David Walker is considered by most people knowledgeable on the subject to be the most credible authority on the nation’s true financial situation and specifically on the long term financial obligations we have amassed as a nation. Walker is the president of the nonpartisan Peter G Peterson Foundation and previously served as Comptroller General of the United States from 1998 to 2008. As the federal government’s chief auditor and even more so since joining the Peterson Foundation, he has been a leading advocate for addressing the long term fiscal challenges facing the country.
The Peterson Foundation tracks the real national debt, our current national financial obligations, which they calculated as of September 30, 2008 to stand at an astounding $56.4 trillion. That’s more than the total net worth of all the people in the country combined. The Peterson Foundation does the math to come up at over $184,000 of federal government liabilities for each man woman and child in the country or $483,000 per household, which is about 10 times median household income. And that was before the bank bailouts, before the stimulus package and before the $1.75 trillion deficit the President’s budget projects for the current fiscal year.
According to a concise summary by the Tax Policy Center, in 2007, the federal government revenues totaled $2.5 trillion, an amount equal to 18.8% of GDP. Of that revenue, 45% was federal income taxes and 35% was from payroll taxes.
When one considers that all the obligations our government takes on ultimately have to be paid back by its citizens, those revenue numbers seem pretty hard to reconcile with the obligations Mr. Walker and his associates report for our government. I know if these were the kind of numbers my business was reporting, my banker would have told me long ago that the debt to revenue ratios simply don’t make sense.
And its getting worse. According to the Peterson Foundation, the Medicare Hospital Insurance Trust Fund is already in deficit spending and the Social Security revenues that the government currently borrows from to support federal budget deficit spending will flip from its current surpluses to deficits by 2017.
It is hard to imagine how anyone could consider current government spending levels or those throughout the Bush administration to be remotely sustainable. It is hard to imagine a path to meeting the massive obligations our government has encumbered us with. Its hard to imagine that things won’t become even more challenging as the government has to budget responsibly when social security revenue surpluses evaporate. Its hard to imagine that the government will be able to meet all its ambitious agendas as an ever increasing amount of revenues has to be dedicated to repaying debt. And it is hard to imagine that folks who have been lending to our government will continue to do so as we continue to spend our way to an ever more untenable financial situation.
And those huge numbers reflecting federal government obligations don’t count the massive obligations encumbering state and local governments, let alone corporate debt or our own personal and business debt obligations.
In both the financial markets and the real markets of America, it is becoming increasingly obvious that almost everyone is feeling unable or at very least unwilling to spend or invest. It seems clear that our massive debt burdens at every level of society are having their inevitable impact.
It is really hard to imagine how more borrowing and deficit spending will help.
I don’t know what the answers are to these huge challenges. But as the old saying goes, it seems that when we find ourselves this deep in a hole, it may be time to stop digging.