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2centsworth
10-28-2006, 10:49 PM
http://apnews.myway.com/article/20061028/D8L1OC5G0.html


GAO Chief Warns Economic Disaster Looms
Oct 28, 12:32 PM (ET)

By MATT CRENSON




AUSTIN, Texas (AP) - David M. Walker sure talks like he's running for office. "This is about the future of our country, our kids and grandkids," the comptroller general of the United States warns a packed hall at Austin's historic Driskill Hotel. "We the people have to rise up to make sure things get changed."

But Walker doesn't want, or need, your vote this November. He already has a job as head of the Government Accountability Office, an investigative arm of Congress that audits and evaluates the performance of the federal government.

Basically, that makes Walker the nation's accountant-in-chief. And the accountant-in-chief's professional opinion is that the American public needs to tell Washington it's time to steer the nation off the path to financial ruin.

From the hustings and the airwaves this campaign season, America's political class can be heard debating Capitol Hill sex scandals, the wisdom of the war in Iraq and which party is tougher on terror. Democrats and Republicans talk of cutting taxes to make life easier for the American people.

What they don't talk about is a dirty little secret everyone in Washington knows, or at least should. The vast majority of economists and budget analysts agree: The ship of state is on a disastrous course, and will founder on the reefs of economic disaster if nothing is done to correct it.

There's a good reason politicians don't like to talk about the nation's long-term fiscal prospects. The subject is short on political theatrics and long on complicated economics, scary graphs and very big numbers. It reveals serious problems and offers no easy solutions. Anybody who wanted to deal with it seriously would have to talk about raising taxes and cutting benefits, nasty nostrums that might doom any candidate who prescribed them.

"There's no sexiness to it," laments Leita Hart-Fanta, an accountant who has just heard Walker's pitch. She suggests recruiting a trusted celebrity - maybe Oprah - to sell fiscal responsibility to the American people.

Walker doesn't want to make balancing the federal government's books sexy - he just wants to make it politically palatable. He has committed to touring the nation through the 2008 elections, talking to anybody who will listen about the fiscal black hole Washington has dug itself, the "demographic tsunami" that will come when the baby boom generation begins retiring and the recklessness of borrowing money from foreign lenders to pay for the operation of the U.S. government.

"He can speak forthrightly and independently because his job is not in jeopardy if he tells the truth," said Isabel V. Sawhill, a senior fellow in economic studies at the Brookings Institution.

Walker can talk in public about the nation's impending fiscal crisis because he has one of the most secure jobs in Washington. As comptroller general of the United States - basically, the government's chief accountant - he is serving a 15-year term that runs through 2013.

This year Walker has spoken to the Union League Club of Chicago and the Rotary Club of Atlanta, the Sons of the American Revolution and the World Future Society. But the backbone of his campaign has been the Fiscal Wake-up Tour, a traveling roadshow of economists and budget analysts who share Walker's concern for the nation's budgetary future.

"You can't solve a problem until the majority of the people believe you have a problem that needs to be solved," Walker says.

Polls suggest that Americans have only a vague sense of their government's long-term fiscal prospects. When pollsters ask Americans to name the most important problem facing America today - as a CBS News/New York Times poll of 1,131 Americans did in September - issues such as the war in Iraq, terrorism, jobs and the economy are most frequently mentioned. The deficit doesn't even crack the top 10.

Yet on the rare occasions that pollsters ask directly about the deficit, at least some people appear to recognize it as a problem. In a survey of 807 Americans last year by the Pew Center for the People and the Press, 42 percent of respondents said reducing the deficit should be a top priority; another 38 percent said it was important but a lower priority.

So the majority of the public appears to agree with Walker that the deficit is a serious problem, but only when they're made to think about it. Walker's challenge is to get people not just to think about it, but to pressure politicians to make the hard choices that are needed to keep the situation from spiraling out of control.

To show that the looming fiscal crisis is not a partisan issue, he brings along economists and budget analysts from across the political spectrum. In Austin, he's accompanied by Diane Lim Rogers, a liberal economist from the Brookings Institution, and Alison Acosta Fraser, director of the Roe Institute for Economic Policy Studies at the Heritage Foundation, a conservative think tank.

"We all agree on what the choices are and what the numbers are," Fraser says.

Their basic message is this: If the United States government conducts business as usual over the next few decades, a national debt that is already $8.5 trillion could reach $46 trillion or more, adjusted for inflation. That's almost as much as the total net worth of every person in America - Bill Gates, Warren Buffett and those Google guys included.

A hole that big could paralyze the U.S. economy; according to some projections, just the interest payments on a debt that big would be as much as all the taxes the government collects today.

And every year that nothing is done about it, Walker says, the problem grows by $2 trillion to $3 trillion.

People who remember Ross Perot's rants in the 1992 presidential election may think of the federal debt as a problem of the past. But it never really went away after Perot made it an issue, it only took a breather. The federal government actually produced a surplus for a few years during the 1990s, thanks to a booming economy and fiscal restraint imposed by laws that were passed early in the decade. And though the federal debt has grown in dollar terms since 2001, it hasn't grown dramatically relative to the size of the economy.

But that's about to change, thanks to the country's three big entitlement programs - Social Security, Medicaid and especially Medicare. Medicaid and Medicare have grown progressively more expensive as the cost of health care has dramatically outpaced inflation over the past 30 years, a trend that is expected to continue for at least another decade or two.

And with the first baby boomers becoming eligible for Social Security in 2008 and for Medicare in 2011, the expenses of those two programs are about to increase dramatically due to demographic pressures. People are also living longer, which makes any program that provides benefits to retirees more expensive.

Medicare already costs four times as much as it did in 1970, measured as a percentage of the nation's gross domestic product. It currently comprises 13 percent of federal spending; by 2030, the Congressional Budget Office projects it will consume nearly a quarter of the budget.

Economists Jagadeesh Gokhale of the American Enterprise Institute and Kent Smetters of the University of Pennsylvania have an even scarier way of looking at Medicare. Their method calculates the program's long-term fiscal shortfall - the annual difference between its dedicated revenues and costs - over time.

By 2030 they calculate Medicare will be about $5 trillion in the hole, measured in 2004 dollars. By 2080, the fiscal imbalance will have risen to $25 trillion. And when you project the gap out to an infinite time horizon, it reaches $60 trillion.

Medicare so dominates the nation's fiscal future that some economists believe health care reform, rather than budget measures, is the best way to attack the problem.

"Obviously health care is a mess," says Dean Baker, a liberal economist at the Center for Economic and Policy Research, a Washington think tank. "No one's been willing to touch it, but that's what I see as front and center."

Social Security is a much less serious problem. The program currently pays for itself with a 12.4 percent payroll tax, and even produces a surplus that the government raids every year to pay other bills. But Social Security will begin to run deficits during the next century, and ultimately would need an infusion of $8 trillion if the government planned to keep its promises to every beneficiary.

Calculations by Boston University economist Lawrence Kotlikoff indicate that closing those gaps - $8 trillion for Social Security, many times that for Medicare - and paying off the existing deficit would require either an immediate doubling of personal and corporate income taxes, a two-thirds cut in Social Security and Medicare benefits, or some combination of the two.

Why is America so fiscally unprepared for the next century? Like many of its citizens, the United States has spent the last few years racking up debt instead of saving for the future. Foreign lenders - primarily the central banks of China, Japan and other big U.S. trading partners - have been eager to lend the government money at low interest rates, making the current $8.5-trillion deficit about as painful as a big balance on a zero-percent credit card.

In her part of the fiscal wake-up tour presentation, Rogers tries to explain why that's a bad thing. For one thing, even when rates are low a bigger deficit means a greater portion of each tax dollar goes to interest payments rather than useful programs. And because foreigners now hold so much of the federal government's debt, those interest payments increasingly go overseas rather than to U.S. investors.

More serious is the possibility that foreign lenders might lose their enthusiasm for lending money to the United States. Because treasury bills are sold at auction, that would mean paying higher interest rates in the future. And it wouldn't just be the government's problem. All interest rates would rise, making mortgages, car payments and student loans costlier, too.

A modest rise in interest rates wouldn't necessarily be a bad thing, Rogers said. America's consumers have as much of a borrowing problem as their government does, so higher rates could moderate overconsumption and encourage consumer saving. But a big jump in interest rates could cause economic catastrophe. Some economists even predict the government would resort to printing money to pay off its debt, a risky strategy that could lead to runaway inflation.

Macroeconomic meltdown is probably preventable, says Anjan Thakor, a professor of finance at Washington University in St. Louis. But to keep it at bay, he said, the government is essentially going to have to renegotiate some of the promises it has made to its citizens, probably by some combination of tax increases and benefit cuts.

But there's no way to avoid what Rogers considers the worst result of racking up a big deficit - the outrage of making our children and grandchildren repay the debts of their elders.

"It's an unfair burden for future generations," she says.

You'd think young people would be riled up over this issue, since they're the ones who will foot the bill when they're out in the working world. But students take more interest in issues like the Iraq war and gay marriage than the federal government's finances, says Emma Vernon, a member of the University of Texas Young Democrats.

"It's not something that can fire people up," she says.

The current political climate doesn't help. Washington tends to keep its fiscal house in better order when one party controls Congress and the other is in the White House, says Sawhill.

"It's kind of a paradoxical result. Your commonsense logic would tell you if one party is in control of everything they should be able to take action," Sawhill says.

But the last six years of Republican rule have produced tax cuts, record spending increases and a Medicare prescription drug plan that has been widely criticized as fiscally unsound. When President Clinton faced a Republican Congress during the 1990s, spending limits and other legislative tools helped produce a surplus.

So maybe a solution is at hand.

"We're likely to have at least partially divided government again," Sawhill said, referring to predictions that the Democrats will capture the House, and possibly the Senate, in next month's elections.

But Walker isn't optimistic that the government will be able to tackle its fiscal challenges so soon. "Realistically what we hope to accomplish through the fiscal wake-up tour is ensure that any serious candidate for the presidency in 2008 will be forced to deal with the issue," he says. "The best we're going to get in the next couple of years is to slow the bleeding."

2centsworth
10-29-2006, 06:31 PM
worst president ever
you have to be as dumb as your name if you think it's Bush's fault.

PixelPusher
10-29-2006, 06:39 PM
you have to be as dumb as your name if you think it's Bush's fault.
Everyone in this credit card consumerist society shares blame, but Bush declining to veto a single spending bill didnt' help either.

smeagol
10-29-2006, 06:49 PM
worst president ever
Even if true, totally irrelevant.

scott
10-29-2006, 09:54 PM
How about worst Elected Government (meaning President + House + Senate) in history. That is pretty relevant since it's a primary driver for what got us into this mess.

Good article Pete, thanks for posting.

RuffnReadyOzStyle
10-29-2006, 11:17 PM
Some economists even predict the government would resort to printing money to pay off its debt, a risky strategy that could lead to runaway inflation.

Um, no. Surely no-one who got to a position of authority over money supply would ever do that. Hell, I learned the folly of printing more money in year 9 business class! :lol

As for the Medicare hole, I wonder how much of that is due to America's massive obesity rate (over 30% obesity, over 64% obese+overweight!!!) and the related health care costs? I bet it's a sizeable chunk, because obesity leads to heart disease (which means expensive heart operations), type II diabetes (expensive meds), stroke (expensive hospital stays and brain operations), etc. Maybe diseases related to obesity should be exempt from Medicare coverage? Or maybe a Logan's Run-style euthanasia at 70 idea could be implemented? (kidding about the second part)

On a more general point, Australia had a similar debt crisis in the early '90s. The conservatives got in and did a great job - they reduced govt debt from 96bil to 6bil over a decade by privatising most of its assets. We now have super low govt. debt (0.7% of GDP) and run surpluses every year, but many services have been totally privatised which has caused other problems. However, it has left our economy in good stead for the challenges now facing us, and it is one thing I certainly respect our last 10 years of conservative govts for having the foresight to do.

Your govt. need to stop wasting hundreds of billions of dollars a year on war as a starter, and it looks like medicare will have to be vastly reduced...

I thought most Americans had private health care anyway? What's with medicare?

Zunni
10-29-2006, 11:30 PM
Medicare is primarily for older people no longer employed and able to GET health insurance.

2centsworth
10-30-2006, 11:54 PM
How about worst Elected Government (meaning President + House + Senate) in history. That is pretty relevant since it's a primary driver for what got us into this mess.

Good article Pete, thanks for posting.the current administration deserves it's fair share of the blame. However, what got us into this mess dates back to Franklin Roosevelt.

Guru of Nothing
10-31-2006, 12:13 AM
the current administration deserves it's fair share of the blame. However, what got us into this mess dates back to Franklin Roosevelt.

Pure schtick.

RandomGuy
10-31-2006, 08:55 AM
you have to be as dumb as your name if you think it's Bush's fault.

You obviously didn't read the part about the overall federal debt and recent budget deficits.

Please read the article you posted in it's entirety.



Like many of its citizens, the United States has spent the last few years racking up debt instead of saving for the future. Foreign lenders - primarily the central banks of China, Japan and other big U.S. trading partners - have been eager to lend the government money at low interest rates, making the current $8.5-trillion deficit about as painful as a big balance on a zero-percent credit card.

In her part of the fiscal wake-up tour presentation, Rogers tries to explain why that's a bad thing. For one thing, even when rates are low a bigger deficit means a greater portion of each tax dollar goes to interest payments rather than useful programs. And because foreigners now hold so much of the federal government's debt, those interest payments increasingly go overseas rather than to U.S. investors


That is A#1 positively, without question entirely Bush's fault.

In case you missed government class, the President proposes and Congress approves budgets.

RandomGuy
10-31-2006, 08:58 AM
the current administration deserves it's fair share of the blame. However, what got us into this mess dates back to Franklin Roosevelt.

What got us into this mess is Ronald Reagan.

http://mwhodges.home.att.net/debtfull.gif

101A
10-31-2006, 09:25 AM
We can blame Congress.

We can blame the President.

The enemy is us. We are a democracy.

Specifically I would blame the baby-boomers. They seem to be the most myopic generation in the history of the world. That graph certainly could be used to illustrate this. When they began to come of age, and take their place as the predominant voting block - the debt took off, and continues to rise. They are the first generation that took living beyond their means to an art-form; they have not saved for retirement. They are a generation that the bulk of its members will stop working and paying taxes with DECADES left on their clocks - and vote en mass to make sure we all pay for their life of leisure. After all, they've earned it!

Meanwhile, the pharmaceutical industry has ramped up to oblige them. Eat like pigs your entire life; don't sweat it; take these four pills, we'll get you cholesterol under control. Didn't exercise enough, spent too much time in front of the TV - now you can't get it up? We've got you covered. Oh, you can't afford these new, damned expensive wonder druge??? Medicare prescription drug program to the rescue!!!!

What ARE the boomers spending their money on? Check out what Harley Davidson stock has done since they started turning 50. Easy rider my ass.

Cut Medicare? Social Security? No way ANY politician is going to touch those issues. Raise Taxes? Sure, they'll do that, as soon as the bulk of the Boomers are retired - the rest of us will foot their bills.

The solution? Free cigarettes for all Americans over 55! Yes, lung cancer and emphazema are expensive, but they are generally pretty fast acting.

xrayzebra
10-31-2006, 10:41 AM
Somewhere down the line most of the entitlement programs are going to be cut
back. When I have no idea. But it will be forced on the Pols to do the job they
were elected to do. Govern.

It just isn't going to be fun for anyone. Taxes will be raised (cause thats what
they always do) and bennies will be cut and the economy will drag and more than
likely recession will follow, hopefully not a depression. And until things get back
on an even footing things are going to stay in a slow down mode.

And seriously speaking those that have been receiving those bennies may even
riot in the streets. Because they feel they are entitled.

It is going to take a real education process to prepare everyone for the
event.

2centsworth
10-31-2006, 01:22 PM
What got us into this mess is Ronald Reagan.

http://mwhodges.home.att.net/debtfull.gif

Think out of the box a little. What's causing these huge budget deficits?

When you answer that correctly then you will understand what I mean by the problem dating back to FDR.

2centsworth
10-31-2006, 01:25 PM
You obviously didn't read the part about the overall federal debt and recent budget deficits.

Please read the article you posted in it's entirety.





That is A#1 positively, without question entirely Bush's fault.

In case you missed government class, the President proposes and Congress approves budgets.


You have to know a little bit about David Walker's work before you make your conclusions. Your assumptions prove your ignorance.

2centsworth
10-31-2006, 01:26 PM
Pure schtick.
do you ever have anything to say, because you're the only one who thinks you're funny. But you're right in assuming your arrogance would get under my skin a little.

101A
10-31-2006, 02:32 PM
Think out of the box a little. What's causing these huge budget deficits?

When you answer that correctly then you will understand what I mean by the problem dating back to FDR.

Isn't Walker all about the Boomers& the promises they've made themselves?

Life expectancy is a MAJOR problem.

FuzzyLumpkins
10-31-2006, 02:45 PM
2Cents, you have no idea of Keynsian economics and its apparent. FDR spending in a recessinon was not the problem. More than anything it was the Eisenhower years that institutionalized the debt pattern that we see today.

Really until we eliminate the 2 party system and actually get a representative democracy nothing is going to change.

300 million people and we get to choose between 2 guys. It is a fucking joke.

2centsworth
10-31-2006, 03:10 PM
2Cents, you have no idea of Keynsian economics and its apparent. FDR spending in a recessinon was not the problem. More than anything it was the Eisenhower years that institutionalized the debt pattern that we see today.

Really until we eliminate the 2 party system and actually get a representative democracy nothing is going to change.

300 million people and we get to choose between 2 guys. It is a fucking joke.
I'm not blaming it solely on FDR. I'm saying it was the beginning of the welfare state which is at the root of the problem. Bush has done nothing but to promote/accelerate the problem.

Ocotillo
10-31-2006, 03:12 PM
As for the Medicare hole, I wonder how much of that is due to America's massive obesity rate (over 30% obesity, over 64% obese+overweight!!!) and the related health care costs? I bet it's a sizeable chunk, because obesity leads to heart disease (which means expensive heart operations), type II diabetes (expensive meds), stroke (expensive hospital stays and brain operations), etc. Maybe diseases related to obesity should be exempt from Medicare coverage? Or maybe a Logan's Run-style euthanasia at 70 idea could be implemented? (kidding about the second part)



I don't really have any facts to back me up and am too lazy to look but I would venture to say most obese Americans are dead before they get to take advantage of Medicare. You see some fat seniors but for the most part they are a lot thinner than the average non-senior American.

2centsworth
10-31-2006, 03:25 PM
Isn't Walker all about the Boomers& the promises they've made themselves?

Life expectancy is a MAJOR problem.
here are a couple of links but you're pretty close.

http://www.spurstalk.com/forums/showthread.php?t=29662



http://www.gao.gov/cghome/rms052605/img8.html
http://www.gao.gov/cghome/rms052605/img3.gif

101A
10-31-2006, 03:30 PM
I don't really have any facts to back me up and am too lazy to look but I would venture to say most obese Americans are dead before they get to take advantage of Medicare. You see some fat seniors but for the most part they are a lot thinner than the average non-senior American.


Good observation. Dead people don't collect Social Security. Another reason the "Cost of Tobacco" is so overblown. Everybody dies. Most people die of things that cost alot of money. Smokers do this at a younger age.

101A
10-31-2006, 03:36 PM
here are a couple of links but you're pretty close.

http://www.spurstalk.com/forums/showthread.php?t=29662



http://www.gao.gov/cghome/rms052605/img8.html
http://www.gao.gov/cghome/rms052605/img3.gif


How many congressman in '64 would have enacted M&M if they could see THAT chart! Cost nearly as much as defense spending WHILE WERE IN A SHOOTING WAR!!! Goldwater would have had alot more allies.