Alarms from Uncle Sam's Auditor

David Walker, head of the U.S. General Accounting Office, assails the White House and Congress for spending with no heed for the future

With the Bush Administration forecasting a $455 billion federal deficit for this fiscal year, Congress' top budgetary watchdog is howling. Comptroller General David M. Walker, head of the U.S. General Accounting Office, is worried that runaway red ink could push the U.S. economy into truly dangerous territory over the next few decades.

It's not just war, tax cuts, and a third year of a faltering economy that has government overseers nervous. Walker wants Washington policymakers to recognize that, if the costs of Medicare, Medicaid, and Social Security aren't brought under control, and the interest on public debt continues to grow, government spending as a percentage of the gross domestic product could explode -- from below 20% today to 30% by 2015 and more than 40% by 2050. The debt could saddle future generations with huge new tax burdens to keep Uncle Sam solvent.

Walker, who was appointed to his 15-year post by the Republican-controlled Congress, recently visited BusinessWeek's Washington bureau to sound the alarm. Here are edited excerpts from his discussion with bureau correspondents and editors:

Q: Won't economic growth help offset these projections? If you added a point more of economic growth, then what would happen to the trend line?

A:

It obviously helps [to cut the ratio of government spending to overall economic output], but it does not solve the long-range problems. We want to do whatever we can to stimulate more economic growth. That is everybody's interest. At the same time, Washington suffers from myopia, near-sightedness, tunnel vision right now.

We have a real stewardship issue. What will be the impact on this generation and the generation after that? They're going to end up paying twice if we don't start making some tough choices.

Q: Have you tried to make some kind of estimate of the long-term cost of a Medicare drug benefit?

A:

Everyone assumes that the spending baseline is O.K. [for Medicare, and Congress is] just adding on to the base. In fact, when you take Medicare Part A, there's already a $5.9 trillion dollar unfunded obligation that we haven't figured out how to address. [The changes proposed by Congress] target the benefit more to the needy. Yet, it's still [an additional] $400 billion dollars over 10 years.

We have to start asking ourselves: When we have a major legislative proposal, is it going to end up involving more in expenditures [beyond] 10 years? If the impact on the budget is getting worse after the 10-year horizon, then we need to figure out a mechanism whereby the Congressional Budget Office (CBO) can [cost it out] before the item is passed. [Lawmakers] are doing things that are affordable in the short term but not sustainable in the long term.

Q: Is anyone listening? Have you talked to the Administration?

A:

I have a speech coming up at the National Press Club in September that's designed to be a wake-up call. This is a real issue and needs to be a part of the debate in the upcoming election. It's not a partisan issue.

Q: But it is a partisan issue, isn't it?

A:

Different people can view it different ways. We're equal-opportunity analysts [at the GAO], and we're looking at the bottom line -- the difference between revenues and spending. Some people will say the answer lies in cutting federal spending. Other people will say "let's raise revenues." The political reality over time is that they might do both.

But [making those decisions] isn't my job. We [at the GAO] aren't in the business of saying what the policy is. We're in the business of providing a reasonable degree of transparency and the appropriate degree of accountability for what the real situation is.

I don't want to start competing with our sister agencies. I'm working with [the CBO] to try to figure how we can work together to shine additional light on this problem. My personal view is it would be best for the CBO to be the...scorekeeper for the budget. It would be best for us to push to create more transparency with things like bonds [to cover government debt] and the trust funds for Social Security and Medicare.

The government got the money [for these trust funds], and the government [has already] spent the money. How come this isn't a liability on the balance sheet? It isn't. We need to increase transparency.

Q: What do congressional leaders think of your efforts to sound the alarm? Do lawmakers really want to hear this?

A:

I have testified on several occasions, both in the House and Senate, about this imbalance. We need a reality check. I want to get it on the radar screen so it gets in public discussion and debate. It's not getting addressed.

Q: What about going to Corporate America, economists, and academics?

A:

We at the GAO have tried to do that in the last several years, to increase our partnerships, not only with audit institutes but also with our counterparts at the state and local auditor levels, as well as with good government organizations. We're trying to put some of the current discussions and debates in a broader context. It's just not happening.

Younger adults -- Generation X and Y -- have to get engaged. They have a lot at stake. Especially with the social insurance programs. If we can address the funding problems early enough, Generation X and Y will have time to deal with the changes.

Edited by Alicia Henry