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Heavy on numbers, short on sweet talk

The United States' accountant i n c hief tours the country, warning that government is on course toward economic disaster.

By Associated PRess
Published October 29, 2006

AUSTIN, Texas - 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 changed."

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 federal government.

He's airing a dirty little secret that everyone in Washington knows, or at least should. The vast majority of economists and budget analysts agree: The country is on course toward economic disaster if nothing is done to correct it.

Walker has committed to touring the nation through the 2008 elections, dubbing his campaign the fiscal wakeup tour.

To show that the looming fiscal crisis is not a partisan issue, he brings along economists and budget analysts from across the political spectrum.

Their basic message is this: If the U.S. 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.

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.

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 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 Medicare. Medicaid and Medicare have grown more expensive as health care costs have increased. And the first baby boomers become eligible for Social Security in 2008 and for Medicare in 2011.

Why is the country so fiscally unprepared for the next century? 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.

But 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.

[Last modified October 29, 2006, 01:08:43]