http://www.cbsnews.com/stories/2007/03/01/60minutes/main2528226.shtml

U.S. Heading For Financial Trouble?
Comptroller Says Medicare Program Endangers Financial Stability

When the stock market soars or plunges, everyone pays attention. But short term results aren't that important to the man you're about to meet. David Walker thinks the biggest economic peril facing the nation is being ignored, and for nearly two years now he has been traveling the country like an Old Testament prophet, urging people to wake up before its too late. Who is David Walker and why should we care?

As correspondent Steve Kroft first reported earlier this year, he is the nation's top accountant, the comptroller general of the United States. He's totaled up our government's income, liabilities, and future obligations and concluded that our current standard of living is unsustainable unless some drastic action is taken. And he's not alone. It's been called the "dirty little secret everyone in Washington knows" – a set of financial truths so inconvenient that most elected officials don't even want to talk about them, which is exactly why David Walker does.

"I would argue that the most serious threat to the United States is not someone hiding in a cave in Afghanistan or Pakistan but our own fiscal irresponsibility," Walker tells Kroft.

David Walker is a prudent man and a highly respected public official. As comptroller general of the United States he runs he Government Accountability Office, the GAO, which audits the government's books and serves as the investigative arm of the U.S. Congress. He has more than 3,000 employees, a budget of a half a billion dollars, and a message he considers urgent.

"I'm going to show you some numbers…they’re all big and they’re all bad," he says.

So bad, that Walker has given up on elected officials and taken his message directly to taxpayers and opinion makers, hoping to shape the debate in the next presidential election.

"You know the American people, I tell you, they are absolutely starved for two things: the truth, and leadership," Walker says.

He calls it a fiscal wake up tour, and he is telling civic groups, university forums and newspaper editorial boards that the U.S. has spent, promised, and borrowed itself into such a deep hole it will be unable to climb out if it doesn’t act now. As Walker sees it, the survival of the republic is at stake.

"What’s going on right now is we’re spending more money than we make…we’re charging it to credit card…and expecting our grandchildren to pay for it. And that’s absolutely outrageous," he told the editorial board of the Seattle Post Intelligencer.

You have heard this before, from Ross Perot 15 years ago. You might have even thought the problem had been solved, when President Clinton announced, "Tonight, I come before you to announce that the federal deficit … will be simply zero."

"Well, those days are gone. We've gone from surpluses to huge deficits and our long range situation is much worse," Walker says.

"President Bush would argue that the economy is in pretty good shape, unemployment is down, the deficit is actually less than expected," Kroft remarks.

"The fact is, is that we don't face an immediate crisis. And, so people say, 'What's the problem?' The answer is, we suffer from a fiscal cancer. It is growing within us. And if we do not treat it, it could have catastrophic consequences for our country," Walker replies.

The cancer, Walker says, are massive entitlement programs we can no longer afford, exacerbated by a demographic glitch that began more than 60 years ago, a dramatic spike in the fertility rate called the "baby boom."

Beginning next year, and for 20 years thereafter, 78 million Americans will become pensioners and medical dependents of the U.S. taxpayer.

"The first baby boomer will reach 62 and be eligible for early retirement of Social Security January 1, 2008. They'll be eligible for Medicare just three years later. And when those boomers start retiring in mass, then that will be a tsunami of spending that could swamp our ship of state if we don't get serious," Walker explains.

To illustrate their impact, he uses a power point presentation to show what would happen in 30 years if the U.S. maintains its current course and fulfills all of the promises politicians have made to the public on things like Social Security and Medicare.

What would happen in 2040 if nothing changes?

"If nothing changes, the federal government's not gonna be able to do much more than pay interest on the mounting debt and some entitlement benefits. It won't have money left for anything else – national defense, homeland security, education, you name it," Walker warns.

Walker says you could eliminate all waste and fraud and the entire Pentagon budget and the long-range financial problem still wouldn't go away, in what's shaping up as an actuarial nightmare.

Part of the problem, Walker acknowledges, is that there won't be enough wage earners to support the benefits of the baby boomers. "But the real problem, Steve, is health care costs. Our health care problem is much more significant than Social Security," he says.

Asked what he means by that, Walker tells Kroft, "By that I mean that the Medicare problem is five times greater than the Social Security problem."

The problem with Medicare, Walker says, is people keep living longer, and medical costs keep rising at twice the rate of inflation. But instead of dealing with the problem, he says, the president and the Congress made things much worse in Dec. 2003, when they expanded the Medicare program to include prescription drug coverage.

"The prescription drug bill was probably the most fiscally irresponsible piece of legislation since the 1960s," Walker argues.

Asked why, Walker says, "Well, because we promise way more than we can afford to keep. Eight trillion dollars added to what was already a 15 to $20 trillion under-funding. We're not being realistic. We can't afford the promises we've already made, much less to be able, piling on top of 'em."

With one stroke of the pen, Walker says, the federal government increased existing Medicare obligations nearly 40 percent over the next 75 years.

"We’d have to have eight trillion dollars today, invested in treasury rates, to deliver on that promise," Walker explains.

Asked how much we actually have, Walker says, "Zip."

So where's that money going to come from?

"Well it's gonna come from additional taxes, or it's gonna come from restructuring these promises, or it's gonna come from cutting other spending," Walker says.

He is not suggesting that the nation do away with Medicare or prescription drug benefits. He does believe the current health care system is way too expensive, and overrated.

"On cost we're number one in the world. We spend 50 percent more of our economy on health care than any nation on earth," he says.

"We have the largest uninsured population of any major industrialized nation. We have above average infant mortality, below average life expectancy, and much higher than average medical error rates for an industrialized nation," Walker points out.

Walker says we have promised almost unlimited healthcare to senior citizens who never see the bills, and the government already is borrowing money to pay them. He says the system is unsustainable.

"It's the number one fiscal challenge for the federal government, it's the number one fiscal challenge for state governments and it's the number one competitive challenge for American business. We're gonna have to dramatically and fundamentally reform our health care system in installments over the next 20 years," Walker tells Kroft.

And if we don't?

"And if we don't, it could bankrupt America," Walker argues.

You’re probably expecting to hear from someone who disagrees with the comptroller general’s numbers, projections, and analysis. But hardly anyone does. He is accompanied on the wake-up tour by economists from the conservative Heritage Foundation, the left-leaning Brookings Institution, and the non-partisan Concord Coalition. The only dissenters seem to be a small minority of economists who believe either that the U.S. can grow its way out of the problem, or that Walker is over-stating it.

"The Wall Street Journal for example calls you 'Chicken Little,' running around saying that the 'sky is falling, the sky is falling,'" Kroft remarks.

"Unfortunately they don't get it. I don't know anybody who has done their homework, has researched history, and who's good at math who would tell you that we can grow our way out of this problem," Walker replies.

Federal Reserve Chairman Ben Bernanke validated much of Walker's take on the situation at congressional hearings this year, and so did ranking Republicans and Democrats on the Senate Budget Committee. Senator Kent Conrad of North Dakota is the chairman.

Sen. Conrad thinks David Walker is "providing an enormous public service."

Asked if he agrees with Walker’s figures and his projections, Sen. Conrad says, "I do. You know, I mean we could always question the precise nature of this projection or that projection. But, that misses the point. The larger story that he is telling is exactly correct."

Conrad acknowledges that most people in Washington are aware how bad the situation is. "They know in large measure here, Republicans and Democrats, that we are on a course that doesn't add up," the senator tells Kroft.

"Why doesn't somebody do something about it?" Kroft asks.

"Because it's always easier not to. 'Cause it's always easier to defer, to kick the can down the road to avoid making choices. You know, you get in trouble in politics when you make choices," Sen. Conrad says.

Asked if he thinks taxes should be raised, the senator says, "I believe first of all, we need more revenue. We need to be tough on spending. And we need to reform the entitlement programs … we need to do all of it."

But he admits he doesn't think there's a consensus for raising taxes.

"Any politician who tells you that we can solve our problem without reforming Social Security, Medicare, and Medicaid is not telling you the truth," Walker told an audience at the University of Denver.

Over the next year, the nation’s top accountant will be traveling to the early primary states, telling voters that we need to begin raising taxes or government revenues and put a cap on federal spending if we want to maintain our economic security and standard of living.

"If you tell them the truth, if you give them the facts, if you explain this in terms of not just numbers but values and people, they will get it and empower their elected officials to make tough choices," Walker argues.

Asked if he knows any politicians willing to raise taxes or cut back benefits, Walker says, "I don't know politicians that like to raise taxes. I don't know politicians that like to cut spending, but I think what we have to recognize is this is not just about numbers. We are mortgaging the future of our children and grandchildren at record rates, and that is not only an issue of fiscal irresponsibility, it's an issue of immorality."

so why not...ahem.... CUT SPENDING??? Are there not areas they can behave more efficiently to save cash?

The prescription drug thing that Bush put in was retarded. I'm glad the comptroller is speaking out on it.


Elected officials are supposed to make tough decisions. There are plenty of financial moves they can make to restructure things, without cutting social programs and hacking out the military budget.

Hell start with closing the Federal Department of Education.

Get back on the gold standard.

I am fiscally responsible and hate the idea of paying more taxes to cover the butts of the irresponsible.

yep

What a selfish person you must be.

You must know me so well. Maybe I should buy a bigger house I can't afford, buy a big screen for each room and put it on my credit card. Oh yeah, I also need a new car every 2 years, so I'll just get a 6 year loan for that each time I buy one. I'll be too busy to make meals at home, because I'll be at the lake on my speedboat, so I will need to eat out every night. In a few years when I actually need to start making payments on all my loans that I can't afford, I'll just let the un-selfish people like you bail me out. I appreciate it!

I was being sarcastic, I share your views. My above response was how some people reacted to any opposition to universal healthcare. Apparently not wanting to pay for other people's lives makes you selfish.

My apologies. Responses like that are common and annoying on this board. I agree with you on the healthcare issue too.

http://www.iht.com/articles/2007/08/17/opinion/edvarzi.php

AMERICA'S HANDICAP
A debt culture gone awry

By Hamid Varzi
Published: August 17, 2007

TEHRAN:

The U.S. economy, once the envy of the world, is now viewed across the globe with suspicion. America has become shackled by an immovable mountain of debt that endangers its prosperity and threatens to bring the rest of the world economy crashing down with it.

The ongoing sub-prime mortgage crisis, a result of irresponsible lending policies designed to generate commissions for unscrupulous brokers, presages far deeper problems in a U.S. economy that is beginning to resemble a giant smoke-and-mirrors Ponzi scheme. And this has not been lost on the rest of the world.

This new reality has had unfortunate side effects that go beyond economics. As a banker working in the heart of the Muslim world, I have been amazed by the depth and breadth of anti-Americanism, even among U.S. allies, manifested in reactions ranging from fierce anger to stoic fatalism. Muslims outside the United States interpret America's policies in the Middle East not as an effort to spread democracy but as a blatant neocolonialist attempt to solve its economic problems by force. Arabs and Persians alike argue that America's fiscal irresponsibility has forced the nation to seek solutions through military aggression.

Many believe that America's misguided adventure in Iraq was a desperate attempt to capture both a reliable source of cheap oil and a major export market for the United States.

The United States borrows a whopping $2.5 billion daily from abroad to service its burgeoning debt. In order to continue borrowing at reasonable interest rates America needs to retain credibility with its overseas creditors, especially Far Eastern nations running huge trade surpluses. A cessation of foreign lending would force the Fed to raise interest rates to attract money, precipitating a collapse of the already weak housing market and pushing the economy into recession.

This is why the Chinese, in particular, have threatened to retaliate against proposed U.S. trade sanctions by reducing their $1.3 trillion in dollar holdings.

The U.S. debt situation is so grave that the Chinese would not even need to "dump dollars" to precipitate a meltdown but could simply refuse to extend further credit: They could cease purchasing additional Treasury Bonds and Treasury Bills, without selling any excess inventory. China has the far stronger hand, because a run on the dollar would merely reduce China's gigantic cash surplus while increasing America's debt burden to astronomical levels.

U.S. debt affects all nations, but in surprisingly different ways: Third world farmers suffer from the effects of gigantic U.S. farm subsidies aimed at reducing the trade deficit, while Russia has actually profited from America's lack of discipline.

Flush with funds generated from a decade of trade and account surpluses, Russia views U.S. sensitivity to its expansionist energy policy as a response to America's own failure to reduce energy waste and exploit alternative energy sources when it had the opportunity to do so. In sum, American economic decadence has become a source of Russian strength.

America's supply-side economists argue that there is nothing wrong with going into debt, but this is valid only as long as a nation and its consumers are gaining something in return.

What have Americans gained from their nation's mountain of debt? A crumbling infrastructure, a manufacturing base that has declined 60 percent since World War II, a rise in the wealth gap, the lowest consumer-savings rate since the depths of the Great Depression, 50 million Americans without health insurance, an educational system in decline and a shrinking dollar that makes foreign travel a luxury.

The best cars, the best bridges and highways, the fastest trains and the tallest buildings are all to be found outside America's borders. Supply-siders ignore the crucial distinction between, on the one hand, debt employed as an investment vehicle to enhance competitiveness and, on the other, debt used to pay off current expenses and to create even more debt.

The bottom line is that America is awash in red ink and seeks the wrong solutions to its debt problems. A return to fiscal responsibility would make America far stronger, both domestically and internationally, than would a continuation of current policies that falsely project strength through idle protectionist threats and failed military aggression.

Current tensions between the United States and the rest of the world will continue as long as America's military bark is louder than its economic bite.

A solution to the U.S. debt problem requires radical measures, including: the elimination of corporate tax loopholes, a reversal of tax breaks for the ultra-rich, a bipartisan campaign to eliminate budget "pork," imposition of stringent limits on corporate debt and speculative lending, a vast reduction in military expenditure and, finally, an additional 50 cent per gallon gasoline tax that would slash the federal deficit, curtail energy waste and spur technological breakthroughs.

Let us hope America heeds the warnings, dispenses with junk-food economics and embraces a crucial diet of fiscal discipline. It remains to be seen, however, whether America's political leaders have the courage to instigate such reforms, and whether Congress is finally willing to do something for the future of ordinary, hard-working Americans.

While I agree with your sentiment that its damn near retarded tha ti should have to give my money to help this who are irresponisbile, at some point, we are all going to be held accountable for the country, as a whole, actions. We will end up indebted to other countries that wouldnt mind blowing us out of the water, perhaps, who knows.

At some point it affects us all. The problem with this country is that all of our problems stem from little mistakes we've made over the years. Maybe our health care sucks, but we as americans are unhealthy as shit cause in america "everyone is entitled to do whtaever the fuck they want". Eat themselves to death, sit on their ass on the computer, fast food restauratns everywhere....fixing healthcare might fix a few problems, but its not goint to fix THE problem.

A whole lifestyle change HAS to take place, good luck getting a bunch of single minded americans to do that though, cause this is the land of the free, and im free to do whatever i please.

We are not a community any longer.

Pretty much.

"Don't be irresponsible but be to free consume all you want, and do what you want." Dumbass philosophy.

Better than having Washington decide what is responsible and what isn't.

The thing is, a lot of what you're saying doesn't diverge with what I believe. But ultimately I think what you're missing is that there's a reason we pay taxes. Surely the federal government can change with the times and stop paying for a lot other peoples' living, but that's not an issue. You see, when you pay taxes, you're paying the salaries of other people in the FDA to make sure you aren't getting some poisoned shit that accidently passes into the market (like in China which has no regulation). You pay the EPA to (try to) punish a mining company that dumps a bunch of arsenic into a river. You help pay the tuition of intelligent people who are broke and can't afford to go to college, and the state sets aside a special reserve made just for them. You pay for the police and fire departments to ensure your safety. You pay for public parkland that keeps citizens centered in a community, and happy. You pay so conditions in factories and other places of business are not substandard and dangerous. You pay the assholes at the state DMV to keep half-blind grandmas off the road. And if we're busy funding some pointless imperialistic war, it can't pay for any of this.

You want the market to solve all of this? The market solves all of this, and lots of people DIE. If a state-behmoth like the Chinese Communist party can't even keep track of what type of products it's citizens are getting, out of sheer greed, imagine what happens when there's no state at all. That's your consumer utopia.

But no, go right ahead and take an extreme ideological position and ask for revolution and anarchy. It goes beyond mere handouts. Stop paying taxes and you stop getting FDA-inspected food. Stop getting free assistance from the fire department. Let a business succeed or fail based on the way it treats it's employees - afterall let people simply stop doing business with them if their workers work for nothing, in filth. Let the already established upper classes pay to go to schools while everyone else clamors for the resources to afford it. There's no fair competition when they already have a head start on everything. And I'm going to forget about what the word good means and a universal consciousness, and instead indulge in materialistic junk.

You want to decentralize a strong and pragmatic democratic government, you have fiefdoms after Rome.

what is with me and the edit button

And you pay for a soil engineer to determine if the amount of dust in the desert could be reduced, and you pay for a bridge that four people a week are going to use, and you pay for a farmer to stop growing food, and you pay for an arts center that nobody is going to go to, and you pay for a clerk to sit around stamping paperwork all day, and you pay for surveillance programs that will be used to spy on you, and... you get my drift.

Of the things you mentioned, only two are probably worth the amount of money we spend (police/fire, education), and the others, though they serve a purpose, could be scaled back considerably to a reasonable level.

Im all for paying taxes. However, what the fuck is our tax money going to? Im still shitload in debt from college, our roads are obviously failing, our food is killing us, and now paying for a war that is leading to more terror...

In a nutshell, broad generalizations, sure but...

raise taxes and lets put them to good use and pay off our debts. Our society is so far behind and so fucked it seems impossible to steer such a large ship into a new direction in time...