Tuesday, August 2, 2011

USA 3 Years Away From Greece-Style Debt Crisis (Video) *David M. Walker: USA has $60+ trillion liabilities*

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USA owes a grand total of $61.6+ trillion in funded and unfunded liabilities

USA Has Staggering Debt of $61.6 Trillion The United States of America owed $61.6 trillion in funded and unfunded liabilities as of September 30, 2010. This debt grows by several trillion per year and is now even higher. These liabilities include public debt, unfunded pensions and retirement, retiree health care, unfunded social security and medicare, and a range of commitments and contingencies. The included funded liabilities, the public debt, is an estimated $14.3 trillion today per the U.S. Public Debt Clock. The unfunded liabilities are a discounted present-value over a 75-year period.

Debt Ceiling Agreement "Very Modest First Step" The current budget and debt ceiling agreement provides for $2.1 trillion to $2.4 trillion in spending reductions, they "think", over 10 years. David Walker states, "This is a very modest first step on a long and difficult road to restore fiscal sanity". Aside from this debt ceiling agreement first step, including the special joint Congressional committee to cut further in 2011, Walker says "The real question is: "When are we going to get into real medicare, medicaid, social security, and tax reform to be able to deal with the tens of trillions rather than single digit trillions?".

Too Big, Too Much, Too Long Walker says, "Government has grown too big, promised too much, and waited too long to restructure. Our problem is overwhelmingly a spending problem. CNBC reports, "We are less than three years away from where Greece had its debt crisis as to where they were from debt to GDP," he said. The US is nearing the 100 percent threshold which historically shaves about one percentage point off GDP, which was just 1.3 percent for the second quarter and 0.4 percent for the first quarter. With the recent increase in the debt ceiling and continued higher budget deficits at the federal level, the US is on course for its own crisis, Walker said. "We are not exempt from a debt crisis," he said. "We're never going to default, because we can print money. At the same point in time, we have serious interest rate risk, we have serious currency risk, we have serious inflation risk over time. If it happens, it will be sudden and it will be very painful."

Short-Term vs. Long-Term The July 2011 Comeback America Initiative report, Restoring Fiscal Sanity,  recognized that long-term structural reform is necessary. The USA has a competitiveness problem, an economic growth problem, and an unemployment and underemployment problem. Both short-term spending stimulus, long-term spending cuts, and structural reforms to entitlement programs and taxes was recommended. This would provide more stability and certainty to the business environment. "We don't want to have significant spending reductions while the economy is weak with high unemployment, but we must have a plan for significant spending reductions over time", Walker says. His plan cuts spending, via entitlement reforms by over $50 trillion over 24 years. A "solvent, sustainable, secure social safety net" is maintained. A drastic tax reform is also called for which is equitable but increases revenues. "Doing nothing" will not work. "You can't solve this problem without comprehensive entitlement and tax reform".  

US Less Than 3 Years Away From Being Greece: Walker The nation should deal with the disease, instead of the symptoms, says David Walker, Comeback America Initiative founder/president/CEO, who says the real reform should be in place to ensure more economic stability.

About David M. Walker David M. Walker served as the seventh Comptroller General of the United States and was the CEO of the U.S. Government Accountability Office (GAO) from 1998 to 2008. He is currently the president and CEO of the Peter G. Peterson Foundation, Walker is a frequent speaker, writer, commentator, and congressional witness. He has appeared on a significant number of television networks, cable channels, and radio programs and has written for many major publications. He's one of America's foremost independent financial experts. As comptroller general of the United States and head of the U.S. Government Accountability Office (GAO) from 1998-2008, "the nation's top auditor" David M. Walker warned Congress, and the Clinton and George W. Bush administrations that America faced a growing fiscal imbalance due largely to known demographic trends and rising health care costs. Unfortunately, the numbers have gotten worse and our fiscal gap has grown dramatically in recent years. Now, as president and CEO of the non-partisan Peter G. Peterson Foundation, Walker works full-time to raise public awareness regarding our nation's growing deficits, mounting debt burdens and dangerous dependency on foreign lenders.

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