Movement warns of US bankruptcy
Seeks support for overhaul of federal budget
WASHINGTON - A new nationwide campaign is warning Americans that unless the federal government puts its financial house in order, the country could be bankrupt in a generation.
The project, organized by Peter G. Peterson, an investment banker who served as commerce secretary in the Nixon administration, and David M. Walker, the former comptroller general of the United States, aims to build grass-roots support for wholesale changes to the federal budget - though the overhaul would require middle- and upper-income Americans to give up some cherished government benefits.
Peterson and Walker said yesterday that the campaign, sponsored by the nonpartisan Peter G. Peterson Foundation in New York, will kick off next week with a documentary called "I.O.U.S.A," the first salvo in an aggressive, multimillion dollar effort that will include television advertisements and Internet outreach.
Peterson, the foundation president, and Walker, the chief executive, said the widening gap between government revenues and spending will eventually destroy the confidence in the American economy that has led international lenders to continue to finance the national debt.
"We are going to get a crisis like most Americans have never seen," Walker said during a breakfast sponsored by The Christian Science Monitor.
The national debt is now more than $9 trillion.
Government budget analysts predict, however, that at the current pace of government spending the national debt could balloon to more than 250 percent of the gross domestic product by 2040.
Entitlement programs such as Social Security and Medicare simply will not be able to keep pace with the estimated 77 million members of the baby boomer generation now beginning to retire, Peterson and Walker contend.
About 10,000 baby boomers will become eligible for Social Security benefits each day for the next two decades, and the government already spends more than $4 on older Americans for every dollar spent on children's education, healthcare, and other basic needs.
If changes are not made soon, new generations of Americans face either crippling tax increases or Draconian cuts in government programs, Peterson and Walker warned. And the result will be sharply higher interest rates; a weaker dollar; higher prices for oil, food, and other necessities; and greater unemployment, according to a new foundation publication called "The State of the Union's Finances - A Citizen's Guide."
Government programs that are required by law, such as Social Security, Medicare, Medicaid, and food stamps, account for more nearly two-thirds of the federal budget. In other words, "62 percent of the budget is on autopilot and it increases every year," said Walker.
The mandatory spending on entitlement programs is ballooning so quickly that "there is no discretionary spending left in 20 to 25 years," Walker said, for needs such as highway maintenance and defense programs.
Heading off disaster will require reining in wasteful and lower priority programs, Peterson said, pointing out that government benefits were originally designed as a safety net for the poorest Americans and that more prosperous Americans who have also grown accustomed to them will have to make sacrifices.
A big target for change must be bringing down the cost of healthcare, a major contributor to higher Medicare costs, according to Walker who as comptroller general oversaw the Government Accountability Office, the investigative arm of Congress.
Peterson and Walker said they hope their message will echo on the presidential campaign trail this year.
The foundation plans to meet with advisers to John McCain and Barack Obama and will be evaluating the candidates' policy proposals.
"We are going to do our best to try to make sure it is an issue in the presidential campaign," Walker said.
