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The U.S. is in financial trouble

By Jack Ward
web posted January 7, 2008

The U.S. Commerce Department recently reported that the Gross Domestic Product (GDP) has expanded at a 4.9 per cent annual rate in the third quarter of 2007. That is the fastest rate of growth in the last four years. For those that continually dispense gloom and doom about the U.S. economy – that is great economic news. The U.S. private sector is doing its job.

Despite this good economic news, David Walker, the Comptroller of the United States and head of the Government Accountability Office (GAO), has warned us that the current level of federal spending is unsustainable unless some drastic action is taken. As the U.S. top auditor, Walker has added up all the federal government's income and compared it to all our liabilities and future obligations such as Social Security, Medicare etc. Those liabilities and future obligations exceed $53 trillion. He has concluded that at the current level of spending, the U.S. is headed toward bankruptcy. The dirty little secret is that our political representatives know it.

Walker isn't a partisan political hack. He is a highly respected public official. When he speaks people listen. But when he began to send out warning signals that the U.S. is facing economic peril, our representatives ignored him. For over two years Walker has been sounding the alarm but our representatives are more interested in passing out entitlements, earmarks, and other assorted pork rather than implementing fiscal disciple. So Walker has given up on Congress and began to take his fiscal wake up message to the public.

The fiscal problem occurred several decades ago when our representatives began to use creative accounting. To make the numbers look better they take spending items like Social Security and Medicare off budget. That is like ignoring your credit card debt when you are asked to reveal your financial liabilities. An Office of Management and Budget (OMB) study revealed that the federal deficit for 2007 would have been 69.2 percent higher if the government used the same accounting methods that private companies are required to use. But, the private sector isn't allowed to use the same budget shenanigans the federal government uses. So once again we see that our representatives exempt themselves from the laws they expect us to live by.

Of course, the Progressive's solution is to cut military spending. But Walker points out that you could eliminate the entire Pentagon budget, all the waste and fraud in the federal government, and the long range problem would remain. The problem is an actuarial nightmare. All of us have heard of the pending Social Security crisis. But as Walker points out "…the real problem, is health care costs. Our health care problem is much more significant than Social Security." "The Medicare problem is five times greater than the Social Security problem." All three are driven by the aging of the U.S. population.

But the reality of these massive health care entitlements hasn't registered with many of the presidential candidates. All of the Democrats have a version of ‘universal healthcare'. Any of these universal healthcare plans will only exacerbate the pending fiscal crisis. Obligating the federal government to pay for unlimited healthcare is unsustainable.

The conservative Heritage Foundation, the liberal Brookings Institution, and the non-partisan Concord Coalition all agree with Walker's dire prediction. Senate Budget Committee Chairman Kent Conrad (D-N.D.) also agrees with Walker's predictions and acknowledged that most in Washington are aware of the situation. When asked by Steve Kroft of CBS why congress doesn't do something about it, Conrad said, "Cause it's always easier to defer, to kick the can down the road to avoid making choices." This, my friends, is the attitude of too many of our representatives. Rather than face difficult fiscal decisions, our representatives take the easy way out and continue to pass out pork to ‘buy' votes.

Walker reminds us that… "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." Remember that when you vote. ESR

© 2008 Jack Ward

 

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