April 12, 2006
David Walker calls America's fiscal condition "worse than advertised"
WASHINGTON, D.C. - The federal government is overextending itself in promises, Comptroller General David Walker said at the closing session of the National Conference of State Legislatures' Spring Forum.
Five years ago the nation's total liabilities and unfunded commitments totaled $20.4 trillion. In the past five years, Walker said, that has ballooned to $46 trillion. The comptroller blames Medicare for most of the increase, $8.7 trillion of which is attributable to the new Part D prescription drug benefit. That in itself, Walker said, is more than the nation's accumulated debt since its inception in 1789.
"If that's not imprudent, I don't know what is," Walker said. "The difficulty is that we have not learned the first rule of holes: When you're in a hole, stop digging. The most imprudent thing you can do is to expand entitlement programs. And that's exactly what was done."
Medicare, Medicaid and Social Security are the main programs that are causing the federal fiscal imbalance. In 1965, Walker said, 43 percent of the federal budget was spent on defense. In 2005, that was down to 20 percent. These three health and social service programs have sucked up the balance, and then some.
The 2004-2004 federal budget had a 35 percent negative bottom line, Walker said. Its accrual-based deficit was a record-high $765 billion. And a relatively small portion of that--$100 billion--was spent on Iraq, Afghanistan and homeland security. Medicare spending, by contrast, is growing five times faster than the economy.
Walker called for leaders to step forward and get this nation on track. He recommends:
- Re-imposing pay-as-you-go and spending cap federal budget controls that served the nation well through the 1990s;
- Improving accounting and reporting metrics so that lawmakers and the general public will know how much money must be invested today to deliver on tomorrow's promises; and
- Drastically restructuring Social Security, Medicare and Medicaid.
"The status quo is an unacceptable and unsustainable path," Walker said. "There's no way we can grow our way out of this problem. It's simple math. …
"Is this only a federal problem?" he asked. "The answer is, "no." Bad news flows downhill, to state and local governments, and eventually, to American families."
Marti Harkness, criminal justice director with the Florida Office of Program Policy Analysis and Government Accountability, says this is already happening today, at least at the state level.
"The federal deficit has a direct impact on state finances," Harkness said. "When the federal government can't balance its books, the states have to pick up the tab. Everywhere, we're seeing more and more reductions in federal funds to states."
The latest update to NCSL’s Mandate Monitor shows Congress has shifted close to $75 billion in costs to states over the past three fiscal years. That figure could grow to more than $100 billion if the president’s FY 2007 budget is enacted. New NCSL data shows state budgets are stable for now, but they face their own challenges in the coming years. Nineteen states expect structural imbalances to show themselves by FY '08.
Delaware Representative Donna Stone, NCSL's vice president, heard Walker's call to action. "It is incumbent upon federal and state governments to start working together as partners, and not be at odds with each other, because our constituents are all the same. We need to solve these problems."
NCSL is the bipartisan organization that serves the legislators and staffs of the states, commonwealths and territories. It provides research, technical assistance and opportunities for policymakers to exchange ideas on the most pressing state issues and is an effective and respected advocate for the interests of the states in the American federal system.
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