U.S. faces crisis on deficits, GAO says

Head of agency calls spending `unsustainable'

Criticism mounts against Bush

January 23, 2004|By COX NEWS SERVICE

WASHINGTON - The head of Congress' auditing arm warned yesterday that "imprudent and unsustainable" federal borrowing is driving the nation toward a fiscal crisis.

The comments by David M. Walker, head of the General Accounting Office, come as a number of conservatives have begun to criticize the Bush administration and the Republican-led Congress for failing to hold the line on spending.

Both branches of government are blinded by political "nearsightedness and tunnel vision" and are failing to see that government borrowing is out of control, Walker said at a breakfast meeting with reporters.

"The path that we are on is imprudent and unsustainable," he said. "Deficits do matter, especially when they are large, structural and growing."

"There are many people who have said, `Don't worry; we can grow our way out of this problem,' " Walker said. But in fact, "our fiscal gap is too great to grow our way out of the problem. Tough choices are going to be required."

His remarks came just two days after President Bush used his State of the Union address to call for $350 billion in spending increases and tax cuts over the next five years.

Already, the federal deficit is on track to hit a record $480 billion this year, a steep $700 billion plunge from the $236 billion surplus the government enjoyed in 2000.

Bush has tied the rise of government borrowing to the 2001 recession, the wars in Afghanistan and Iraq and higher domestic security spending, not to the tax reductions he supported.

But during his term, Congress has approved average annual real increases in domestic discretionary spending of 8.2 percent, compared with 2.5 percent during the Clinton years, according to calculations by the Club for Growth, a conservative group that lobbies for tax and spending cuts.

In his speech, Bush promised to hold spending increases to less than 4 percent in the next budget.

But Walker said restraining discretionary spending is not enough to avert the coming fiscal crisis tied to entitlement programs. The first baby boomers will become eligible to collect Social Security benefits in less than four years, and as more retire in the ensuing years, tax revenue will slow as payouts increase. By 2018, Social Security will be paying out more in benefits than it collects in payroll taxes.

"It's time that we recognize reality," Walker said. "And it's time we start making tough choices" about reducing entitlements.

Walker said passage of the Medicare prescription-drug law would make the budget hole much deeper. The program would cost $395 billion over the next 10 years, but most baby boomers would not begin taking advantage of it until the next decade, say budget planners.

If standard accounting methods were used to estimate the program's cost over 75 years, the price tag would be closer to $8 trillion, Walker said. "That is more than the accumulated deficits since the beginning of the republic," he said. "That's $25,000 for every man, woman and child in the United States."

In the past week, prominent conservatives also have begun to call on the administration and Congress to cut spending sharply. For example, hours before Bush spoke Tuesday, the Heritage Foundation, a conservative research group, held a conference titled, "The $pree of the Union - Bush, Congress and Your Money."

The same day, The Wall Street Journal's conservative editorial board featured an editorial headlined: "GOP Spending Spree."

Last week, leaders of six major right-wing groups jointly condemned the "drunken sailor budget." One of those conservatives, Stephen Moore, president of the Club for Growth, said that "adding unnecessary and wasteful spending to the budget when we already have a half-trillion dollars of deficit spending is a form of fiscal child abuse."

Walker said the Democratic presidential candidates also are failing to propose realistic budgets. For example, most of them have called for an end to many Bush-backed tax cuts, but also have demanded new spending programs.

Walker launched his campaign against deficits in a September speech to the National Press Club.

Before becoming the comptroller general in 1998, Walker was a partner and managing director in the Atlanta office of Arthur Andersen LLP.

He was appointed to his current position by President Clinton, and was approved by the Republican-controlled Senate. During the Reagan administration, he served as an assistant secretary of labor.

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