From the April 2006 Idaho Observer:
Congress responds to looming economic disaster by raising debt ceiling (again)
The U.S. government is no longer functioning by any standard of fiscal reality. It is spending "credit" and its only true spending limits are the tolerance of the creditors—the international banking cartel—and the tacit approval of the American people. The following article, from the comptroller general of the United States, should awaken Americans to a stark economic truth: We are just as responsible for the looming crisis as the fiscally-irresponsible D.C. politicians. The following article is humbling in content and the source should be carefully considered. David Walker began his 15-year term as comptroller general of the United States in 1998 and is head of the Government Accountability Office—one of the only federal agencies currently functioning in the public interest.
by David M. Walker
The four deficits confronting U.S.
Last month, for the fourth time in five years, Congress raised the federal debt ceiling—this time to nearly $9 trillion.
Although this stop-gap measure was necessary to prevent an unprecedented default on U.S. Treasury notes, it obscures the fact that almost nothing is being done to address the underlying causes of our nation’s mounting fiscal woes.
The United States now confronts not one but four interrelated deficits with serious implications for our role in the world and our standard of living here at home.
Deficit 1: The first is our federal budget deficit, which was about $318 billion on a cash basis (that is cash outlays vs. revenues) and $760 billion on an accrual basis (including future payments already promised) in 2005.
The accrued deficit is at an all-time high, even though only about $100 billion of this relates to the global war on terrorism or incremental homeland security costs.
More troubling are the federal government’s long-term liabilities and unfunded commitments, which now exceed $46 trillion, up from $20 trillion just five years ago. These include future promises for Social Security and Medicare benefits, costly environmental cleanups and potential payouts by entities like the National Flood Insurance Program.
This translates into a burden of about $375,000 for every full-time worker in this country.
Deficit 2: The second deficit is our savings deficit. Last year, for the first time since 1933, our annual personal savings rate was negative. Clearly, many Americans, like their government, are living beyond their means and are deeply in debt.
This trend is particularly alarming in an aging society such as our own, because Americans who save more will certainly live better in retirement.
So who has been underwriting America’s recent spending spree? Foreign investors. This brings me to America’s third deficit—our overall balance-of-payments deficit.
Deficit 3: The United States is simply spending more than it is producing. U.S. trade deficits hit a record high of $726 billion in 2005, twice what it was just four years earlier.
Our "salvation" has been a flood of investment money coming from overseas. Thanks to the relatively high saving rate in China, Japan, South Korea and elsewhere, it has been relatively cheap for America to borrow.
The catch is that we are slowly ceding control of our future to these foreign investors, some of whom may not share our nation’s long-term strategic interests.
Imagine what would happen to interest rates on Treasury securities if these investors suddenly decided to buy fewer of these securities or, worse yet, started to sell off their U.S. holdings. Interest rates would rise dramatically.
Deficit 4: Finally, there is America’s fourth deficit, and it is perhaps the most sobering of all. This is our leadership deficit. Too few key policymakers have been willing to step forward, speak out and make the hard choices needed to put our fiscal house in order.
At both ends of Pennsylvania Avenue and on both sides of the political aisle, there have been pitifully few calls for meaningful changes or shared sacrifice. Instead, the government’s continuing lack of fiscal discipline and business-as-usual attitude has made our long-term situation even worse.
Among other things, we need to impose meaningful budget controls, undertake a top-to-bottom review of federal programs in light of current societal needs, and face up to the challenge of entitlement reform.
At the same time, Wall Street and the American business community have not been as vocal on this issue as they should be.
The private sector, however, really does have a dog in this fight, because if the government keeps on as it has, companies are going to pay a price, including higher taxes and interest rates and slower economic growth.
What we have going are the elements of a perfect storm—a potent mix of ignorance, apathy and inaction in all sectors of American society. If we continue on our present course, a fiscal crisis is not a matter of "if" but "when."
The time for action is now.
Fiscal Wake-Up Tour
The nonpartisan Concord Coalition is organizing a series of forums around the country to focus attention on our nation’s daunting long-term fiscal challenges. David Walker is among the speaker scheduled for an April 24 event in Kansas City. Those interested in entertaining the possibility of sponsoring a Wake Up event in their area can contact Tristan Cohen at 1-(888) 333-4248 or contact the Concord Coalition online at www.concordcoalition.org
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