A Ray of Hope Through Fiscal Gloom

NATIONAL PRESS CLUB, D.C. -- The latest report on the nation's overall fiscal health paints a picture of a very bleak future indeed if the U.S. doesn't fix some major problems.

U.S. Comptroller General David Walker talked about the release of the Financial Report of the United States yesterday, saying, "Candidly, if the federal government were a private corporation, and the same report came out this morning, our stock would be dropping, and there would be talk about whether the company's management and directors needed a major shakeup."

Walker, who also heads the Government Accountability Office, explained why he is unable to give his audience at the National Press Club a rosy portrait of the country's fiscal health.

For the 11th straight year GAO was unable to express an opinion on the consolidated financial statements of the U.S. Government, primarily due to financial management problems within the Department of Defense. GAO also noted a number of very serious internal control weaknesses.

At the same time, there is some good news in connection with this year's audit. Today's annual report includes the first GAO opinion on a statement within the federal government's consolidated financial statements. Specifically, GAO expressed an unqualified opinion on the Statement of Social Insurance. This statement includes the largest numbers in the federal government's financial statements. To put things in perspective, we're talking numbers in the tens of trillions of dollars in current dollar terms. One of the reasons we could issue an unqualified opinion is because the Department of Defense has nothing to do to with the Statement of Social Insurance!

Roughly translated, Walker says the GAO was not able to say whether or not the Financial Report was an accurate statement of the country's fiscal health because of continued problems with auditing the books at the Pentagon. However, he goes on to say, the report does paint a painfully accurate picture of the perilous state of the Social Security trust fund. And he says the only reason he can say this with any certainty is that the Pentagon has nothing whatsoever to do with Social Security. Walker told his audience that taken as a percentage of the nation's economy, the deficit is rather small.

But, he went on to say that combined with all that is owed the growing number of seniors in the form of Social Security and Medicare benefits in the years and decades to come, then the numbers begin to be sobering at best:

"The federal government's total liabilities," he said, "and unfunded commitments for future benefits payments promised under the current Social Security and Medicare programs are now estimated at $53 trillion, in current dollar terms, up from about $20 trillion in 2000. This translates into a de facto mortgage of about $455,000 for every American household and there's no house to back this mortgage! In other words, our government has made a whole lot of promises that, in the long run, it cannot possibly keep without huge tax increases."

Part of that money, says Walker, will begin going to Kathleen Casey-Kirschling, a Washington-area resident, and the first of the baby boomers who turns 62 at the stroke of midnight on New Year's Day.

"Don't forget, the first 'baby boomers' will begin to draw their early retirement benefits under Social Security in a couple of weeks! And, just three years later, they will be eligible for Medicare. When 'baby boomers' begin to retire in big numbers, it will bring a tsunami of spending that, unlike most tsunamis, will never recede."

Walker also had harsh words for the Medicare drug prescription benefit, approved by the last Republican-dominated Congress:

"The prescription drug benefit alone represents about $8 trillion of Medicare's $34 trillion gap. Incredibly, this number was not disclosed or discussed until after the Congress had voted on the bill and the President had signed it into law. Generations of Americans will be paying the price-with compound interest-for this new entitlement benefit. In many ways, the 2003 Medicare prescription drug episode arguably represents government 'truth' and 'transparency' at its worst."

This is usually the place where Walker is asked what to do, and as usual, he urges the reimposition of tough budget controls, comprehensive Social Security and Medicare reform, as well as the start of fixing health care and tax reform.

For years, Walker has been crisscrossing the country, talking to just about anyone who will listen about the nation's fiscal peril. But now, he says, it seems like people are REALLY listening.

Since September 2005, he and the Concord Coalition, the Brookings Institution, and the Heritage Foundation, to name just a few, have been barnstorming the country as part of what he calls "the Fiscal Wake Up Tour". Walker says they've hit 30 cities in 25 states, and the message he's getting from the people in relation to the looming fiscal crisis is sobering.

"First, the American people have little trust or confidence in the federal government's ability to address serious issues in a timely and constructive manner. Second, most Americans don't have a high opinion of the executive or the legislative branch, or of either major political party. Third, they are starved for two things, truth and leadership. It's time they got more of both.

"On a more positive note," he continued, " the American people are smarter than many elected officials and other individuals give them credit for. We've seen that once citizens are given the facts, most of them get it. In addition, most are willing to make some sacrifices for the future of their country and their families."

Perhaps borrowing a page from former Vice President Gore, and the attention paid to global warming since the release of the Oscar-winning "an Inconvenient Truth", Walker has also been involved in the creation of a documentary based, as he says on his deficits message regarding budget, savings, balance of payments, and leadership. The movie has been picked for the Sundance Film festival next year, and is tentatively titled 'I.O.U.S.A".

And Walker also takes heart in learning that, surprisingly, fiscal issues have also become an important part of the presidential campaign:

"I take great comfort in the fact that in the last two presidential debates held in Iowa, the first question, in fact, more than one question, dealt with fiscal issues."

Walker adds that the editor of the Des Moines Register said that the number one issue that Iowans wanted to hear more about that they were not hearing from the candidates dealt with fiscal issues.

He says proudly that "the three trips by the "Fiscal Wake-up tour to Iowa didn't hurt in that regard."

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On the Web:

• GAO - Fiscal Year 2007 Financial Report of the United States
• AP - $45 Trillion Gap Seen in US Benefits