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A Fiscal ‘Tsunami’

Jeffrey Bartholet
Newsweek
Wednesday November 14, 2007

David Walker can sound like a modern-day prophet of doom, warning about the gross irresponsibility of his countrymen and the disaster that awaits them if nothing is done. Put a scraggly beard on him, replace the neatly pressed suit with a tattered frock, and you could drop a coin in his cup and walk on by. But Walker is frighteningly sane. A former partner at Arthur Anderson LLP, he has been the comptroller general of the United States and head of the Government Accountability Office since he was appointed to a 15-year term in 1998. The GAO is a nonpartisan agency that investigates, on behalf of Congress, how the government is performing. It then issues thoroughly researched and often critical reviews. If the federal government is not spending taxpayers' money effectively, it's Walker's job to holler. He's hollering now--mainly about a severe fiscal crisis that will strike the United States as baby boomers reach retirement age. His fears are supported by economists from the left-leaning Brookings Institution and the conservative Heritage Foundation. NEWSWEEK's Jeffrey Bartholet spoke to Walker at his office in downtown Washington. Excerpts:

NEWSWEEK: You have likened the situation here in the United States to the fall of the Roman Republic. Do you foresee the decline and fall of the United States?
David Walker: I don't believe that the United States will decline and fall, but I think it's important that we wake up and recognize that we are seeing some of the same warning signs that existed with the Roman Republic. There are many people who think the United States is the longest-standing republic in the history of mankind, and that's not true. Rome lasted over double the period of time that we have existed so far, and it is important that we make tough choices to make sure that we are the first republic to stand the test of time.

So what are the changes [that are needed], in a nutshell?
To a great extent, we have a situation where people are too focused on today and not taking enough steps to prepare for a better tomorrow. In the fiscal realm, people have a false sense of security, because our deficits have come down for three years in a row, and they think we are on the right path, when in reality the structural imbalance between our long-range commitments and our projected revenues has continued to grow every year. As a result, we don't have the sense of urgency that is needed in order to make prudent changes, sooner rather than later, and that is one of the reasons that I have been speaking out.

Let me ask you specifically about Social Security. Tax-paying Americans receive statements from the government telling them how much they should expect to receive in Social Security when they retire. Are those statements a fiction?
No, they're not a fiction, but there is also a footnote in those statements that says that starting in about 2041, absent reform, Social Security only has enough revenues to pay about 73 cents of every dollar of promised benefits. So, no, they are not a fiction, but footnotes are an integral part of statements, and one needs to read the footnotes. The ultimate irony is that Social Security is the easiest problem that we have to fix.

Sum up for me the fiscal situation with Medicare and Medicaid. How long will those programs be sustainable?
Well, they're not sustainable right now. Let me just give you some statistics to put it in perspective. Social Security is underfunded [meaning there's a gap between dedicated funding and benefits] by $6 trillion in current-dollar terms. Medicare is underfunded by over $32 trillion in current-dollar terms, of which the Medicare prescription-drug benefit is underfunded by $8 trillion.

When people see these statistics, eyes tend to glaze over. There is not a sense of urgency out there in the land. So why should people feel a sense of urgency? Politicians aren't expressing a sense of urgency. No one feels that the crunch is coming tomorrow.
We have a failure of leadership in America, and it is a bipartisan problem.

Full article here.

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