Posted by Frank James at 4:20 pm CDT
If the world made more sense, what David Walker said today would get a lot more attention than the doings of John Mark Karr, the strange little man arrested on suspicion of killing JonBenet Ramsey or whether Sen. Hillary Clinton will run for president or not.
Walker is comptroller general of the Government Accountability Office, an agency that acts a sort of a truth squad for Congress.
He gave a speech today on the financial reckoning facing America to an American Institute of Certified Public Accountants conference. It is worth paying attention to.
Walker didn’t break any news. But what he said and the way he said it demands that attention be paid.
“We have four deficits: a budget deficit, a balance of payments deficit, a savings deficit and a leadership deficit,” he said. That last deficit is the one that makes all the others so troublesome.
For it’s that last one that has placed the U.S. on the course it’s on now. This is how Walker described the nation’s present fiscal direction.
“The United States government is on an imprudent and unsustainable fiscal path. We do not face an immediate crisis, but we face large and growing structural imbalances that are growing every second of every minute of every day due to continuing deficits, known demographic trends and rising health-care cost. The status quo is unacceptable and unsustainable, and anybody who tells you -- whether they be Republicans, Democrat or Independent, that we can solve this problem through economic growth alone or that we can solve this problem without having to reform entitlement programs, reengineer the base of discretionary spending and have additional tax revenues -- anybody who says that we are not going to have to do all three of those is not telling you the truth. It's as simple as that.”
Walker wanted to get the accountants at the Marriott hotel where the conference being held worked up. He wants to get everyone worked up. He wants Americans to understand the risks the nation is running so that they’ll demand action from their elected leaders.
In the past five years, the U.S.’s unfunded future commitments related to Social Security and Medicare have risen by $20 trillion, Walker said, to $46 trillion.
“How much is $46 trillion?” he asked. The answer is that if you added up the net worth of everyone in America, it would be more than 90 percent of that total.
“It’s $156,000 for every man, woman and child in the U.S.,” he said. “People talk about eliminating the death tax. How about eliminating the birth burden, that $156,000? No wonder newborn babies cry. Somebody’s giving them the bill.”
Walker discussed the accounting tricks the government employs to make the problem appear less bad, like having the Congressional Budget Office only look at the federal budget or program costs over a 10-year period.
“The difficulty is, the U.S. is going to last more than 10 years, I can assure you of that… So we are making decisions today that do not take into account known demographic realities. We should be saving. We should be investing in order to help deal with this tremendous burden. But we’re not. We’re dissaving at record rates, especially when you consider the fact that (in 2005) for the first time since 1933, Americans spent more money than they took home.”
Walker reminded the audience in the hotel ballroom of something many Americans probably don’t know, that the largest tax preference in the Internal Revenue Code is the one given for employer-provided health benefits.
“… The fact (is) that none of us in this room, no matter how wealthy we are, no matter how much money we make and how much net income -- net worth we have, no matter how generous our employer-provided and paid health care is, we never pay a dime of income or payroll tax on the value of employer-provided and paid health care. That is approaching $200 billion a year and growing rapidly. And I'm here to tell you, that's part of the problem with our health care system, not part of the solution, because it disconnects people from the true cost of health care, and ultimately, we're going to have to reform the entire health care system in installments, including a fundamental redivision of responsibilities between government employers and individuals over a number of years.”
Staying on the health-care theme, he singled out the way lawmakers and the White House Medicare prescription drug benefit program to show how an already difficult fiscal situation was being made worst, not better.
“The Medicare prescription drug-benefit bill is a perfect example of what's wrong with Washington, in two ways. When the estimated cost of that bill was calculated, it only considered 10-year cash flow cost. The actuary for Medicare had calculated the number. His number was $534 billion. CBO's was $290 billion.
“The Medicare actuary was told that he could not tell the congress the $534 billion number for risk of losing his job. That not only was unethical, it was illegal. And nobody has been held accountable.
“Congress wanted to spend $300 billion on Medicare prescription drugs when we had a surplus, but at the time that bill was passed, we had large and growing deficits. And four months after the bill was passed, the Medicare Act trustees, based on the work of the actuaries, came out with the estimated discounted present value dollar number that I talked about before. And how much was it: $8.1 trillion, one and a half times what the Social Security imbalance was, and more than the entire total debt of the United States that had been accumulated since the beginning of the republic in 1789 at that time.
“Wasn't disclosed, wasn't discussed, wasn't debated. That's the first problem.
“The second problem is, is that Medicare was underfunded by $15 (trillion) to $20 trillion in current dollar terms before Medicare prescription drugs was passed into law. So we took a program that was designed in 1965, based upon Blue Cross/Blue Shield largely, Medicare Part A and Part B, we added to the unfunded obligations another $8 trillion, and we didn't reform the program in any meaningful way at all. That's irresponsible. And that's not a partisan issue.”
Considering the problems he laid out, Walker seemed anything but pessimistic.
“We can -- we must -- we will, I believe, rise to this challenge. But we need to do it sooner rather than later, and the professions need to be part of the leadership team. We need public education, discussion and debate. It needs to be professional, objective, fact- based, non-partisan, non-ideological, fair and balanced. You cannot solve a problem until a majority of the people realize that you have a problem that needs to be solved and it's prudent to solve it sooner rather than later. Ultimately, elected officials will have to make the tough choices, but they need help, because they're going to have to make tough choices. And realistically, elected officials, especially if they want to be re-elected, are not going to get too far ahead of their constituents. So we need to help prepare the way, and I would like to ask for your help.”
At the start of his speech, Walker had said there were lessons to be learned from ancient Rome, imperial Britain and, of all places, New Zealand. They were indeed examples worth mulling.
“Rome. The republic that has lasted the longest in the history of the world is the Roman Republic. It lasted a little over 500 years. More than a thousand years is an empire, but only a little over 500 is a republic.
There are a lot of reasons that the Roman Republic fell. Let me mention three. Declining moral values and political comity -- that's I-T-Y, not E-D-Y -- at home, overconfident and overextended around the world, and fiscal irresponsibility by the central government. We should learn from history and take steps to make sure that history is not repeated.
The British Empire did not survive the test of time, and they also had their own challenges in Mesopotamia, currently known as Iraq. We should learn from history.
And thirdly, New Zealand versus Argentina, two countries who came to the brink of bankruptcy and chose different paths. Argentina did not make reforms, and they declared bankruptcy. New Zealand made dramatic and fundamental reforms in the role of the federal government, how they did business, and who did their business, and they stepped back from the brink.
And by the way, New Zealand, Australia and other countries now regularly issue long-term fiscal sustainability reports. They're not just focusing on today, they're preparing for a better tomorrow. If New Zealand can do it, we can do it, the sooner the better.”
You didn't have to be an accountant to learn a lot from Walker's speech.
• 
• 
• 
Comments
This must be Bill Clinton's fault.No,it must the Democratic Congress.
Good thing the "Conservatives"are running the show.These fiscally sound rabbits can fix this mess.
How about more tax cuts for the filthy rich,and then it will trickle down to the peasants.
Al Sharpton said it best,"we got the down,we just ain't seen the trickle".
Maybe we should follow Ronny Reagan's plan,after tax cuts for the richest,let's do some tax increases on the working fools.
Oh,health care,didn't little GWB say he was going to get around to that.
Just one more stinkin state,and we would have had a real President.
Posted by: Raving Loon | August 21, 2006 4:38 PM
Quite scary....I'm sure some will want to bash him or what they perceive is some political rant..however with the long tenure of the GAO it is known to be a non-partisan and fact based operation.
Posted by: bill r. | August 21, 2006 4:50 PM
Which party is it again that has controlled both houses of Congress, the presidency, and the federal courts for most of the last 6 years? I forget.
Posted by: Chicago Jason | August 21, 2006 5:02 PM
Interesting article overall.
One small correction to the Mr. Walker's speech: There actually are people in the U.S. who DO pay taxes on employer-paid health insurance. They are the folks who are lucky enough to work for companies that provide domestic partners benefits, but unlucky enough to live in society that believes that such benefits ought to be given only to married heterosexuals. If your company pays for your domestic partner's health insurance (in exactly the same way for a legally-married spouse), you will have to pay taxes on the full amount of money your company pays for that insurance. In fact, there is a good chance you will pay more in taxes for your partner's insurance than you'll have to pay for your own insurance under many company plans.
Posted by: Yembenmesh | August 21, 2006 6:11 PM
Mr. James -
Than you for report on Mr. Walker's speech. Unfortunately, it will not get the attention it deserves, because he addresses a collective, American (Democratic and Republican) problem - not a problem or issue that is easily hijacked by one or the other of the two main political parties to be used as a cudgel to beat over the heads of their political opponents.
The lack of fiscal intestinal fortitude exhibited by both parties in Congress over the past couple of decades has put us where we are today. Overly generous entitlement programs (medicare, welfare, farm subsidies, tax breaks for foreign corporate subsidiaries and the inexorable march towards eliminating the death tax) voted for by both parties have contributed to our current long term financial mess by postponing payment for the fruits we are lavishing upon oursevles today. On top of this, our Congress and President have passed 9and signed into law) tax cuts during an extremely costly (and increasingly bloody) time of war - something unprecedented in our history.
We have only ourselves to blame for not demanding that our elected officials instititue "pay as you go" policies for new programs (or reforming old ones).
Unlike Mr. Walker, however, I am not as optimistic about our ability to straighten out this mess without a severe socio-economic upheaval occurring . . . .
Posted by: Jay | August 21, 2006 6:12 PM
AMEN. This is not a Republican/Democrat Conservative/Liberal problem. They are all guilty of deferring this train wreck to the next Congress/Administration.
Posted by: Terry | August 21, 2006 9:29 PM
With all the out of control spending by Congress. The effects are cuts to Brain injury research. Phony PTSD studies so they can cut the programs.Miltary families not receiving the help they need. Military Retirees cut in rate plus told you can not have your SS and your retirement pay. Because of this garbage 3500 nurse cut from the VA hospitals. 18 VA hospital being closed with none of the money going into veterans health care. The Economy is being told to us is great. But yet returning troops are not finding jobs. Education for our returning troops not being paid. No more about we support the troops and veterans. The record proves you don't
Posted by: Dale Peters | August 21, 2006 11:05 PM
A lot of people don't want to talk about the national debt or the consequences from foolish spending. People can't see the debt, you can't hold it in your hands, so who cares? We're living for the now, spending what you got now and if you have anything left over, you shortchanged yourself. It's only money, it's not like it's something really meaningful.
I'm concerned about our governments ability to payback Social Security what it borrowed. Many people tell me, quit worrying, why bother? That's the kind of mindset we have today. As Frank Sinatra once said, "Enjoy it while you got it, baby."
Posted by: lou kaye | August 21, 2006 11:12 PM
Unfortunately the way congress is spending the money it doesn't have is reflected in the way many households are spending to keep up with the Joneses. Hence the uptick in bankruptcies and foreclosures. Is the US government next?
Posted by: lochnessmonster | August 22, 2006 6:30 AM
Terry,now were all in this together.Nice try,your "conservative"party is known for fiscal responsibility.
Republicans running for office are always saying they keep the size of govt.and spending down.
How many times did Ronny Reagan raise taxes?
Posted by: Raving Loon | August 22, 2006 9:07 AM
Yes Mr. Walker is trying to keep political parties equally accountable for the present state our monetary system is in, but the fact that for the last 6 years Republicans have controlled the executive branch and for the last 12 years the congressional branch. It’s obvious the Republican Party has been hijacking the system. First we need to stop this entitlement program for the pharmaceutical companies, next we need to stop the tax cuts for the wealthiest people in the country. Our healthcare costs have gone through the roof and I believe if we don’t put a lid on it soon we’ll all be facing bankruptcy. A friend of mine spent 1 day in a hospital to undergo tests, the hospital bill alone was $48,000 that’s insane!!
Posted by: Rory M | August 22, 2006 9:27 AM
Raving Loon - I read your post and realize why public education reform is a high priority in this country. If you went to a private school, tell mom and dad to get a refund.
The programs that are causing the deficit in this country are not the defense program nor the war on terror; but its the entitlements - Social Security and Medicare. Programs started under FDR, expanded by LBJ.
Don't get me wrong, the Republicans have not shown enough fiscal responsibility over the past five years.
The gov't running small deficits (excluding the social security and medicare piece) is really beneficial. The reason being is when we ran surpluses in the late 90's, the 535 Congressman and the Executive Office just wanted to keep increasing spending as if the economy would grow forever (we saw that come to an end in 2000).
By the way, President Reagan raised Social Security Taxes in 1983. One of his worse acts ever, should have let social security die on the vine.
Posted by: Terry | August 22, 2006 6:08 PM
Terry,the bean counter,I was smart enough to finally embarrass you into admitting Reagan raised taxes.
As far as my education,I always seem to be a step ahead of you right wing know it alls.
Go ahead and keep making excuses for your wing nut congress,but you know and I know,they spend our tax dollars faster than any Dem congress.
The only difference is the Dems spend the money on working people,while your crooked pals funnel the money to the rich.
Please end the entitlement deal,you guys always wine and then the wing nuts get control and they do nothing.You sound like all the other chickenhawks,let the lower and middle class do the fighting for you.Get some walls.
Posted by: Raving Loon | August 22, 2006 9:22 PM
Most of his comments are well-stated, but his thoughts on Rome wouldn't stand up to the barest historical scrutiny and rather undermine his argument. Too bad he does himself in with this amateurish reductionism. Does that extend to the rest of his arguments? I find myself suspicious.
Posted by: eric f | August 23, 2006 10:09 AM
Raving Loon,
You were smart enough to make me quote a fact. Gee, that's some intellengence you must have.
As far as being a step ahead of me - I've forgotten more about economics than you will ever know.
The repubs spend as fast as the dems, but their spending is generally better than the dems (military vs. welfare). Back to the working people, that's a good one (read sarcasticaly).
I'll get some walls, if you get some balls.
Posted by: Terry | August 23, 2006 5:45 PM