GAO chief sounds alarm bells on debt

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General Accounting Office chief David M. Walker, who has raised the profile of his agency by warning about the dire consequences of spiraling government debt, said yesterday that the public and Congress remain oblivious to the serious financial crunch that is looming with the retirement of the baby boomers.

"The public has no idea how big the problem is," he said, estimating that $43 trillion in unfunded Social Security, Medicare and other retirement benefits promised to baby boomers will drive the government into insolvency by 2040 unless Congress moves quickly. The oldest among the baby boomers -- defined as those born in the years immediately after WWII -- begin retiring in 2008.

"You get wide eyes and dropped jaws" on Capitol Hill when legislators and their staff are briefed on the budgetary dilemma, he said in an interview with reporters and editors of The Washington Times. "They really don't understand the magnitude of the problem."

Despite his efforts -- as well as warnings from Federal Reserve Chairman Alan Greenspan and other respected leaders -- Mr. Walker said the most that is likely to be done to restrain a record budget deficit of $500 billion this year, because of the elections, will be an agreement on a more restrictive budgetary regime for future Congresses.

Mr. Walker expects House and Senate conferences on the budget to agree to reinstate "pay-go" rules requiring any new spending programs or tax cuts be offset with spending cuts or tax increases. The rules would provide an exemption for President Bush's middle-class tax cuts.

Those tax cuts would include the increased child tax credit, the broadened 10 percent tax bracket, and the reduction in the marriage penalty, he said.

"We have a large problem," he said. First, "we have to stop digging" the hole deeper, then "provide discipline."

Mr. Walker said he took the unusual step of speaking out about deficits -- something not done by previous directors of the low-profile General Accounting Office -- because, as the official auditor of the government's books, he felt he had a duty to warn the public about the government's increasingly shaky finances.

The public should be told, for example, that the trillions of dollars in payroll taxes they have paid into Social Security and Medicare "trust funds" has already been spent by Congress and will not be available to solve the problem later, he said.

Politicians and bureaucrats who portray those funds as secure pervert the meaning of "trust," he said. "They are not trust funds. They are accounting devices.

"I'm here because I believe I have a professional responsibility, and because I am growing increasingly concerned because I have two children and two grandchildren, and they're the ones who are going to pay the price if this is not taken seriously."

Mr. Walker said the mounting deficits must be tackled on all fronts, with no exceptions.

Programs that are currently "getting a pass" include defense, homeland security and popular tax preferences for health care and housing, he said.

The Defense Department's budget is in such a state of chaos, he said he has refused to sign off on the Pentagon's audit and would give the government's largest agency a "D-minus" for transparency and accountability to the public.

Attacking other sacred cows, Mr. Walker said "the tax system is a nightmare" and the government should rethink and restructure its health care benefits to help control the spiraling costs of medical care.

"The system is fundamentally broken," he said. "We ultimately have to engage in comprehensive health care reform" aimed at cutting subsidies for anything but basic health care expenses.

"Escalating health costs, which have grown at double-digit rates in recent years, not only have become a big headache for the government, but they are a major reason that employers have been slow to hire new workers and are quick to outsource jobs to countries where health care costs are lower, he said.

Nothing should be exempt from the budget axes, he said, suggesting that Congress also revisit whether the government needs to be providing electricity in rural areas anymore, or postal services that are now provided quite profitably by the private sector.