The Next Inconvenient Truth

Ten years ago, few leaders in business or politics talked much about global warming, let alone acted. Yet following the flurry of publicity and debate around the release of An Inconvenient Truth last year, much has changed. An ABC News poll taken in April showed that a third of Americans think global warming is the world's largest environmental problem, representing a two fold increase from 2006.

For many, including skeptics, the most compelling part of Inconvenient Truth occurred when Al Gore cited that nearly 1,000 peer-reviewed scientific studies conducted between 1993 and 2003 showed, without exception, that the earth's temperature was rising due to human activity. Today politicians and corporations alike have reacted by becoming increasingly "green friendly." Growing real and perceived scientific consensus helped shift public opinion, causing political and business leaders to take heed.

But, for those among us who would like to lead rather than react, what will be the next "inconvenient truth"? One person has a compelling answer.

David Walker, the Comptroller General of the United States, believes that the nation is headed for a fiscal crisis of potentially catastrophic proportions. As head of the Government Accounting Office (GAO), Walker is the country's top accountant, an appointed, nonpartisan position.

David Walker's truth is spelled out in the numbers. Most glaring, while the national debt is currently roughly $9.0 trillion, that figure does not include future obligations for Social Security, Medicare, and Medicaid.

According to Walker, over the next 75 years the gap between what has been promised for these entitlement programs and how much in dedicated revenue is likely to be received (such as through payroll taxes and premiums) is a mind-boggling $38.8 trillion. That figure, which Walker calls "implicit exposures," represents the amount money we would need today, invested at Treasury rates, to pay for future entitlements. For perspective, that gap represents a burden of over $128,000 for every man, woman, and child in the United States and total national household net worth is $53.3 trillion, so the magnitude is very significant.

Unlike the controversial debate over global warming, leaders and think-tanks in Washington are not questioning David Walker's numbers in any significant way. In fact, prominent think tanks ranging from the left-leaning Brookings Institute to the conservative Heritage Foundation use the same numbers and representatives from both groups acknowledge that the problem is getting worse.

The $38.8 trillion implicit exposures have grown 197% since 2000, when the GAO projected implicit exposures of $13.0 trillion. Of that $25.8 trillion increase, $7.9 trillion can be attributed to the 2006 prescription drug program, while the rest is driven by demographic trends and the compounding effects of debt - another price of inaction.

Taken together, the unfunded national commitments, including the national debt, future obligations on entitlement programs, and other commitments such as pensions, that fiscal exposures are $50.5 trillion or $170,000 for every man, woman, and child. The United States fiscal inconvenient truth should feel especially weighty for those in Generation X, Generation Y, and the generations to follow because according to the GAO, the total fiscal burden over the next 75 years represents $400,000 for every full-time worker in the United States and $440,000 per household.

Walker warns, "If we [the United States] were a company, we would be out of business."

Leading Democrats and Republicans alike also admit that a crisis is brewing, but political leaders are hesitant to act especially without public opinion pressure. As the truth becomes known, all of that will change.

There are some notable exceptions. Senators Kent Conrad (D-ND) and Judd Gregg (R-NH), who have courageous and principled voices on these issues, have a proposal (S. 2063) to create a Bipartisan Task Force for Responsible Fiscal Action to address the nation's long-term fiscal challenges.

These inconvenient truths, like global warming, are increasingly becoming moral issues, especially since future scenarios increasingly suggest we are headed for large-scale crisis and generational strife. Through actions and commitments large and small, we have the chance to act proactively before it is too late. Baby Boomers still have time to redeem their legacy for leaving behind a country that is better off while working with younger generations who must take responsibility for their future. We can each lead in our own ways to make this truth known today and support and encourage those in Washington who are courageous enough to act, lest we wait ten years for history to repeat.

Additional information on these issues can be found through the Government Accounting Office website: www.gao.gov

Follow Peter Sims on Twitter: www.twitter.com/petersims

Comments

[drblack]

First of all there needs to be a fund with real money in it for these things.
Second we have to cut back...End the "War On Some Drugs" and you save at least a trillion a year.
We must also have a more efficient military. the waste is incredible!!!! The armed forces has to cut WAY back on private contractors.

[olda]

social sec. will stop running a surplus around 2040 ,medicare and the gov. drug program will need more $- reform. Please leave social sec out of the total budget problem the right wing is just using that to avoid paying it back.Goverment over spending-war etc. and tax cuts got us here don't be fooled by that right wing trick to steal social sec funds to pay for tax cuts for the top few % trickle down=pissed on.

[NCGigi]

Oh, please. Does anyone really think the "tax-free" 401k and IRA accounts will not be taxed when they are withdrawn? These accounts will be taxed like crazy, at high, high, rates. And there's nothing to stop that from happening. Pre-tax when you put it in, taxable when you take it out.
This tax burden will be shifted to the middle class by looting those accounts. That's why the Roth IRA/401k was created. These accounts are just sitting ducks. Pay off your mortgage and plant a garden; the money isn't coming.

[paddymick]

Accountants are so silly. They like to equate financial catastrophes with physical/e­vironmenta­l ones. Only one problem--they aren't equal. Yes, we are looking at an unimaginable shortfall for retirement and medical needs. The government has severely mismanaged our funds for decades and decades. So what happens when/if these funds run dry? People starve. People with medical requirements die. What does it do to the environment? Nothing. What does it do to the next generation of human beings? Nothing. While it may be catastrophic for the INDIVIDUALS involved (and believe me, that number will be high), it does not represent any threat to the mankind or to our life on this planet such as those predicted due to global warming or its associated risks.

A financial crisis does not measure up to a physical/e­nvironment­al one for that simple reason, there is no lasting effect. The people who were short-changed will pass on and those left are unaffected.

Apples and oranges. No. More like apples and lincoln logs.

[swift goat pet for truth]

Simply print money to cover the shortage. That is what the Weimar Republic did.

And, hey, the US voters agreed on this the last 8 years. Me? I'm looking into bailing this country while my money is still worth something.

[madprophet]

Oh, and that 9 trillion is your federal debt. How much state debt is there?

I can't get a read on most states, but did find one: NY State is projected to have a total debt by year end of 52 billion. A pittance compared to 9 trillion. But that is one state, alebit a large one.

http://www.osc.state.ny.us/debt/debtfacts.htm

Congratulations Americans. By electing Bush twice, or allowing him to steal the election, (whatever floats your boat), you have brought this catastrophe upon yourselves.

And if Cheney gets his way, you are going to attack Iran, which will have untold economic implications. (none of them good).

I have said it before, and will say it again: America, what are you prepared to do to stop the evil men running your country, now that Congress has made it clear they are incapable or unwilling.

[MilwaukeeDan]

Mr. Sims, thank you, I brought up Mr. Walker on another blog yesterday. As I said, after reading "A Fiscal Hurricane on the Horizon" by Richard Wolf, 11/15/2005, USA Today, I have not trusted any economic news from Washington. Mr. Walker knows what he is talking about. I still keep this article on my desk at work, anytime I need a reality check, I read it.

[ljsfolly]

With bushes war the budget seems to go for a month or two before he's back wanting more money for blackwater (sewage co) mercenaries and whatever he has in the deep dark hole he is throwing the country into.We should have some idea of what he is spending money on as he has not one citizen besides himself, cheney and cronies at the top of the spending list. He is willing to cut any and all social programs to keep the dough going to his buddies. There should even be a ramping up of his demands for money to congress as his time is running out on what more he can give them and his retirement fund of course. I wish someone could give us a general accounting of just how much money he has really handed over to his cronies and himself (under the table). We as a country had extra money before bush and just look at us now. Blackwater is flushing the money down the toilet and Haliburtin has done so much while our soldiers have low quality armour if they have it and less ied proof vehicles.... yep bush has bankrupted us and china will be taking over the white house soon..

[elkabong]

George Bush knows a thing 'r two about worthless IOUs. He should, he wrote 'em.

[RPaulH]

You know, it gets to be sad (and very un-funny) when not only discipline is ignored, but actual numbers. There is not much fudging a number in the tens of trillions - though the talking points would probably point to: cut taxes, refund to taxpayers, watch the GDP grow, and we collect even more tax funding than we cut.

OH BOY! No wonder Ron Paul is raising $4mm/day - he's at least telling the truth to the American people. Will we get Jimmy Carter II in 2008 who will tell us the truth (you hear me Barack Obama!!) or will we drive this country/ec­onomy/good­times off a cliff just like Rome did?

Thanks Peter for ringing another bell - now we need you on PPT on DVD :) Tick tock til Nov. 2007, and then Jan. 2008 - maybe we can still turn this super-tanker around...

[SisterAnn]

The government can't project the budget for one year, let alone 75 years.

Medicare doesn't have to go bankrupt. Throw out the insurance companies and their profits. Demand reasonable prices for medical services and equipment.

We have paid in over 2 trillion extra into a Social Security trust fund since 1983 because we knew the boomers would put a strain on the younger generations. We are still paying it. They have raised the cap to almost $100,000.

I suppose we should all work until we are seventy then get half the benefits we are legally supposed to get, while we pay for the retirements of everyone else.

Stop the war. We can't afford it. Regulate the oil companies, their high prices make everything cost more.

I think this article is Republican BS, a way to beat people out of their own self paid retirement.

[curiousasheck]

The Boomers, the better off, richer, and better educated then our parents generations created this mess.

Now their grandkids will spend their entire lives cleaning up this wreck.

[mmckinl]

But the Mother of all Inconvenient Truths is Peak Oil.

Our whole financial system is based on cheap energy and those days are over. in the past 5 years Oil has tripled and so has natural gas and it will at least triple again in the next 5 years , unless a financial meltdown happens first.

All these programs are bets on cheap energy. The economy will collapse before they become a problem.

[CharlesMac]

The best thing going for David Walker and his Office is that nobody pays attention to them. These folks would have been renditioned years ago because they have one tragic flaw impermissible in our government.

They can count.

In fact it was critical that their name be changed to "Government Accountability" from "General Accounting". That way they sound like some moral values group, rather than the auditors of the United States government.

Beginning in the year 2000, it is LAW that each agency in the Executive Branch submit Financial Statements for audit. First of all, they don't do it. They submit a "consolidated report" instead.

It is the document created by Treasury from which each year's official national deficit is reported.

And each year, David Walker states precisely that the numbers coming from the Executive Branch lack "material support" and do not vaguely follow Generally Accepted Accounting Procedures (GAAP). He goes on further to state that the numbers should not be used for any planning or running of the government.

So if it is THE LAW for the Executive Branch to submit verifiable financial statements, why don't they?

Because nobody wants us to know exactly how screwed we are. And how much of our tax dollars have been squandered.

It began in 2001 with the Dept of Defense. The DoD had $2.3 trillion of "Undocumented Adjustments". These are monies and assets for which they could not account. Gone. Lost. (Google Donald Rumsfeld, Sept 10, 2001).

Consistently, Walker's reporting has contradicted claims by the DoD and the Administration whenever the subject of cost or expenditures has come up.

My favorite thing of all is when the Treasury claims the deficit is under control due to Bush's policies, $283 billion last year. Walker points out that if the deficit was $5 trillion in 2001, and it is $9+ trillion now...

1) Where did that $283 billion annual number come from..
2) And how can you say it is under control.. if you have blown $4 trillion in 6 1/2 years?

The man can count.

[January]

I think people are not pressuring the politicians in Washington because we have been hearing a similar message now for a long, long time. The GOP told us Social Security would never work when it was first adopted during the New Deal.

Ever since then, the GOP has been attempting to prove their party was right. They keep changing tactics, but the goal is the same. After the GOP captured Congress in 1994, they tried to shut down government. Since then they have tried to spend all our money on themselves, including starting a war. "Starve the beast" by bankrupting government.

Since Nixon, with few exceptions, Washington, DC, has been dominated by thieves, robbers, and liars. Rather than helping the Third World, we have adopted its practice of corruption. The logical consequence of that is suffering. Yes, that is another inconvenient truth.