Fiscal wake-up tour's inconvenient truth

CONCORD, N.H.
IT'S BRACING TO hear an honest discussion of the challenges that confront this country, even when the reality is daunting.

And just such a candid conversation took place in the first primary state this week -- though not at the initiation of any of the candidates who fancy themselves presidential timber.

Rather, it came courtesy of David Walker, the country's comptroller general, Bob Bixby, executive director of the Concord Coalition, Isabel Sawhill, a senior fellow at the Brookings Institution, and Alison Fraser, director of economic policy studies at the Heritage Foundation , who are tilling the ground for truth as part of the "Fiscal Wake-Up Tour."

Their message was stark: With the boomers set to begin retiring, the long-term costs of Medicare, Medicaid, and Social Security will soon start to explode -- and unless this country deals with those expenses, huge problems lie ahead.

"Whether you are liberal, conservative, middle of the road, Democrat, Republican, Independent, the numbers don't add up," says Bixby. "It's a matter of arithmetic, not ideology."

Yes, the federal budget deficit has ostensibly eased, to about $250 billion last fiscal year. But that figure reflects only how much we borrow to finance current operations. The government is also spending the entire Social Security surplus -- money that will have to be repaid in future years. Factor that in, and the imbalance was more like $435 billion.

And that's only a small part of a large problem. If we stay on our current course, fiscal crisis looms in about three decades, Bixby says. In four decades, Medicare and Medicaid alone will absorb as large a share -- 20 percent -- of gross domestic product as the entire federal budget does today, driving the total budget's share of the economy much higher.

Project out 75 years, and the magnitude of the problem is stunning. In those projections, "we have gone from $20 trillion to $50 trillion in total liabilities and unfunded commitments in six years, primarily because of unfunded entitlements," says Walker, the nation's chief public accountant. That translates to $440,000 per current US household.

"If we eliminated the entire Department of Defense, it would not solve this problem," notes Fraser.

Helping seed the gathering storm is the new Medicare prescription drug plan. As Fraser wryly puts it, her oldest child will finish high school, go to college, and join the workforce just in time "to pay for Donald Trump's drug benefit."

With the campaign commencing, voters should press candidates about how they would address the problem, the quartet said -- and look askance at any candidate who takes off the table the notions of raising more revenue or revamping entitlements.

"As long as Republicans are saying we can't raise taxes, and as long as Democrats are saying we can't touch Social Security and Medicare, we are not going to get where we need to be," says Sawhill, who served as associate director of the Office of Management and Budget in the Clinton administration.

Walker is blunter: Anyone who claims the problem can be solved without reforming entitlements and generating more revenues either doesn't know the facts or isn't telling the truth.

Why does massive public debt matter? Because it mortgages the next generation's future. Their standard of living will be diminished to repay the money we are borrowing to finance ours.

And soon. "We are not talking 100 years from now," says Bixby. "We are talking 20, 30 years from now."

Meanwhile, interest payments, at $227 billion last year -- or about twice what we spent for operations in Iraq and Afghanistan -- have already become the fifth largest item in the federal budget.

And because so much of our new debt is held by foreign countries, we are losing control of our economic destiny even as we put our children in hock to the rest of the world, Sawhill says.

With the alternative minimum tax demanding reform, and the Bush tax cuts slated to expire in 2011, the time for the debate is now, as the presidential campaign is beginning.

The Fiscal Wake-Up Tour has now visited 18 cities to sound the alarm.

"What we have found is that people are starved for truth and starved for leadership," said Walker.

So as the campaign starts, put the candidates through the paces about how they will confront the yawning fiscal gap. And let them know you'll only vote for someone ready to tackle the real problems we face.

Scot Lehigh's e-mail address is lehigh@globe.com.