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Everyone knows that the federal budget deficit is going to be huge in the next fiscal year: a half-trillion dollars or more. And that's before the $87 billion the President has requested for rebuilding Iraq next year. But over the next few decades, the budget deficit may actually soar tens of trillions of dollars above and beyond that amount--due to largely unaccounted-for costs from entitlement programs, warned Comptroller General David Walker in an interview with Fortune.com this week.
A deficit that high could be a fiscal catastrophe, says Walker, who runs Congress's investigative arm, the General Accounting Office. Most Americans don't know about these liabilities because they don't appear in any of the ten-year estimates that official Washington relies on to write its budgets and to form new policies, says Walker, who is scheduled to give a major address to the National Press Club next Wednesday in Washington, D.C., to warn about the matter. He intends to "issue a wake-up call that we face serious and structural deficits that we need to start doing something about."

Washington experts have been forecasting annual deficits of around $500 billion, but Walker says those numbers don't take into account that, as the Baby Boom starts to retire over the next decade, entitlement programs, especially Social Security, Medicare and veterans health programs, will balloon in cost. "There are tens of trillions of dollars in discounted present value of commitments and obligations that aren't adequately addressed," Walker says. "We would have to have tens of trillions of dollars invested at Treasury rates today to make good on those promises and we just don't have it." And the gap between incoming revenue and expenditures on these programs "is too great to simply grow our way out of the problem," he says. "Tough choices have to made."

Walker declined to give a complete listing of solutions he will suggest next week. But he gave a few hints. For instance, he plans to propose that better, more accurate measurements should be published about the long-term costs of programs now on the books. He also would like to begin "a massive education campaign" to inform the public about these concerns. "One of the biggest problems is that the American public doesn't understand the nature and magnitude of our challenge," he says. As the Baby Boom hits retirement age starting in 2008, "we face a demographic tidal wave that is unprecedented in the history of this country," he says.

How to fix the budget? "We're going to have to look beyond entitlement programs," Walker says. "We're going to have to review and examine a wide range of government activities on the spending side and on the tax side. We need to engage in a fundamental review and reengineering that will take years, and it's important that we start now."

Walker's warning comes at a time when President Bush and Congress have their hands full dealing with short-term problems, particularly rebuilding Iraq, so it's not clear how much impact his comments next week will have. He doesn't have the authority to change laws. But as a high-ranking officer of Congress, his speech will be widely broadcast and is likely to become part of the burgeoning debate about the budget deficits this year. Nonetheless Walker says he hopes his notions will be discussed at some point and "the sooner the better."

By: Jeffrey Birnbaum