USA IS going bankrupt!!
GAO chief warns economic disaster looms
By MATT CRENSON, Associated Press Oct 28, 20062 yrs before recession hit
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
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
On 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
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
"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
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
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.
AMERICA WILL OWE THE RANCH!
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
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. (unless you have a fixed rate mortgage!)
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."
Copyright © 2006 The Associated Press.
WHAT CAN WE DO?
1.) ORGANIZE TO NAG AUTHORITIES. Create a living room group by calling it a barbecue party and making it a hoot. Prepare a speaker to knock guests off their feet after a few pina coladas! Demand fiscal awareness by Congress with a post-party mail campaign. Send this very article here to your congressman's email or to his local office by fax or mail. Ride civic authorities (Mayor's office,) also with post-party guests doing letters, phone campaigns. Teach party guests to do TALK SHOW dial ups on subject of CITY GRAFT.
2.) Prepare for the worst. Create a powerfully popular up and running cottage industry that services or sells what people really need. We can control what money does (or more important, DOESN'T DO,) if we own the corporation and it's sub rasa.
3.) Earn extra $$ so you can have an isolated cabin one gas tank away from the city that is OFF GRID. Because when the"fit hits the shan", the average U.S. city will be mayhem. Your poodle could end up as tacos. Get your daughters OUT OF TOWN! Who knows what they could end up as!
4.) MOST IMPORTANT CONCEPTS TO ENGRAVE ON YOUR MIND: Create a world where your MONEY and that of other citizens of your city actually STAYS IN the COMMUNITY. We don't ship our cash to japan or china! We don't buy walmart which has JAP/ CHINESE GOODS. The locals use ithaca dollars with ONE ANOTHER. COmmunity can take the buffeting of a recession or outright DEPRESESSION.
5.) FIGURE OUT WHO YOU NEED in YOUR UNIVERSE. This concept is important. You may no longer be able to eat at GRANDE CHAIN MERCADO without plastic. You may have to use the FOOD CO-OP or LITTLE ETHNIC GROCER who will do ITHACA DOLLARS with you. SET UP TIES with your cash/food & important service-universe and its dwellers now.
6.) GETTING OFF GRID at your city home can mean solar panels, a generator and a lot of saving tallow from beef to make candles. If I could bury trees on fire (like my CUBAN neighbor Don Miguel did,) leaving it smoking underground for a week, I'd have enough charcoal for a year of cooking but my property abuts another one and that guy smoked up my house for that week!. If I could light my gas stove some other way, well that one's hopeless. Wild ideas like 1 liter coke bottles on the roof, on a pipe grid to heat water for bathing, laundry? It's doable. Mickey Mouse up some concepts!
7.) LAND- The only thing that holds its value in an INFLATIONARY DEPRESSION is land. Have paid up food growing land. Ted Turner just bought 2 1/2 million acres in l0 states, and as much again in Patagonia, the Canada of South America. Bush bought 100thousand acres in PARAGUAY. Nazi stronghold. But you have to have a fixed rate mortgage! And plant it to an orchard, vegie garden.
8.) Start a GLOBAL BUSINESS from your cabin in the mountains. Read THE NEW MODEL FOR BUSINESS.
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