The nation's top accountant warned a half-full Salomon 001 Thursday against fiscal irresponsibility by the government or its citizens and called on the next president to make sober fiscal policy a top issue.
"If the next president does not make fiscal responsibility one of the top three priorities, we have a serious problem ... and we can't afford to have them as our president," said David Walker, the comptroller general of the United States.
Walker, who is the head of the General Accountability Office, spent much of his speech outlining the dire state of the national deficit and called for dramatic bipartisan efforts to control government spending and increase the savings rate among citizens, noting that the leadership on fiscal issues has not been up to the challenge in recent years.
The national debt is nearly $9 trillion, he said, and during fiscal year 2006 the government ran a deficit of between $250 billion and $450 billion, depending on how the number is measured. "Those are big numbers," he said.
"If you look at GAO's long term budget simulations, you'll find that if we don't make some tough choices soon," tax burdens in 2040 may be double, he said. "That's the prime of your earning careers," Walker said.
The GAO is an independent agency in the legislative branch that investigates whether taxpayer dollars are spent efficiently and reports its findings to Congress. According to the GAO's Web site, the office saved the government $51 billion - or $105 per dollar invested in the office - in fiscal year 2006.
The comptroller general serves a 15-year term, giving Walker what he described as the freedom to criticize spending issues in the government of either party. Walker's term expires in 2013.
The major issue lawmakers must address is rising spending on health care, Walker said. "Heath care is the number-one fiscal challenge for the federal government, ... state governments and ... American business. If there's one thing that could bankrupt America, it's health care," he said.
Walker called the Medicare prescription drug program - which was signed into law with an "$8 trillion price tag" - the "poster child" of the problem.
Walker also warned of a savings deficit caused by overspending by U.S. citizens.
"For the last two years in a row, American households ... have been spending more money that they make. ... In the not too distant future, they may not be able to make the minimum payment," Walker said. "The last time American households spent more money than they brought in ... (was) the Great Depression." He added, however, that he doesn't think another major depression is on the horizon.
Without savings, Walker cautioned, the nation will be unable to invest in the research and development that leads to innovation, economic growth and greater disposable income.
"We are in a situation where we are eating our seed corn and mortgaging our future because we're living for today rather than preparing for a better tomorrow," Walker said.
Foreign investors with high savings rates such as China, Japan and Korea currently fund the U.S. budget deficit and allow the Federal Reserve to maintain fairly low interest rates, Walker said.
"They have been willing to lend us their excess savings at reasonably low interest rates to fund our excess consumption," Walker said. "The question is, how much longer will they be willing to lend us tens and hundreds of billions of dollars that we will need if we don't increase our own savings rate? And what price will we have to pay in order to attract that capital?"
In 2006, the percentage of the federal budget dedicated to paying off interest on the debt increased from 7 to 9 percent, or $227 billion, Walker said. "If there's a single item of waste in the federal budget, it's probably interest on the federal debt because you get nothing for it. It's paying for past sins."
A growing deficit or higher interest rates could send the nation "past the tipping point," Walker said.
"We've gone from being the world's biggest creditor nation to the world's biggest debtor nation," Walker said. "The miracle of compound (interest) works for you when you're an investor, but (it) works against you if you're a debtor."
Walker called on officials to consider the long-term sustainability of tax cuts and spending increases and restore budget controls, similar to those that expired in 2002.
Walker said students should plan and save for their retirements. "You're going to need it," he said.
As the 2008 presidential election approaches, Walker said he will seek out presidential candidates from both parties after they have been winnowed down to speak with them about fiscal issues. He said it is unlikely that President Bush will enact the sweeping changes he believes are necessary.
"I try to get people to look longer range, look broader, do the right thing," Walker said. Walker also called on students to take on public service positions, including teaching.
Students reacted positively to Walker's speech.
Cash McCracken '08, chair of the Undergraduate Finance Board, said the lecture was "an excellent speech." He said its nonpartisan nature was "refreshing" and added that he was disappointed more people didn't show up.
Zachary Townsend '09, a former Herald opinions columnist, called Walker's message a "sobering" look at a "pending fiscal disaster."
"For a lot of people in our generation, there's always that question of 'What can I do?' " Townsend said. "He answered that."
Ben Creo '07 said Walker's lecture was an "excellent presentation."
"(It was) right down the middle. It was appealing to everyone regardless of what their stripes are," he said.
The lecture was a part of the John Hazen White Lecture Series, sponsored by the Taubman Center for Public Policy.
