David Walker formerGAO Director has been using the bully pulpit since 2005 that I am aware of talking about the upcoming fiscal crisis. Here are some of his comments from Forbes.com in 2006. 

Accountants don’t often speak in revolutionary tones, but these days David Walker, head of the U.S. Government Accountability Office sounds a lot more like Thomas Paine than your average calculator-carrying CPA.

"History has shown that when America faces difficult challenges and when it rises to the occasion, anything is possible," he said in an interview. Yet “a fiscal cancer,” he said, “is growing within us, that if we don’t treat, can have catastrophic consequences."

For more than a year that’s been Walker’s message to Americans. It is part of what he calls a Fiscal Wakeup Tour, an itinerant, bi-partisan lecture panel known as the Concord Coalition, which is traveling to college campuses in advance of the 2008 presidential elections. Accompanying Walker are economists from the left-leaning Brookings Institution and the conservative Heritage Foundation (usually Isabel Sawhill from the former and Stuart Butler from the latter). They may disagree about the potential solution, but they are in accord that a problem exists.

The crux of the campaign: to spread the word that Americans and their government are living beyond their means and that fiscal fecklessness is imperiling the country’s living standards.

Sound familiar? It should. For decades, there have been intermittent cries of a looming U.S. fiscal crisis. But over the past five years, the problem has become especially acute, Walker says, due to demographic trends, tax cuts, the new Medicare prescription drug benefit plan and the expiration of budget controls in Congress. Medicare has become especially expensive, as healthcare costs have ballooned and lifespans have lengthened, increasing payments to beneficiaries of the program. In fact over the next ten years, adjusted for inflation, the debt and unfunded liabilities of the U.S. government could rise by $2 trillion to $3 trillion a year.

This is what might happen: as the first Baby Boomers become eligible for Social Security in two years and Medicare in five years, the amount of money the government is spending will begin to dwarf its revenues. Meanwhile, the Treasury, which has been piling up debt from willing, mostly Chinese foreign lenders, finds the cash spigot turned off. The result? Interest rates at government bond auctions go through the roof, raising the cost of borrowing throughout the U.S. economy. Rising mortgage rates will crush the housing market, credit-card bills will lead consumers to declare bankruptcy and college loans will price middle-class students out of premium educations.

This Doomsday scenario is well-known to economists, but it hasn’t motivated many politicians.

"I think there’s rampant myopia and tunnel vision," Walker says. "We don’t have enough people focusing on the big picture and the long run."

So why has he taken this task upon his shoulders? For one, it’s his job. As the comptroller general of the United States. Walker has a responsibility to audit the statements of the government, just as Arthur Anderson had the responsibility to audit Enron.

"Being an accountant and having a professional responsibility as well as being a father and grandfather, I’ve seen our long-term fiscal situation deteriorate dramatically in recent years," he said.

Another reason he’s taken it upon himself to scream the fiscal equivalent of "The British are coming!" is because he can. Unlike politicians who have to focus on re-election, Walker is an official appointed by a bi-partisan group of lawmakers and serving a 15-year term. He’s able to speak his version of the truth regardless of how unpopular it is. But if lawmakers don’t act in the next five years, by the time he leaves office in 2013 the fiscal state of the union may have already crossed the danger threshold.

"Our hope is that through this and other efforts that any serious candidate will have to deal in specific terms with what they are gong to do to help restore fiscal discipline and save our future," he said.

Just how that can be done remains to be seen. But it will likely involve two highly unpopular moves: raising taxes and cutting spending. "There’s no question that we need revenues," Walker said. "The question is how best to raise those revenues."

For the time being, he’s satisfied with posing the question, rather than finding the answer. In the future though, he hopes politicians will use fiscal common sense.

During my recent graduate studies, I did a good deal of reseach on these topics in preparing a research paper. This was an independent study by me, and was not subject to other bias from professors. Since I am a senior, I had a vested interested in learning the truth. My conclusions were that Social Security is doing just fine, and with a few minor adjustment to retirement age, and income indexing, to revise for gains in longevity it will continue to do fine well into the future. I read a lot of research papers, including the GAO, and National Association of Actuaries, This latter group has members that are also members of social security’s researchers. Comments on their site stated that they were pressured by the Bush administration to use worst case scenarios to project the future health of social security, when in all past projections they used the "most likely scenario.

The dire descriptions of social security failings is simply politics practiced by free marketers wanting to move the money into Wall Street. If that advice were followed, can you imagine the loss it would be taking through our current financial crisis? Further, when I compared US social security benefits with other developed countries, our benefits are paultry by comparison to some of the more generous countries like France. Having a significant segment of society with generous purchasing power would stablize a consumer based economy like the US. Notice that France is not suffering the extreme financial calamity as the US that cuased the current crisis. I, and many others think their strong social safety net contributes to their more stable economy. James Galbraith is a good economist to read on this topic.

As to Meduicare and Medicaid … in brief, if you consider that all the other developed countries provide health care for all at less than half the cost of the US, something is definitly wrong with the US system. However, the problem is not Medicare nor Medicaid, it’s our profit based system of health care. If profit is removed, Medicare and Medicaid would do just fine.

So, in my opinion, the problem is the political economy of the US, and not our senior safety net. Political action will be required to fix these problems, and maybe there will be an opportunity for change given a new administration in Washington. I’m not holding my breadth, though.