U.S. Comptroller General Warns the Nation of Economic Calamity [Fiscal Conservatism Needed Alert]

NewsMax ^ | Aug. 3, 2006 | Dave Eberhart

[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?

[Dick Bachert]

Inflation and deflation CAN exist under a metals based system but they are confined to narrower ranges BUT ONLY if those living under such a system DEMAND that it be adhered to by those administering it.

When Nixon finally closed the gold window, he wisecracked that "We're ALL Keynsians now."

For those who don't recall what THAT meant, I submit the following:
******
At the time John Maynard Keynes was promulgating his
interventionist/statist economic policies during the Roosevelt
administration, a critic pointed out that, in the end, these
policies would, if carried to their illogical conclusions, take
the nation to bankruptcy. Keynes replied that "In the end
we'll all be dead". (A variation of the old "Eat, drink and be
merry for tomorrow we die" or the Madam Pompadour classic, "Apres
moi, les deluge".) Keynes, a notorious ands unabashed
homosexual pedophile, was clearly into immediate gratification in
several spheres of his life, physical and economic!

"By a continuing process of inflation, governments can
confiscate, secretly and unobserved, an important part of the
wealth of their citizens. There is no subtler, no surer means of
overturning the existing basis of society than to debauch the
currency. The process engages all the hidden forces of economic
law on the side of destruction, and does it in a manner which not
one man in a million is able to diagnose."
John Maynard Keynes,
The Economic Consequences of The Peace, 1920

My guess is that you either work for government and are, therefore, a beneficiary of the process damaging most of the rest of us or you are one of the 999,999 who will probably never "get it."

Or perhaps both?

[Toddsterpatriot]

Inflation and deflation CAN exist under a metals based system but they are confined to narrower ranges

Really? Narrower than what?

That doesn't look like a narrow range.

BUT ONLY if those living under such a system DEMAND that it be adhered to by those administering it.

That's funny. I thought the nice thing about a gold standard is that you didn't have to trust the government to administer it? I guess the wild swings that happened in the 1800s happened because the people didn't demand a narrow range? They must have liked jumping between inflation and deflation?

My guess is that you either work for government and are, therefore, a beneficiary of the process damaging most of the rest of us

How do government employees benefit from inflation?

or you are one of the 999,999 who will probably never "get it."

Yes, I'll never get how people can believe that a gold standard today would give us anything but long term deflation.

[cherry]

first, change all govt ...local, state, federal...pension systems to simple 401K's ....no more obscene public pensions for anyone....president on down to the local teachers or postmen....

SS should be indexed......you get 100% of what you paid in but after that, its all taxed as ordinary income AND if you are one of the famous double and triple dippers, OR if you have a fat private pension, then your SS checks will be decreased in some form......

no entity can continue doing good work if it has promised a bulk of its budget to retirees.....roads can't be built, zoos can't be sustained, schools can't keep up with modern technology, and the Armed forces can't be the modern, superior force we need if a large portion of their budget goes to retired military.....IMO of course....(I have a dtr who gets Medicaid and a hubby who will get a Guard pension eventually so cutbacks would hit us at home too....but I feel it has to be done)

[cherry]

" get healthcare back in everybody's wallet "

a radical idea would be to do away with Medicare completely, as well as any govt promised medical benefits...

why?......because if the hospitals and docs and pharmaceuticals have a willing partner ready to pony up for everything under the sun with little expense paid for by individuals, the system is going to be USED and USED REPEATEDLY....

curious isn't it that despite the fact that we have something like 40million people without Medical insurance, 40 million people ARE NOT DYING .....they seem to manage their health pretty well.....

IF you grant free access to people...people will use is....

IF you constrain that usage, or charge people more for using the system, they won't use the system as much....

and when the system isn't used as often, believe me, you'll find docs and drug companies and hospitals vying for your patronage.....

[RexBeach]

Good one, Cherry!

Now. Who's got the guts to axe Medicare? That would be a brave person.

-Rex

[Dick Bachert]

Go read some Hayek. Or George Bancroft's (look him up)
"A Plea for the Constitution of the United States, Wounded in the House of its Guardians" IF you can find a copy.

Your hero, FDR, ostensibly to support the war effort, ordered the PRESS PLATES (since you sound like you're not over 25, that's how they USED to print books!) MELTED DOWN. He and his progressive/inflation loving minions started with books like Bancroft's lest, you know, people actually READ them and figure out what was being done to them and future generations and kick off another revolution.

Until you read more about what those stupid old white guys who kicked this thing off 240 years or so ago ACTUALLY had in mind, THIS conversation is over.

[Toddsterpatriot]

Your hero, FDR

My hero is Reagan.

(since you sound like you're not over 25, that's how they USED to print books!)

So you're 90? Is that why you think deflation would be a great idea? Is it because you're old? Or because you're senile?

THIS conversation is over.

Run away.

[Dick Bachert]

Do check out those books I suggested -- if you can find someone there at the State Home for the Perpetually Bewildered to drive you to the library. Ask Nurse Ratchet.

Must toddle off now and help some friends locate that incessant WHIRRING noise coming from a hilltop near Charlottesville, Virginia.

But, of course, you cannot hear it...

[Toddsterpatriot]

Maybe you should read some Milton Friedman? Until then, buy Gold!!

[martin_fierro]

BA-LOL!

[expat_panama]

Your hero, FDR...   ...Until you read more ...   ..... THIS conversation is over.

Before everyone runs off in in a huff, let's look at where we stand.  Todd's argument is that prices are less stable/predictable with metalmoney, and Dick's point is that anyone who argues with him is an idiot. 

We got common ground here, and we can have complete agreement here if Dick's willing to say that metalmoney made prices less stable, and Todd admits that he was an idiot for wasting his time trying to explain it.

[RightWhale]

Yes, N Kor is also printing US cash, no charge.

[Gritty]

This following Bible passage perfectly describes our own current rulers and outlook...

Then Isaiah said to Hezekiah, "Hear the word of the LORD : The time will surely come when everything in your palace, and all that your fathers have stored up until this day, will be carried off to Babylon. Nothing will be left, says the LORD.

And some of your descendants, your own flesh and blood, that will be born to you, will be taken away, and they will become eunuchs in the palace of the king of Babylon."

"The word of the LORD you have spoken is good," Hezekiah replied. For he thought, "Will there not be peace and security in my lifetime?"... Isaiah 20:16-19

This prophecy was fulfilled completely. Hezekiah was more concerned about his own personal peace and security than the looming destruction of his nation and descendants.

The parallels to today are striking!

[Hop A Long Cassidy]

>>>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.

I'm sure glad Bush is a tight-fisted conservative!

It appears that it's not just spending but "committments" of future moo-lah, like MediCare, etc. So, the problem is not just increasing the money supply (printing dollars), and not just borrowing money instead of printing it. It's all three issues: government spending (shows up in printing money and borrowing money) and future entitlements.

As Plato suggested: democracy -> anarchy -> dictatorship -> autocracy -> oligarchy -> republican form of government -> democracy. We're on the curve!

[ELS]

"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.

I wonder which countries rank, on average, 1 through 15.

[Dick Bachert]

Now that's TWO posters who believe themselves to be intellectually superior to the likes of Roger Sherman, George Bancroft, Jefferson, etc.

Anyone having any questions concerning why this country is circling the drain, contact ex_pat panama (who, judging by his screen name chose to take flight rather than stand and fight for what remains of the Founders' vision) and Todd.

These two are those to whom George Sanayana was referring when he made his famous comment -- in one of the few lucid thoughts to emerge from Harvard in the last 200 years --that those who fail to understand history are condemned to repeat it. And we ARE repeating it.

I choose not to engage in further exchanges with posters lacking a basic grasp of the historical record and the INTENT of the Founders for the same reason I abstain from trying to teach a pig to sing: It just wastes my time and really annoys the pig(s).

We're clearly doomed.

[Toddsterpatriot]

I choose not to engage in further exchanges with posters lacking a basic grasp of the historical record and the INTENT of the Founders

Yes, the Founders wanted us to have a gold/silver standard. Now explain why going back on a gold standard today wouldn't give us long term deflation.

for the same reason I abstain from trying to teach a pig to sing: It just wastes my time and really annoys the pig(s).

I can't refrain from trying to teach economics to protectionists and goldbugs. The problem is they're dumber than pigs.

[expat_panama]

46... THIS conversation is over... 

56... I choose not to engage in further exchanges ....

Now I know Dick is right about how anyone who fusses with him is an idiot.  All I wanted was to do is find out what he was saying, and I feel dumber already

That guy sure is one smart cookie!

[Dick Bachert]

Return to this country and perhaps your comments will have some legitimacy.

[Toddsterpatriot]

Return to this country and perhaps your comments will have some legitimacy.

That's some intellectual rigor you're demonstrating there, Dick.

Did you learn that from the Founders?