Watchdog sounds deficit alarm
GAO chief warns that it's 'not manageable'
BY MARILYN GEEWAX: Cox News Service Sept. 18, 2003

WASHINGTON - The federal governments budget is in far worse shape than most Americans realize, and the fiscal hole is deepening, the head of Congress' non-partisan watchdog agency said yesterday.
  "Our projected budget deficits are not manageable without significant changes" in taxes or spending, U.S. Comptroller General David Walker said in a speech to the National Press Club. 'We cannot simply grow our way out of this problem."
  After four straight years of budget surpluses through 2001, the government returned to deficit spending in 2002. The Congressional Budget Office said last month that the federal deficit would hit $480 billion next year, far exceeding the previous dollar-amount record of $290 billion, set in 1992.
  The CBO also predicted the annual budget shortfalls would total $2.3 trillion through 2011, a stunning reversal from the 10-year, $5.6 trillion surplus the CBO forecast in 2001.
  But Walker, who heads the General Accounting Office, said even those daunting figures do not convey the scope of the problem because conventional government accounting leaves out the impact of promised benefits for veterans' health, Social Security, Medicare and other programs.
  “These additional amounts total tens of trillions of dollars," he said. They are likely to exceed $100,000 in additional burden for every man, woman and child in America today, and these amounts are growing every day,'' he said.
  Walker said he is a non-partisan auditor whose job is to "state the facts and speak truth" about the nation's bookkeeping. Current accounting systems fail to adequately reflect just how severe the government’s fiscal problems are, he said.
  "The time has come for all responsible parties to recognize reality," he said. "Our nation has a major long term fiscal challenge that is not going away."
  Walker's assessment of the budget deficit is far grimmer than then Bush administration's. White House officials have stressed the importance of cutting taxes, while calling the deficit a manageable and relatively minor problem.
  Walker vigorously disagreed. "The 'bottom line' is, there is little question that deficits do matter, especially if they are large, structural and recurring in nature," he said. "The days of surpluses are gone and our current and projected budget situation has worsened significantly."
  President Bush has tied the rise of government borrowing during his term to the recession, the wars in Afghanistan and Iraq and higher domestic security spending, not to the tax reductions he championed.
  But Walker, a former Reagan administration official, said Bush's explanations don't add up.
  "It's true that deficits are understandable and sometimes necessary in times of recession and/or war," he said. "However, while it may not seem like it to those who are out of work or underemployed, we have not been in a recession for almost two years."
  Moreover, the projected deficits "far exceed the costs associated with Iraq, the global war against terrorism and any incremental homeland security costs," he said. "It is time to admit we are in a fiscal hole and to stop digging."
  White House spokeswoman Claire Buchan said "The president believes that returning the budget to balance is an important priority." However, Bush must focus right now on "economic security and waging the war terrorism."
  "Those priorities are more important at this point," she said.
  Buchan said tax cuts have been needed because "Its important that we make every effort to grow the economy because a growing economy will help reduce the budget deficit.”
  Stephen Moore, president of the tax-cut advocacy group called the Club for Growth, said Congress’ focus should be on reducing spending.
  Moore said economic growth will boost government revenues and that "tax cuts are an important part of getting the economy going again." At the same time, "we need to do something about this stampeding growth in spending," he said.
  Walker said Congress must make tough choices about both taxes and spending.
  On Capitol Hill and on the campaign trail, Democrats have seized upon the rising deficit to criticize Bush for his support for massive tax cuts in 2001 and 2003.
  Before becoming the comptroller general in 1998, Walker was a partner and managing director in the Atlanta office of Arthur Andersen LLP That accounting firm unraveled in 2002 in the wake of auditing scandals involving its clients Enron Corp. and WorldCom Inc.
  Walker drew some parallels between the nation's accounting problems and those that engulfed a number of U.S. companies in recent years
  "The recent accountability failures in the private sector serve to reenforce the importance of proper accounting and reporting practices," he said. "It is critically important that such failures not be allowed to occur in the public sector."
  Walker was appointed by President Clinton, and approved by the Republican-controlled Senate. During the Reagan administration, he served as an assistant secretary of labor.
  He says that currently, he is neither a Democrat nor a Republican.
  The comptroller general serves a 15-year term and enjoys an exceptional degree of independence.  
  Thomas Mann, a senior fellow at the Brookings Institution, a left-leaning think tank, said it is "perfectly appropriate" for the comptroller to speak out about the deficit. "Every, serious policy person recognizes we, now face very serious medium and long term deficit problems," he said.