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Federal (Including Military) Spending Per Household = $29,043 in F2010 Federal Entitlement Spending Per Household = More Than Half ($16,670) F2010 USA Inc. Expenses = F2010 USA Inc. Expenses Per $3.5T Household = $29,043 Net Interest : ; Payment Discretiona : One-Time Weg Entitlements $16,670 $152B Social Security $5,939 —— Medicare + Federal Medicaid $6,087 Discretionary / $431B i Unemployment Insurance + Other $4,644 Defense $5,828 Non-Defense Discretionary $3,619 care + Defense Discretionary One-Time Items $1,277 $694B Net Interest Payments $1,649 Unemployment Insurance + Other Entitlements $553B Note: Non-defense discretionary spending includes infrastructure, education, law enforcement, etc. Discretionary one-time items includes TARP, K ARRA, and spending on GSEs. Source: White House Office of Management and Budget, Census Bureau, Bureau of Economic Analysis. www.kpcb.com USA Inc. | What Might a Turnaround Expert Consider? 333 At a High Level, With Focus on Improving Operating Efficiency, USA Inc. Might Consider Ways to Do Things Like... e Consider empowering an independent / 3" party auditor with expertise in government operations around the world / corporate turnarounds to conduct a broad-ranging audit of USA Inc.’s operations. e Restore strong rules for budget process: Require annual budget resolutions and reconciliation; PAYGO* to limit spending, enforce annual appropriations process consider biennial budgeting. e Consider giving the President ‘line-item’ veto / rescission authority. e Empower commissions analogous to the military base closing panels to review and consolidate government functions and agencies, as well as aid to State and local governments. e Seek flexibility to manage performance and terminate poor-performing Federal employees. e Develop flexible / long-term compensation plans including bonus payments for Federal employees when annual budget deficit reduction goals are met. e Privatize government real estate and other assets with little use, expanding on current efforts to trim $3 billion in government-owned real estate. e Identify additional opportunities to increase public/private investment, management and operations to drive innovation and investment in infrastructure Note: PAYGO is the practice of financing expenditures with funds that are currently available rather than borrowed. KP Source: KPCB and Alvarez & Marsal Public Sector Services, LLC. (@ EB) www.kpcb.com USA Inc. | What Might a Turnaround Expert Consider? 334 HOUSE_OVERSIGHT_021008