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Economy Warnings in the wilderness
A new Jeremiah: Economic warnings unheeded
Date published: 8/16/2007
LIKE JEREMIAH, whose prophecies of impending calamity went unheeded, David Walker, the comptroller general of the United States, who heads Congress' nonpartisan Government Accountability Office, has been traveling the land issuing ominous warnings of coming financial catastrophe without getting much response.
This past July, he spoke to the National Press Club about the long-term fiscal challenges facing not only the federal, but state and local governments in the next decade.
Using projections out to 2050, Walker forecast that Medicare and Medicaid health care costs, which have exploded from 1 percent of federal spending in 1966 to 21 percent in 2006, would continue to climb rapidly.
Unless we do something very soon, he declared, the growing financial burden on federal, state, and local governments will become impossible to sustain at current revenue and expenditure levels over the decade--with the situation steadily deteriorating out to 2050.
Walker calculated that the resulting accrued federal fiscal gap between total revenues and expenditures, including Social Security, would reach $54.5 trillion in 2007 dollars by 2050. Adding in state and local governments shortfalls, the fiscal chasm deepens to $66 trillion.
These daunting numbers are based on the accrual accounting method that's required of businesses. What that means is that if you borrow $100, you're not $100 richer, the way you would be if using a simple cash accounting system. Under accrual, that $100 is immediately offset by the $100 you now owe.
Actually you're worse off, because you also owe interest.
Well, what does this mean for us taxpayers? Walker, in a December 2006 report to Congress, pointed out that the federal government's long-term fiscal exposure had risen rapidly. As of last September, he observed, "This translates into a current burden of about $170,000 per American or approximately $440,000 per American household."
Unfortunately, that's not all the bad news. For state and local governments to keep debt at current levels over the period to 2050, he told the Press Club, "State and local tax levels would have to rise immediately and permanently by 16.8 percent, or state and local spending financed by own revenues would have to decrease immediately and permanently by 14.1 per cent."
Date published: 8/16/2007
Most recent reader comments:
Ron Paul has been addressing this head-on at every stop. The problem David Walker cites so conclusively can only be solved with massive cuts in government services and the immediate withdrawal from $1 trillion a year in foreign entanglements. Otherwise, our children will be sleeping in boxes on the street with all of their income servicing the interest accrued by the Fed, which has just pumped tens of billions of fake dollars into the market to further exacerbate the gov't-caused mortgage mess.
Economy Warnings in the wilderness
(posted by
James_McMath
, Sep. 25, 2007 2:41 pm)
It is hard to imagine a message more important than Paul Metzger’s op-ed. If we don’t correct this fiscal problem, the capacity of the federal government will be reduced to a fraction of what it is today, and America will forfeit its role as a super power.
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