The Public Policy
It Will All Come to Tears
GAO tells it like it is.
What has it come to when you start getting anxious over a new budget document released by a federal agency like the Government Accountability Office (GAO), which some readers, of a certain age, will remember as the former General Accounting Office? Maybe I have been living in Washington too long. The GAO just released its fall 2009 update on The Federal Government’s Long-Term Fiscal Outlook.
Basically, “it’s a tear-jerker for budget wonks,” says Taxpayers for Common Sense. It is also a downer for taxpayers, their children and their grandchildren.
The weak economy and financial markets, “and the government’s response to them,” have resulted in “near-term increases in federal deficits,” reaching record levels in 2009.
Unfortunately, the feds face even larger fiscal challenges “that will persist long after the return of fiscal stability and economic growth.” The die, as it were, is cast.
GAO’s simulations or models show “escalating levels of debt that illustrate that the long-term fiscal outlook remains unstable.” In little over 10 years, debt held by the public as a percent of GDP is projected to exceed the historical high reached in the aftermath of World War II “and grow at a steady rate thereafter.” Again, it will come as no surprise that this fiscal situation is driven by health care cost growth and demographic trends.
“Absent reform, Social Security, Medicare, and Medicaid will account for a growing share of the economy in coming years,” says GAO. “The longer action to deal with the nation’s long-term fiscal outlook is delayed, the larger the changes will need to be increasing the likelihood that they will be disruptive and destabilizing.”
As the Irish like to say, it will all come to tears. But we do not have to wait long for that. Evidently, the cost and demographic trends, which we often assume are somewhere out there on the horizon, are already taking their toll. The oldest members of the baby-boom generation are now eligible for Social Security and will be getting Medicare benefits in less than two years. The Medicare Hospital Trust Fund began running out of cash in 2008, meaning expenses exceeded dedicated revenues. Social Security surpluses, which have been financing other government programs, are now projected to turn into cash deficits by 2016. Annual budget deficits are likely to increase continuously under GAO’s two different sets of assumptions or simulation models that it uses for these forecasts, and “both simulations show that the federal government is on an unsustainable fiscal path.” For any green eyeshade types who might be reading this, GAO makes it clear that the results of its various simulations “are not materially different.” You can check out the document for the technical explanations.
Is anyone in Congress listening? And are we to believe that the Baucus health care plan is really a cost-saver over time? Adding new health care mandates on top of this mountain of debt is simply “the absolute height of fiscal irresponsibility” as my hero, Congressman Paul Ryan (R-WI) recently told Peggy Noonan.
Anyway, GAO soldiers on, noting that “the sense of urgency has increased” since it now sees “persistent annual budget deficits in excess of 7 percent of GDP — levels not seen since the aftermath of World War II.”
According to the GAO, “…absent changes in federal entitlement programs, spending on Social Security, Medicare, Medicaid, and interest on the federal debt will account for an ever-growing share of the economy.” There will be little room for “all other spending,” which basically is what we all think of as “government”: defense, homeland security, highways, farm price supports and assistance to needy families. Under one simulation model, GAO claims that roughly 92 cents of every dollar of federal revenue will be spend on major entitlements and net interest costs by 2019 due to the increased federal debt.
“However, the longer action to deal with the nation’s long-term fiscal outlook is delayed, the greater is the risk that eventual changes will be disruptive and destabilizing,” says GAO. So “waiting even ten years would require a revenue increase of about 58 percent, a noninterest spending cut of about 39 percent, or some combination of the two.” Pick your poison.
Of course, none of this is unexpected. This train wreck has been predicted for some time. What is amazing is the collective case of cognitive dissonance that has gripped Washington. Congress and the Administration have long forgotten the principle of “do no wrong.” They are deep into making matters worse. The entire town seems immune to the exhortations of GAO and other urgent voices such as David Walker, the former Comptroller General of the United States.
It is as if the colonists, hearing the cries of Paul Revere, gave out a yawn, rolled over, and went back to sleep.
About the Author
G. Tracy Mehan, III served at the U.S. Environmental Protection Agency in the administrations of both Presidents Bush. He is a consultant in Arlington, Virginia, and an adjunct professor at George Mason University School of Law.
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Appleby| 10.21.09 @ 6:54AM
One thing that nobody seems to have figured out is what would happen when the last generation that believes in a good days work for a good days pay is retired, and the country is run by people whose main goal is Work Life Balance -- meaning that they aim to work the minimum possible time and be paid and promoted and praised just as are their hard-working brothers and sisters.
France has proved the non-starter status of this mindset, and Canada is proving it, but so far nobody in the USA is paying attention.
Three more years and the rest of us reach retirement. What will you do then?
Melvin| 10.21.09 @ 7:48AM
You see Abbleby, we're going to be different. In spite of the abject failures of European and Canadian style medical socialism, we're somehow going to avoid the pitfalls that have befallen the above referenced.
If we believe that, then Harry Reid has some beach-front property for sale in Nevada.
KyMouse| 10.21.09 @ 10:07AM
Good points, Appleby and Melvin. I remember my grandparents refusing to buy things on credit -- if they couldn't afford to pay cash, they waited until they could (or they traded something, in barter). And they would have waited until the point of starvation before they would have taken a "government charity" handout. That generation is gone, and so are many of their ideals.
Pecos Pete| 10.21.09 @ 7:50AM
inflation ... Inflation ... INFLATION ... like a train under full steam is heading our way.
JP| 10.21.09 @ 2:53PM
Inflation is already here, just look at the price of Gold in relation to the dollar since Jan 2009. The dollar has lost 30% of its value. In other words, the dollar can buy less Gold. Look at the the dollar and the Euro and other currencies.
Martin j smith| 10.21.09 @ 8:07AM
Have people decided that what we have is just foolish economic policy or purposeful destruction of our economy ?
daddio| 10.21.09 @ 3:37PM
Both-remember the operating principle of this administration is "never let a crisis go to waste".
steponbugs| 10.21.09 @ 8:52AM
History may not repeat itself exactly, but it sure echoes pretty loudly...welcome to the United States of Argentina. One supposes that we'll have the portrait of James Earl Carter gracing our soon-to-be issued $10,000,000 Federal Reserve notes...
Eric Cartman | 10.21.09 @ 8:58AM
I can't wait to be responsible for millions of illegals and their third-world mega-families that trundle over the border with them (Oh, is that your goat your14th cousin twice removed is riding? Well, how nice!). AND their health care along with millions of our own Gimme Monsters. Plus the banks who screwed us and the bailouts Bush and Obama seem to love. More clunker programs (Cash for Flunkers! A new education benefit!) AND the bailouts of stupid states and cities who would never lay off even one janitor or aide who doubles as a sex toy. I just can't wait. And then I get to watch the stupid republicans who used to give a damn sit there letting it all happen with their stupid smile plastered on their dumb face! I just love what Bush and the limp-dick Republicans conspired with the Teddies and McCains to leave us. WEEEEEEEE!
Eric Cartman| 10.21.09 @ 3:30PM
And the crying will continue:
http://www.republicans.waysand.....tID=150826
Okay Republicans, you have all the ammo, are you going to shoot yourself in the ass again?
Big Leo| 10.21.09 @ 11:08AM
When I post here and elsewhere, I look at a reminder of what the stakes are in the current political situation that I have pinned to my board. It is a 100 billion dollar note issued by Zimbabwe. When Rhodesia got majority rule under Mugabe's socialists thirty years ago, it was prosperous, democratic, and relatively stable. Now, thousands of whites and blacks have been murdered by pro-government thugs, the former food exporter is starving, and the currency is meaningless. That is our fate if we continue in our current course-- not according to me, but according to the GAO. Financial collapse and chaos is being predicted very clearly by accountants (whom I trust) and not politicians.
Tim| 10.21.09 @ 11:09AM
Contemplating the future is like Charleton Heston at the end of Planet of The Apes. We blew it up.
JohnD| 10.21.09 @ 12:54PM
"DAMN YOU!
DAMN YOU ALL TO HELL!"
Al Adab| 10.21.09 @ 1:07PM
Exactly the words future generations we use if we fail and humanity is plunged into a new dark age of tyranny. Unless we stand for liberty and set a strong example, ala Cato, it will be a long time before freedom is rediscovered. They will have every right to use those words to descibe us. We have sold our birthright for a bowl of pottage.
adam smith| 10.21.09 @ 1:20PM
It is already too late. When the rest of the world is already divesting themselves of our debt & currency (plenty of help from gov. to push this on), the real crisis will come in 2 years or less.
Wonder how well the "it's Bush's fault" plays then?
Then again, if anyone complains by then they may be taken to reeducation camps run by Obama's "civilian security force", or out of work ACORN minions more correctly...
JP| 10.21.09 @ 2:56PM
We're getting there. As of Sept, there are more government workers in Michigan as there are employees working for manufacturing. The State of Michigan is the biggest employer in Michigan.
The average wage of a federal worker is now $77,000, or about $35000 more than the average wage of non-government workers.
Victim| 10.21.09 @ 3:19PM
As a victim of job loss, government hiring in MI?
JBobs| 10.21.09 @ 2:06PM
If the die is truly cast and our financial future is as bleak as described, the question seeking an answer is: Will there be a leader or leaders that will step forward with a call to action? And what action? Will there be followers? Key words quoted in the GAO report are "disruptive and destabizing" with respect to changes as a possible result. Nations collapse and die, are conquered, and are sometimes fractured apart in such times. It is almost a certainty that our governmental leaders will continue to ignore these financial issues... meaning that the status quo will not long last.
Stan Redmond| 10.21.09 @ 2:17PM
I know what will fix these monumental problems. MORE GOVERNMENT!!! If only we spent MORE money on these problems and made a dedicated agency to solve these problems we wouldn't have these problems. If theres one thing the government has proven over and over, Obama especially, is that there is no problem the government can't fix. Look at TARP, it rescued the economy. Social Security has ensured a comfortable retirement for generations to come. Medicare has never gone over budget. The War on Poverty has dealt a crushing defeat to poverty in America. Public housing is a raging success of clean safe neighborhoods. Public education is turning out brilliant educated citizens that know where "Obama Money" comes from.
Aw heck. It's Bush's fault anyway.
Jim O'Brien| 10.21.09 @ 3:40PM
Congress is focused on buying votes with pork barrel projects and entitlements, using our taxes and our public debt, all the while lying to us about the cost. For most of us, it seems impossible to change the recklessness of our Congress-persons, who Glenn Beck appropriately labels "cockroaches" in his book, Common Sense.
I think there is at least one way to get the attention of Congress: If all tax-paying Americans get behind the Fair Tax, which calls for elimination of the federal income tax and the IRS, Congress would have to listen. Go to www.fairtax.org, read about it, and join. This is not about being a Republican, Democrat, or Independent. This is about depriving Congress of the power to play with our lives using the tax code. Tell your Senators and U.S. Representatives that they will not get your vote unless they support the Fair Tax legislation already introduced and being held up in Congress.
jr| 10.21.09 @ 5:06PM
More left each day and I wonder what, if anything, will pull the trigger on the peasant uprising. Or have we faded into pansies?
Patrick| 10.21.09 @ 8:08PM
We have faded into pansies.
Yet who knows what three days without food will do. Some dream that gen X (most were killed in utero) or gen Y (more populous, but with fragile self-esteem) could lead us back....but what reference point is there left? Who do we look to?
Meh, as long as there's bread and circuses, I'll just wait for the barbarians to invade.
Pingback| 10.21.09 @ 5:10PM
Twitter Trackbacks for The American Spectator : It Will All Come to Tears [spectator links to this page. Here’s an excerpt:
JohnD| 10.21.09 @ 8:06PM
JR:
The great French Medieval historian, Marc Bloch, once said, "History is about the convergence of long-term trends with short-term events." The problem here is our rights, freedom, and prosperity are whittled away a little bit more every day, and like a frog in a pot of boiling water, we do not notice we are being cooked until its too late.
Look at how much money the Treasury has put into circulation: http://research.stlouisfed.org/fred2/series/BASE
Now look at what it has done to the dollar:
http://www.x-rates.com/d/EUR/USD/graph120.html
This long-term trend should spark outrage, as our grocery bills, energy bills, etc., soak up more and more of our flat, to declining, to non-existent nominal income. The remaining Americans with jobs probably don't understand why they can't make ends meet, or why they have a declining standard of living.
But there is no "short-term" event to spark us to say, "OK, this is enough, We aren't going to take anymore of this.
I have two fears: I fear that there will be no "short-term event" and we will wake up one day and realize we are powerless subjects; I also fear there will be a "short-term event" that sparks something ugly and violent that we have never seen in the history of this great Republic.
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