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The U.S. Government Accountability Office (GAO) — the auditing arm of the U.S. Congress — warns that the nation's deficits and debts are now so overwhelming, America may face fiscal Armageddon.
Unfortunately, the warning has fallen on deaf ears — so much so that long-time GAO head David M. Walker has recently resigned, hoping he can get his message out more effectively on his own. His main points:
1. The federal deficit is not something that comes and goes. It's built in. It's very large. And its growth trajectory takes America on a veritable collision course with bankruptcy! According to the GAO, unless radical fiscal reform is instituted quickly, the U.S. federal deficit could reach 20% of GDP , or five times greater than the worst level of this century.
2. State and local deficits are on a similar path. Thus, any efforts to shift some of the fiscal burden from federal to local governments will be futile.
3. This astronomical — and potentially devastating — growth in our debt has little to do with the ups and downs in the economy and has everything to do with locked-in, predictable aging of our population.
So from this point onward, the bill is starting to come due: Nearly 80 million Americans becoming eligible for Social Security retirement benefits over the next two decades — an average of more than 10,000 per day. But ...
4. The burden of the government's future obligations for Social Security pales in comparison to the burden for Medicare. In fact, the government's future obligations for Medicare Part D alone exceed all of the unfunded obligations for Social Security.
5. Even if the economy could somehow grow much faster, it would not be enough to solve the problem. For that, you'd have to see our GDP expand at 10% or more every year for the next 75 years!
6. If corrective action is not taken now, then later, when deficits get out of hand, the only way to close the gap will be to cut federal spending by 60% or double all taxes — fiscal shocks that would crush the U.S. economy and depress it for decades.
7. Overall, the federal government's fiscal burden — including expected Social Security, Medicare and other liabilities — totals $50.5 trillion, or $400,000 for every full-time worker in America.