Posted on 08/03/2006 9:06:03 AM PDT by conservativecorner
The Comptroller General of the United States warns the nation will go broke within a generation - unless it takes radical steps now to rein in out-of-control federal spending.
In an exclusive interview with NewsMax, Comptroller David M. Walker, explained his mission: Save America from the brink of financial disaster.
Walker has revealed America's collision course in computer simulations that show balancing the budget in 2040 (under the status quo of spending like there's no tomorrow) could require cutting total federal spending by an incredible 60 percent - or raising federal taxes 200 percent over today's level.
Serving a 15-year appointed term that began when he took his oath of office on Nov. 9, 1998, this no-nonsense certified public accountant is the nation's chief accountability officer and head of the U.S. Government Accountability Office (GAO).
Walker has won plaudits from both Republicans and Democrats for his no-nonsense straight talk about the nation's current economic crisis.
In his wide-ranging interview with NewsMax, Walker offered a candid assessment of the problems and risks facing Americans over the next several decades.
Among his key assessments:
Prescription Drugs:: Walker says that the prescription drug plan is the "poster case for what is wrong with Washington." He notes that when Congress first took up the matter of Medicare prescription drugs, estimates placed the cost at $300 billion.
But he argues that both Congress and the administration simply downplayed or ignored the true costs of the program. Today, the nation will have to pay out for the program $8 trillion-plus in current dollar terms.
Walker also detailed that when the Medicare actuary of the Center for Medicare/Medicaid Services calculated the true costs of the program, he "was told he could not tell the Congress or else he might lose his job."
"That not only was unethical but it was illegal, and nobody has been held accountable for it," an angry Walker said.
Defense Budget: Walker argues that Defense Department simply is out of control and that basic rules of accountability don't apply. He said that although it received a whopping $500 billion in appropriations, the Defense Department "is the only agency in the federal government that cannot adequately account for its assets and its expenditures - and cannot withstand an outside financial statement audit."
Walker grades the agency with a "D" on "economy, efficiency, transparency, and accountability." He added, "And it has not been held accountable."
The Nation's Debt: Walker says the United States risks losing its pre-eminence around the globe because of its growing status as a debtor nation. He ominously notes that "last year was the first year since 1933 that Americans spent more money than they took home and, as you probably recall, 1933 was not a good year for the United States."
Because the United States has to rely on foreign central banks to finance its deficits, it places itself in a high-risk situation.
"It means that other players hold an increasing percentage of our nation's mortgage; and it means the debt service is going to go overseas rather than domestic; and it means that we will have less leverage on them with regard to economic, foreign policy and national security issues - and they will have more leverage on us."
Entitlements: The United States must rein in entitlement programs or face economic woes, he argues. Walker says that today the United States is "about 3 percent short of the GDP between what we are taking in and what we are spending, and it is going to get worse when the [baby] boomers start to retire - primarily because of entitlement programs.
"You can't solve the problem without fundamental reform of the entitlement programs. Medicare is going to require much more dramatic and fundamental reforms than Social Security because the problem is six to seven times greater than Social Security.
"It is going to take entitlement reform; it is going to take spend constraint; and it is going to take some revenue enhancements."
Walker's Mission
Walker's frequent refrain is simply, "The status quo is not an option!"
He's been telling his story to Congress, the media, and anyone else who will listen.
His globetrotting has included speaking appearances at Gresham College London, England; the London School of Economics; the Atlanta Rotary Club; the National Press Foundation; and the National Conference of State Legislatures - just to name a few.
Walker likes slide shows – to better facilitate the ominous graphs and charts that highlight his message.
The long-term modeling that is at the heart of his warning is adapted from work done at the Federal Reserve Bank of New York and the various new estimates that become available from the Congressional Budget Office and from the Social Security and Medicare Trustees.
Walker is not overly impressed with the recently touted spurt of economic growth and its accompanying windfall of unexpected federal revenues.
"Faster economic growth can help, but it cannot solve the problem," the straight-shooting former public trustee for Social Security and Medicare emphasizes.
Here's where Walker typically clicks on one of his attention-grabbing slides on the subject.
The audience digests as the GAO chief reads from the screen:
Closing the current long-term fiscal gap based on reasonable assumptions would require real average annual economic growth in the double-digit range every year for the next 75 years.
During the 1990s, the economy grew at an average 3.2 percent per year.
"We cannot simply grow our way out of this problem," he announces somberly.
When playing to a home crowd of working stiffs, Walker follows with another body blow that penetrates the reality world of mom and pop: It's called, benignly enough, "Our Total Fiscal Burden." But when broken down as to show the impact on every man, woman, and child in the country, it can knock the wind from the collective lungs.
Up pops another eye-widening slide:
Total fiscal exposures: $46.4 trillion.
Total household net worth: $51.1 trillion.
Burden/net worth ratio: 91 percent.
Forget the accounting jargon; what's my personal bill for my government's runaway spending?
As if to say "Glad you asked that," there follows the grim tally:
Per person: $156,000.
Per full-time worker: $375,000.
Per household: $411,000.
Gee, that sounds a bit extreme. Can our pocketbooks handle that tab?
Just how extreme is explained by the next slide:
Median U.S. household income: $44,389.
Disposable personal income per capita: $30,431.
After learning that we are a wee bit short on the greenbacks, Walker switches back to the macro-picture, revealing yet another disturbing picture:
"The United States may be the only superpower, but compared to most other OECD countries [countries belonging to the Organization for Economic Co-operation and Development] on selected key economic, social, and environmental indicators, on average, the U.S. ranks 16 out of 28," announces Walker to an accompanying slide.
Included in those OECD indicators are such down-to-earth items as quality of life, education, and prices.
Walker, the author of "Retirement Security: Understanding and Planning Your Financial Future," is for sure no administration spinner.
He will tell you that he is only following a grand tradition of the bipartisan GAO, which for more than a decade has published the results of its long-term budget simulations in reports and testimonies.
Well, at least some of the states are doing well these days - those increased property values and all . . .
Don't get too wound up on that front, warns Walker. States are reeling under their own fiscal challenges, including unsustainable Medicaid cost increases; unfunded liabilities of state retirement systems; education funding squeezed by competing demands; infrastructure maintenance and expansion needs given unparalleled sprawl and congestion; and - lest we forget - emergency preparedness response and recovery needs.
The bottom line, according to Walker: "We must make tough choices, and the sooner the better."
The chief financial overseer advises that a multipronged approach is needed:
Revise existing budget processes and financial reporting requirements.
Restructure existing entitlement programs.
Re-examine the base of discretionary and other spending.
Review and revise tax policy and enforcement programs - including tax expenditures.
"Everything must be on the table," says Walker.
While not an optimist, Walker does see some progress. He happily points out that the White House now "readily acknowledge now that we face a huge long-range structural deficit that has to be addressed."
Meanwhile, beating the drum for fiscal reform is but one facet of the immense GAO workload.
Walker's agency must advise not only Congress, but the heads of executive agencies -- such as Homeland Security, the Environmental Protection Agency, the Department of Defense, and Health and Human Services -- about making government more effective and responsive.
To do the job, Walker heads up some 3,200 employees and manages a budget of $474.5 million.
At the end of fiscal 2005, 85 percent of the 1,752 recommendations the GAO made in fiscal year 2001 had been implemented, notes the agency. But is the all-important keeper of the federal purse strings, the Congress, reacting to Walker's big-picture warnings of fiscal crisis ahead?
STOP PRINTING FIAT "MONEY!"
*******
(I wrote this a number of years ago when things were NOT going well with the economy. Trust me: They WILL get ugly once again as man -- or certain men -- cannot resist playing God. We continue to violate the universal, immutable laws of economics at our great peril.)
Despite the apparent economic strength of the American economy, history proves that EVERY house of cards eventually comes down. And the higher the card house, the harder the fall when it finally comes. And when it does, the more freedoms we will voluntarily surrender to "restore order." It was the Founders' concern about this historically valid problem which prompted their attempt -- now ignored -- to keep American "money" sound and honest.) Dick Bachert 1998
* * * * * * * *
The Forgotten History of Money
This is the fascinating story of the efforts by certain of the Founding Fathers to prevent the economic distress we find all about us today. It is also a sad story on the basis that modern, "sophisticated" Americans have abandoned the corrective institutional mechanism that remains in place to this day. As you read it, think about a world with many fewer S&L, banking and political scandals and economic problems now considered the norm.
"Blood running in the streets. Mobs of rioters and demonstrators threatening banks and legislatures. Looting of shop and home. Strikes and unemployment. Trade and distribution paralyzed. Shortages of food. Bankruptcies everywhere. Court dockets overloaded. Kidnappings for heavy ransom. Sexual perversion, drunkenness, lawlessness rampant. The wheels of government are clogged, and we are descending into the vale of confusion and darkness. No day was ever more clouded than the present. We are fast verging on anarchy and confusion. (George Washington in a 1786 letter to James Madison, describing the effects of fiat paper money inflation then ravaging America in the pre Constitutional period.)
"The annihilation (of the paper money) was so complete that barber shops were papered in jest with the bills; and sailors, on returning from cruises, being paid off in bundles of this worthless money, had suits made of it, and with characteristic lightheartedness, turned their loss into frolic by parading through the streets in decayed finery which in its better days had passed for thousands of dollars." (Contemporary writer, Breck, 1786)
"Paper money polluted the equity of our laws, turned them into engines of oppression, corrupted the justice of our public administration, destroyed the fortunes of thousands who had confidence in it, enervated the trade and husbandry, and the manufactures of our country, and went far to destroy the morality of out people." (Peletiah Webster, 1786)
At the drafting of the U.S.Constitution, there were many "Friends of Paper Money" present. On August 16, 1787, when the discussion arose on Article 1, Section 8, the proposed wording was this: "The Legislature of the United States shall have the power to...coin money...and emit bills of credit of the United States."
A hot argument ensued on the power to emit bills of credit, which is another way of saying "printing paper money".
Here are the actual words James Madison wrote describing the debate in his diary: "Mr.G.Morris moved to strike out *and emit bills of credit.* If the United States had credit, such bills would be unnecessary; if they had not, unjust and useless.
MADISON: Will it not be sufficient to prohibit the making them a tender? This will remove the temptation to emit them with unjust views. And promissory notes in that shape may in some emergencies be best.
MORRIS: Striking out the words will leave room still for notes of a responsible minister which will do the good without the mischief. The monied interest will oppose the plan of the Government, if paper emissions be not prohibited.
COL.MASON: Though he had a mortal hatred to paper money, yet as he could not foresee all emergencies, we was unwilling to tie the hands of the Legislature [Legislature = Congress].
MR.MERCER:(A friend to paper money) It was impolitic...to excite the opposition of all those who were friends to paper money.
MR. ELSEWORTH thought this was a favorable moment to shut and bar the door against paper money. The mischiefs of the various experiments which had been made, were now fresh in the public mind and had excited the disgust of all the respectable part of America. By withholding the power from the new Government, more friends of influence would be gained to it than by almost anything else...Give the Government credit, and other will offer. The power may do harm, never good.
MR.WILSON: It will have a most salutary influence on the credit of the United States to remove the possibility of paper money. This expedient can never succeed whilst its mischiefs are remembered, and as long as it can be resorted to, it will be a bar to other resources.
MR.READ thought the words, if not struck out, would be as alarming as the mark of the Beast in Revelation.
MR.LANGDON had rather reject the whole plan than retain the three words *and emit bills*".
The motion for striking out carried.
Historian George Bancroft later wrote: "James Madison left his testimony that *the pretext for a paper currency, and particularly for making the bills a tender, either for public or private debts, was cut
off.* This is the interpretation of the clause, made at the time of its adoption by all the statesmen of that age, not open to dispute because too clear for argument, and never disputed so long as any one man who took part in framing the constitution remained alive."
ROGER SHERMAN(1721 1793)should be a name familiar to every American. As familiar as Washington, Madison, Jefferson and Adams. He is the only man to have signed all 4 documents surrounding the formation of the United States of America: The Continental Association of 1772, The Declaration of Independence, The Articles of Confederation and The United States Constitution. He was a Judge of the Superior Court in New Haven, Connecticut, serving that office with distinction from 1766 until 1788. He served as Treasurer of Yale University from 1765 to 1776. He was renouned for his high intelligence and unswerving honesty and was described by John Adams "as honest as an angel and as
firm in the cause of American independence as Mount Atlas." He served in the U.S.Senate from 1791 until his death in 1793.
Why is Roger Sherman*s name unfamiliar? HE WAS AN ENEMY OF PAPER MONEY!! In 1751, Roger Sherman and his brother William sued James Battle for paying a debt to their shop in New Milford, Connecticut, in depreciating paper currency. Over a period of 15 months, Battle had charged "divers wares and merchandizes" amounting to 129 pounds of what
Sherman assumed were pounds of Connecticut "Old Tenor", a stable currency whose value were well preserved by taxation taking it out of circulation. But Battle assumed the debt was denominated in pounds of ever depreciating Rhode Island currency, tendered in same, and the Shermans took a beating in the payment and sued for recovery of loss by depreciation. The Shermans lost when Battle argued that he was merely following the accepted custom of the day. In 1752, Sherman wrote his book "A Caveat Against Injustice or An Inquiry into the Evils of a Fluctuating Medium of Exchange" indicting UNBACKED PAPER MONEY.
It was this experience that Sherman brought to the Constitutional Convention and prompted him to rise on August 28,1787 and propose new, more restrictive wording to Article 1,Section 10. The standing version under consideration was worded this way: "No state shall coin money; nor grant letters of marque and reprisal; nor enter into any Treaty, alliance, or confederation; nor grant any title of Nobility." (From Madison’s Notes of the Convention) "Judge Sherman and Mr. Wilson moved to insert the words *coin money* the words *nor emit bills of credit, nor make any thing but gold and silver coin a tender in payment of debts* making these prohibitions absolute, instead of making the measures allowable with the consent of the Legislature of the U.S. Mr. Sherman thought this a FAVORABLE CRISIS FOR CRUSHING PAPER MONEY. If the consent of the Legislature could authorize emissions of it, the friends of paper money would make every exertion to get into the Legislature in order to license it." Mr. Sherman*s and Mr. Wilson*s motion was quickly agreed to and became the supreme law of the land.
Some additional quotations to ponder:
"All the perplexities, confusion and distress in America arise not from defects in the constitution or confederation, nor from a want of honor or virtue so much as from downright ignorance of the nature of coin, credit and circulation" (John Adams in a letter to Thomas Jefferson, 1787)
"I deny the power of the general government to making paper money, or anything else, a legal tender." (Thomas Jefferson)
"You have been doubtless been informed, from time to time, of the happy progress of our affairs. The principal difficulties seem in great measure to have been surmounted. Our revenues have been considerably
more productive than it was imagined they would be. I mention this to show the spirit of enterprise that prevails." (George Washington in a letter to the Marquis de LaFayette, June 3, 1790 AFTER the United States Constitution prohibited unbacked paper money at Article 1, Section 10)
"Since the federal constitution has removed all danger of our having a paper tender, our trade is advanced fifty percent. Our monied people can trust their cash abroad, and have brought their coin into circulation." (December 16, 1789 edition of The Pennsylvania
Gazette)
"Our country, my dear sir, is fast progressing in its political importance and social happiness." (George Washington in a letter to the Marquis de LaFayette, March 19, 1791)
"The United States enjoys a sense of prosperity and tranquility under the new government that could hardly have been hoped for." (George Washington in a letter to Catherine Macaulay Graham, July 19,1791)
"Tranquility reigns among the people with that disposition towards the general government which is likely to preserve it. Our public credit stands on that high ground which three years ago would have been
considered as a species of madness to have foretold." (George Washington in a letter to David Humphreys, July 20, 1791)
"It is apparent from the whole context of the Constitution as well as the times which gave birth to it, that it was the purpose of the Convention to establish a currency consisting of the precious metals.
These were adopted by a permanent rule excluding the use of a perishable medium of exchange, such as certain agricultural commodities recognized by the statutes of some States as tender for debts, or the still more pernicious expedient of PAPER CURRENCY." (Andrew Jackson, 8th Annual Message to Congress, December 5, 1836)
DESPITE WHAT YOU WERE TAUGHT IN SCHOOL, THE HISTORICAL RECORD IS CRYSTAL CLEAR: AMERICA WAS TO HAVE BEEN SPARED THE DESTRUCTIVE EFFECTS OF AN UNBACKED PAPER MONEY SYSTEM. MOST OF THE PROBLEMS WE FACE TODAY CAN BE TRACED TO WHAT ANDREW JACKSON CALLED "THE PERNICIOUS EXPEDIENT OF PAPER MONEY".
HISTORY TEACHES THAT AN "ARTIFICIAL" MONEY CREATES AN "ARTIFICIAL" WORLD WHERE THE PRICE FOR SOME ITEM...EVEN OUR MOST POPULAR WELFARE "PROGRAM"...CAN BE DEFERRED TO FUTURE GENERATIONS (OUR $11 TRILLION
NATIONAL DEBT) OR PAID WITH A "MONEY" CREATED OUT OF THIN AIR WHICH ROBS THE VALUE FROM THE MONEY WE MIGHT BE UNFORTUNATE ENOUGH TO HAVE IN OUR POCKETS AT THAT MOMENT (INFLATION). AND ONE THING YOU MUST REMEMBER ABOUT INFLATION IS THAT IT IS NOT AN "EQUAL OPPORTUNITY" DESTROYER: THOSE FIRST IN LINE TO GET THEIR HANDS ON THE NEW MONEY ROLLING OFF THE PRESSES (THE MODERN FRIENDS OF PAPER MONEY) HAVE A CHANCE TO SPEND IT BEFORE IT LOSES ITS VALUE. THE LITTLE PEOPLE (THAT’S US, FOLKS!) FARTHEST DOWN THE LINE ARE THE ONES WHO FEEL THE FULLEST EFFECTS OF THIS DESTRUCTIVE PROCESS.
filename:$history
Dick Bachert
Abnsurd Nonsense. The thing that busts the budget is Medicare and Social Security. And they are only going to get worse as the Baby Boomers retire. All the ranting and raving about "Fiscal Reporting" and "Discresionary Spending" is to dick around on the edges and avoid the REAL problem.
Total household net worth: $51.1 trillion.
If "total fiscal exposures" includes Social Security and Medicare, it is dishonest to compare that to household net worth.
Yup. Correct-a-mundo! We've got to find a way to get healthcare back in everybody's wallet and out of the government's general fund.
Social Security? It's a ponzi scheme.
No one dares say that...yet.
A gold backed currency will save us?
1. Reign in spending and reduce government. And that ain't going to happen because it would actually make the politicians make hard decisions and act responsible (how are they going to buy votes?).
2. Inflate the way out of this. The government may have promised you $2000 a month in Social Security and Medicare - but if that only buys a lunch it will mean nothing. And the politicians will have to take no hard decisions but will have "solved" this issue.
So - invest in hard assets (gold, real estate, Swiss franc, etc.) that go up with inflation. Certain stocks will do well.
Timing is key (housing bubble that is deflating right now)
Comments?
It sure is a good thing the democrats are no longer in control of the Legislative and Executive branches, else we would really be in truouble, Right?
Rubbish. No big government agency could withstand the kind of auditing they routinely inflict on private business.
Review and revise tax policy and enforcement programs - including tax expenditures.
For him even to use such a term is proof that he is a statist and socialist. "Tax expenditures" is liberal-speak for what ordinary sensible Americans would call "tax cuts". The assumption is that the government lays claim to 100% of what you produce, and anything they let you keep is an "expenditure."
I agree with his alarmism about deficit spending, but my solution to that problem would not sit well with the statist government-worshipers and dependent teat-suckers.
-ccm
Privatizing Social Security and Medicare would work too.
"Yup. Correct-a-mundo! We've got to find a way to get healthcare back in everybody's wallet and out of the government's general fund. "
It already is in everyones wallet. Go to the hospital. You pay a surcharge to support people who cannot pay their hospital bill.
The only way you are getting this away from the government is by creating private accounts.
Well, it's a good thing that paper money is being rapidly replaced with "plastic," isn't it? Well, isn't it?
I'm thinking of an obscure minor poem by Kipling entitled "The Laws of the Copybook Headings," the essence of which was "You just can't defeat mathematics or spend yourself rich."
It's already happening. Due to changes in the way the CPI was calculated during Clinton's tenure, inflation is understated, so Social Security COLAs are understated as well. If you're one percent low per year, that negatively compounds. By 2020, if current trends continue, Social Security benefits will probably be only about 50-60 percent of their 1992 equivalent value. And that is about what the system can provide since there is no SS Trust Fund with real assets.
Wow! Thank you. I was just wondering where I could find a copy. I remember it from high school back in the Dark Ages (when we were expected to be able to read and understand all this stuff by Dead White Males).
Not really. Gold can be manipulated as much as anything. Several countries in the past were quite good at it. And remember, the Spanish Empire had a gold back monetary system, and they went broke from inflation.
I know that. You know that. I wondered if he knew that?
I'm willing to bet that if the welfare gravy train is sliced dramatically that many of those fedgov titty babies will be forced to find work and a large % of the 'recent arrivals' will 'self deport' themselves and families back to wherever they came from......additionally, if a lot of these employers find that they'll actually have to pay a livable wage even to illegals (because the taxpayers won't be forced to supplement their employee living expenses anymore) that maybe, just maybe they'll hire Americans again.
The Gods of the Copybook Headings
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