GAO chief reprises warning of unsustainable deficits

Humming the same tune he's been singing in a tour of the nation, Government Accountability Office chief David Walker warned senators Tuesday that the federal budget is spiraling out of control and that little time remains to steer it to safer ground. Driven by a combination of soaring healthcare costs and the demographic swell of baby boomers on the cusp of retirement, Walker told the Senate Budget Committee that "the federal budget is on an imprudent and unsustainable path" and that "the passage of time only serves to worsen this situation."

Congress and the next president, he said, have about five years to get a firm grip on the problem or burden taxpayers with huge tax hikes and beneficiaries of federal programs with steep cuts in aid. As of the start of this year, Walker said, the nation's debt was $9 trillion -- up from $5.8 trillion in 2001.

But the structural debt at the current rate of growth and spending in federal entitlements is $53 trillion, assuming that "future promised and funded Social Security and Medicare benefits, veterans health care, and a range of other commitments and contingencies" are fulfilled. He said: "One way to think about it is this: Imagine we decided to put aside and invest today enough to cover these promises tomorrow. It would take approximately $455,000 per American household -- or $175,000 for every man, woman and child in the United States."

Although the cost of the wars in Iraq and Afghanistan, along with tax cuts that have cut into revenues, are contributing to the rise of indebtedness, Walker acknowledged, the chief culprit is healthcare spending for the poor, elderly and veterans. "If there is one thing that could bankrupt America," Walker said, "it's rising healthcare costs. We can't afford to keep writing a blank check for health care." Year after year for the past 40 years, he went on, the cost of health care has outstripped inflation by 2 percentage points a year.

Walker praised Senate Budget Chairman Kent Conrad, D-N.D., and ranking member Judd Gregg, R-N.H., for their proposal to create a bipartisan task force on entitlements, composed of congressional and administration members, to come up with a plan to address the matter.

"I intend to bring this to a markup this year," Conrad said. "We have got to do something, or this will bedevil the next administration unless we face up to it."

Calling the runaway growth in healthcare spending the equivalent of a "fiscal meltdown," Gregg said the task force would provide a "fair and open and bipartisan procedure, its recommendations would require an up-or-down vote on the floor, and all entitlements and taxes would be on the table.... We need to pass on to our children a viable nation that they can afford." Walker also warned the committee that the creditor nations in Asia and Europe that are financing the United States' debt, may not be so eager to do so as the debt mounts. At the least, he said, they will start charging higher interest rates that will make it more difficult to achieve robust economic growth and compete in world markets.