Introduction 8 HOUSE_OVERSIGHT_020845