Memo to President Obama: Listen to Mr. David Walker

Remember David Walker?

Huffington Post:

David Walker was the former Controller General of the United States, and former head of the Government Accountability Office. As the nation's chief accountant he was appointed by President Clinton, and resigned near the end of George W. Bush's second term. He had no authority to decide how a single penny of government funds should be collected or distributed.

His job was to count those funds.

Mr. Walker's enormous range of mind reaches far beyond a single budget year. His is a long-range perspective, which allows him to project fiscal trends decades into the future, and to assess, through simulations, the impacts of policy decisions beyond their immediate effects. He truly understands the economic maxim, promoted by Henry Hazlett, to look beyond the visible effects of any given policy, and to consider its unseen effects.

When Walker plotted these trends and considered demographics among many other factors, what he found was "chilling." If fundamental reforms are not begun now, he concluded, the United States will experience a financial and political collapse comparable to the fall of Rome.

In a presentation to the National Press Foundation, January 17, 2008, Mr. Walker brought forth the following facts and projections:

1. From 1966 to 2006, the percentage of federal funds spent on Medicare rose from 1% to 19%. This trend will grow exponentially as millions of "baby boomers" enter the entitlement pool.

2. For the same period, spending for mandated government commitments rose from 26% to 53% of the total budget. The budget is increasingly out of the control of government officials.

3. As of 2007, Medicare is running in arrears. In 2017 Social Security will be in deficit. By the year 2040, Medicare and Social Security alone will be running annual deficits of nearly 900 billion dollars.

4. Medicare spending from now until 2032 will be 235% of economic growth. By 2040, Medicare will be spending about 10% of the nation's Gross Domestic Product annually, and the annual deficits of the United States will total some 20% of the total Gross Domestic Product.

The bottom line is this: the largest mandated fiscal exposures now, projected into the future, are over 52,000 billion dollars. That will amount to 90% of all household wealth in the U.S., and will place a burden of over 450 thousand dollars on every household in the land. This is almost ten times the present median household income level. Such spending will lead to national bankruptcy.

Mr. Walker concludes that "We face large and growing structural deficits largely due to known demographic trends and rising health care costs." Further, "GAO's simulations show that balancing the budget in 2040 could require actions as large as cutting total federal spending by 60 percent, or raising federal taxes to two times today's level."

Here is Walker's presentation. Click here.

Here are some highlights that I found in his powerpoint presentation:


P.33:

Issues to Consider in Examining
Our Health Care System

•The public needs to be educated about the differences between wants, needs, affordability, and sustainabilityat both the individual and aggregate level
•Ideally, health care reform proposals will:
•Align Incentivesfor providers and consumers to make prudent decisions about the use of medical services,
•Foster Transparencywith respect to the value and costs of care, and
•Ensure Accountabilityfrom insurers and providers to meet standards for appropriate use and quality.
•Ultimately, we need to address four key dimensions: access, cost, quality,and personal responsibility

p. 36:

Three Key Illnesses

•Myopia
•Tunnel Vision
•Self-Centeredness


p. 37

Four National Deficits

•Budget
•Balance of Payments
•Savings
•Leadership


p. 39:

Three Key Groups That Need to Increase Their Influence and Involvement

•The Business and Professional Community
•Young Americans
•The Media