Former Comptroller General of the United States and Fiscal Wake-Up Tour star David Walker outlines how our impending entitlement crisis parallels the current subprime mortgage mess in the Financial Times:
… a lack of transparency facilitated the crisis. Banks and other financial institutions created off-the-books entities so that regulators would find it hard to track the risks to their health. The US federal budget does not reflect the government’s huge off-balance sheet and unfunded promises, commitments and contingencies that stood at over $40,000bn at September 30, 2007.
Beyond the turmoil for banks and homeowners, however, there is a super-sub-prime crisis brewing in Washington. Our fiscal policies have created a disconnect between today’s citizens and future taxpayers. Today’s taxpayers benefit from high government spending and low taxes, while future generations are expected to pay the bill. Our real challenge is where we are headed on our do-nothing fiscal path.
Washington has charged everything to the nation’s credit card – engaging in tax cuts and spending increases without paying for them. Washington’s imprudent, unethical and even immoral behaviour is facilitated by a lack of transparency. For example, as of September 30, 2007 the federal government was in a $53,000bn dollar fiscal hole, equal to $455,000 per household and $175,000 per person. This burden is rising every year by $6,600-$9,900 per American. Medicare represents $34,000bn of this deficit and the related Medicare trust fund is set to run dry within 10 years. The Social Security programme is projected to have negative cash flow within about 10 years.