U.S. comptroller general warns of fiscal crisis

[UpInArms]

http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2006-03-14T201035Z_01_N14286904_RTRIDST_0_ECONOMY-USA-WALKER.XML

LONDON, March 14 (Reuters) - The United States is headed for a financial crisis unless it alters its course of racking up big budget deficits year after year, Comptroller General David Walker told a British audience on Tuesday.

"If we continue on our present course, a fiscal crisis is only a matter of time," Walker said in the course of an address to the London School of Economics in which he stressed the need for the United States to get its fiscal house in order.

The comptroller general acts as the nation's chief accountability officer and is the head of the U.S. Government Accountability Office, or GAO.

<snip>

"I think it's going to take 20-plus years before we are ultimately on a prudent and sustainable path," Walker said, partly because so many American consumers take their example from the government.

...more...

20 years! That man is an optimist!

[MadMaddie]

1. We all knew it was coming....

in the mean time * cabal keeps towing the line that the economy is rosey!!

[underpants]

3. Well, they only have 3 years left with their hands in the till

Even with a say Frist win THIS pack of hoodlums only have direct access for 3 more years. Aside for fulfilling the "government doesn't work" BS they only have 3 more years to fill their pockets.

[shanti]

32. they can do a lot of damage in 3 years

look what they've done in 5!

[Ezlivin]

2. Yeah but did you hear what Jennifer Aniston had to say about Brad?

We need to get our priorities straight.

I am so fucking cynical right now that I doubt that there is any news bad enough to cause the American Sheep™ to wake from their fitful slumber and act.

Why will a person believe what their psychic says but will ignore scientists and other experts?

[saigon68]

4. The Sheep are snoozing soundly in their heated water beds

Bought (but not paid for) on credit cards from Best Buy.

[MadMaddie]

6. Did you hear the latest Terra, Terra alert....?

Supposedly Al Queda is trying to recruit Black muslims and blond muslims to wear bombs on their bodies and go into games at the college basketball tournaments.....

I am always suspicious at the timing of these warnings.....I want our kids to be safe but me thinks the * cabal is behind this....

[Mithras61]

8. People generally tend to distrust people...

that they think are smarter than they are. People generally believe that those smarter than them will intentionally mislead them and take advantage of them. People generally believe scientists abd other experts are smarter than they themselves are, and so they distrust the experts. Pshycics, however, are believed to be normal intelligence people who will give them the straight poop on what's happening around them.

It's because scientists and other experts aren't conning them and telling them what they want to hear...

[anotherdrew]

14. "people" are as dumb as logs and will be treated AS logs at this rate

God help us all, I know of no other force able to at this point

[bottomofthehill]

5. Its good to see he is talking about it

Here is a good thought, talk about it here instead of overseas. Funny, Al Gore and the Dixie Chicks got into all sorts of trouble for talking out of school overseas, I wonder what will happen to Mr. Walker

[MadMaddie]

7. Oh he is going to get Swiftboated for sure.....

to be replaced with a party hack!!

[femrap]

27. Maybe he is just the setting the stage to rid the US of

'entitlement' programs....health care, Social Security, education. As we all know, the budget for the Pentagon eats up all of our tax dollars, and it will be increased...that's where all the corporations make the big bucks.

As for the American Sheep (lol...love the Trademark)...I wonder how are they going to handle poverty? They're not smart and they have guns....not a good combination, is it?

[54anickel]

15. He has been, but the media hasn't bothered to cover him.

We had a bit of a discussion on this in the SMW thread (my apologies for being repetitive). Roland99 found this article from the WAPost from last May. I know I've posted articles covering him in the past, though they weren't from any of the MSM.

Almost Unnoticed, Bipartisan Budget Anxiety
http://www.washingtonpost.com/wp-dyn/content/article/2005/05/17/AR2005051701238.html

snip>

While Washington plunged into a procedural fight over a pair of judicial nominees, Stuart Butler, head of domestic policy at the conservative Heritage Foundation, and Isabel Sawhill, director of the left-leaning Brookings Institution's economic studies program, sat down with Comptroller General David M. Walker to bemoan what they jointly called the budget "nightmare."

There were no cameras, not a single microphone, and no evidence of a lawmaker or Bush administration official in the room -- just some hungry congressional staffers and boxes of sandwiches from Corner Bakery. But what the three spoke about will have greater consequences than the current fuss over filibusters and Tom DeLay's travel.

With startling unanimity, they agreed that without some combination of big tax increases and major cuts in Medicare, Social Security and most other spending, the country will fall victim to the huge debt and soaring interest rates that collapsed Argentina's economy and caused riots in its streets a few years ago.

more...


He was appointed to a 15 year term by Clinton in 1998. http://www.onpointradio.org/shows/2005/07/20050726_b_main.asp

edit to add - here's a link to some of his addresses in the past. http://www.gao.gov/cghome.htm

I was looking for the one where he used the term "leadership deficit" of the US.

[freefall]

22. Mr. Walker was appointed to his position for a 15 year term. The

position was given that term in order to remove the incumbent from political pressure. Mr. Walker has been making essentially the same speech whenever he gets a chance, mostly in the US, for several years. I first heard him at least four years ago. His speeches have been carried on NPR and reported in the press. Nobody bothers to pay attention because they don't like the message and because he says things that no politician regardless of party wants to hear. Maybe the fact that he made this speech overseas will get more attention. That seems to have worked in your case, bottomofhtehill. Let's hope it works with the sheeple too.

Peace,

freefall

[SpiralHawk]

9. Thanks a pantload, George Bush and Republlican Cronies

You have tossed America's golden economic well being into the cosmic crapper

[no_hypocrisy]

10. No shit, Sherlock. n/t

[ProfessorGAC]

11. Duh!

A paper i published in 1991 established that the recession (which was even worse than advertised) of the late 80's & early 90's was causative traceable to the running of huge deficits for 7 years in a row. I won an award for that paper, so why this should be news to any economists, or why any economists would now realize this, 15 years later, is a mystery to me.
The Professor

[Mithras61]

12. Hey, Professor!

Good to see you again...

The reason so many are surprised by this is the lack of light where they've been keeping their head... :D

[ProfessorGAC]

13. That Must Be It!

I mean this guy is a "professional" economist. Doesn't he read the journals? I wrote that article 15 years ago, and won in the analysts' class. Maybe the mathematics involved were above this buffoon's head and he didn't understand. Of course, that would be even though the conclusions were written in plain english, and that it explicitly stated that sustained gov't borrowing would lead to potentially catastrophic recessionary behaviors and excessive inflation.

Like i said: Duh!
The Professor

[Piscis Austrinus]

16. Professor - I'd like your thought on this...

Since Econ is your area of expertise - and it sure isn't mine!

The US has a combination of a large trade deficit, a huge national debt, significant consumer debt, and deceptively high unemployment. In short, we're leveraged pretty hard.

I understand also that Iran is going to open an oil-for-euros bourse this month, which is a departure from the normal standard of using dollars. This sounds to me as though it would weaken the dollar against the euro.

Finally, the Fed has discontinued the M3 report. If I understand right, the purpose of the M3 is (was!) to provide a transparent account of the total number of US dollars in circulation worldwide.

Am I crazy, or does this look like "fire up the presses" time? Seems to me that without the M3, there's no way to tell for sure exactly how many greenbacks are rolling out. This looks like a situation ripe for an attempt to print our way out of debt. (It also looks like the situation under President Carter - devaluation of the dollar coupled with that wonderful term, "stagflation.")

I've been thinking on these lines for a while now. What scares me is that I work among a lot of people who make really good salaries and have significant investments, yet not a single person I've asked has even heard of the M3 (and most of these people earn in six figures). Am I correct in thinking that if these people don't diversify their holdings fairly soon, they might see a memorable hit in their finances?

Just wondering. I only know enough to know I'm ignorant, so I'd really like your thoughts on the matter.

Thanks...
Peace
PsA

[notadmblnd]

18. Excellent question

I've been telling my money guy for about 2 years to put some of my money in foreign currency. He looks at me like I'm nuts. Am I wrong to want to do this?

[ProfessorGAC]

19. My Takes, In Reply

The leveraging isn't as bad as it looks. It's bad from a U.S. history perspective, but many countries (Japan, Western Europe in the 50's and 60's, Mexico in the late 80's, So. Korea in the mid-90's) had far higher leverage levels and their economies survived. So, while i certainly don't disagree about the fact that we're at high degrees of leverage and the economic condition is mediocre at best, it's far from panic time. I'm of the opinion that economies at our scale move glacially and are not subject to sudden shifts of tectonic proportion. So, there is plenty of time to correct the mistakes. But, they DO have to be corrected.

As to the Iranian bourse thing, don't get me started. I'll get flamed again. In my research, there is absolutely no evidence that an economy can be other directed by the choice a supplier makes in currency of exchange. The Iranians can change but i don't see that having a large impact on the economy. It's going to go where it goes based upon monetary and fiscal policy without much regard to extrinsic decisions like that. And, since the neocons believe that the shift to petroeuro (from petrodollar) would be bad, i'm reflexively inclined to disbelieve it, since they've been wrong about everything else.

You don't M3 to tell how much cash is in circulation. Cash actually in circulation is in M1 and all cash equivalents are in M2. M3 was not a terribly useful metric anyway and the failure to report that is hiding, if anything, how much foreign-held debt there is. But, it's not really hiding it, just making it harder to figure out. We can still figure out that number quite exactly anyway through other market metrics. So, eliminating M3 is not a precursor to, or a smokescreen behind which to fire up the presses. There's plenty of cash in circulation and there would be no real advantage to printing more dollars anyway. Even if the gov't printed another trillion dollars (they won't), their balance sheet still wouldn't mesh. The deficits would still exist as a function of receipts v. outlays, and their cash flow sheets would still indicate negative numbers.

The hit on people's finances may happen if the market corrects to reflect the stagnation of the real economy. Right now, there is great deal of hedging expecting an eventual uptick in the real economy. Investors are, by and large, going very long right now. From a pure economic perspective, this is actually good because it stabilizes the market v. the stagnant economy and reduces the velocity of money within the market. That should keep the market from going nuts due to mid-range speculation. (See 1987 as an example of where the economy was flattening and the market went wild anyway.)

But, again i don't think the elimination of the M3 report will have anything to do with that. More likely, if the economy stays flat and if energy prices keep rising, the overall consumption of other goods and services will fall as people have hit their "lack of comfort" level of debt. That will cause a far more noticeable contraction of the economy which will scare the daylights out of investors. Then investment value may fall by enough to cause some pain.

These are only opinions, but they are at least, based upon a lot of causative modeling and data crunching.
The Professor

[Mithras61]

26. Thanks for your perspective...

it certainly helps reassure me on a number of things that have had me worried recently, and upon which there has been a noticeable lack of hard information from reliable sources.

[cantstandbush]

17. It's that great big sucking war machine and those huge tax cuts

for the wealthy and the criminals running our economy that are to blame.

[MGKrebs]

20. All is going according to plan then.

Grover Norquists' master plan is coming down the home stretch. Soon, the government will not be able to afford anything but military spending and servicing the debt. No more freeloaders!

Start filling up the bathtub.

[saigon68]

25. And those Tramps

Won't get abortions anymore </sarcasm>

[populistdriven]

21. we knew the path the Repukes were on during Reagan, they have not altered

their course www.zfacts.com

[Lasher]

29. Thanks for the great link

Added to my favorites.

[redqueen]

30. They've gotten worse! At least Reagan raised taxes again! n/t

[CoffeeCat]

23. I'm sorry, I didn't hear you!

...What you're saying involves numbers and graphs!

Please! I'm more concerned about driving to Walmart in my SUB and buying cheap Chinese trinkets!

Numbers! Bah!

Double Bah!

(This message has been brought to you by the USFA (United Sheeple Federation of America)

[HamdenRice]

24. One reason the long term "fiscal crisis" is red herring

It is certainly true that we would be heading for a financial crisis given our current budget priorities. And it is true that if we maintain the same priorities, entitlements like medicare would have to be cut.

But in "framing the debate," one thing that the analysts never talk about is how drastically our budget priorities could be changed. For example, their analysis assumes that military spending would continue to be roughly proportional to what it is now.

But if there were a real dollar crisis leading to a world financial crisis, the US would be forced to cease spending on its military as much as all the other military powers combined.

I used to watch a PBS show on defense hosted by retired generals who no longer were in thrall to the contractors and their superiors, and they routinely said that we could meet all our strategic goals with a defense budget reduced from what was then $300 billion defense budget, to about 1/10th of that or about $30 billion.

So next time someone tells you that we may experience a financial crisis, remind them that if we put the $400 billion + defense budget on the table -- along with our idiotic imperial/military foreign policy -- there would be no financial crisis.

[Lasher]

34. Funny how New Zealand spends $500 million a year on defense

And we spend $500 billion - ten times more than any other nation. Yet we are in constant danger of being attacked, while New Zealanders don't seem to be threatened. Surely we could manage to get by on a measley $50 billion or less like every other nation on earth is doing.

Edit: Maybe we need to spend 10 times more to protect ourselves because everybody hates us for our freedoms.

[wordpix2]

28. notice he says this to a Brit audience, not American-tell it to BushCheney

& Repug Congress, why don't you, Walker?

[shantipriya]

31. fiscal crisis

The only thing which prevents and/or prolongs the inevitable collapse of US ecomony is the fact that the US dollar is an international currency. So we go on printing dollars as needed to enact tax cuts and engage in unnecesary wars. The day foreigners demand payments in non-US dollar currencies like Euros, the party will be over overnight.The stock and bond markets would tank like never before and our stanadard of living will drop to levels of some third world countries!
All this thanks to Republican policies of tax cuts and pepetual wars!!!

[reprobate]

33. Let me suggest that it is all intentional.

The looting of the treasury, the incompetence of the reaction to Katrina, the corruption in congress, possibly even the tragedy of Iraq, and the supposed 'bad' intelligence. I believe this all to be intentional, with the goal of showing that government is intrinsically unable to solve problems and it's only the private sector that can help.

Remember Grover Norquist? "We're going to starve government until it's small enough to drown in a bathtub."

[Bandit]

35. You mean we can't keep increasing our Debt by over $100,000.00

a Second. That's right. The USA is increasing it's National Debt by over a hundred thousand dollars a second and we are paying interest on that debt at over a half million dollars a minute. I wonder if some American in Mississippi or Louisiana could use some of that? :shrug: Doesn't matter because we must keep huge tax cuts for extremely wealthy..They need the money far far more than any Average American.

[UTUSN]

36. Why is he telling Brits instead of guesting all over t.v. here? n/t

[raccoon]

37. Reckon the corporate media hos don't want to air that? nt

[raccoon]

38. Notice what he's suggesting as a "remedy:"

"Walker said some combination of reforming (translated: cutting out) so-called entitlement spending like that for health care and Social Security, curbing discretionary spending and possibly changes in tax policy (translated: more tax cuts for the haves and have-mores; possibly tax INCREASES for everybody else) likely will be needed to get deficits under control."

OF COURSE, he acts as if a decrease in military spending is automatically off the table.

[wordpix2]

39. is this comptroller a * appointee?

[raccoon]

40. No, he became CG during Clinton's admin.

"David M. Walker became the seventh Comptroller General of the United States and began his 15-year term when he took his oath of office on November 9, 1998."

http://www.gao.gov/cghome/dwbiog.html

[FULL_METAL_HAT]

41. Did you know the Comptroller General can't be fired by El Residente??

Because of his unique position, and 15 year term (ending in 2013), David Walker may be one of the few people who has enough independent power to save the country.

From:
http://en.wikipedia.org/wiki/GAO and http://en.wikipedia.org/wiki/Comptroller_General_of_the_United_States

The GAO is headed by the Comptroller General of the United States, a unique non-partisan position in the U.S. Government. The Comptroller General is appointed by the President, by and with the advice and consent of the Senate for a 15-year, non-renewable term. The President selects a nominee from a list of at least three individuals recommended by an 8 member commission of congressional leaders. The Comptroller General may not be removed by the President, but only by Congress through impeachment or joint resolution for specific reasons. Since 1921, there have been only 7 Comptrollers General, and no formal attempt has ever been made to remove a Comptroller General. The long tenure of the Comptroller General and the manner of appointment and removal gives GAO a continuity of leadership and independence that is rare within government.

The position is currently filled by David M. Walker, a former Arthur Andersen partner and a Labor Department official in the Administrations of Presidents Ronald Reagan and George H. W. Bush. The seventh Comptroller General of the United States, Mr. Walker was appointed by President Clinton, and began serving his 15-year term in 1998.
<snip>