U.S. Comptroller Warns: U.S. Government`s Worsening Financial Situation

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U.S. Comptroller Warns: U.S. Government`s Worsening Financial Situation

ï¿½U.S. Comptroller General David Walker and Federal Reserve Chairman Alan Greenspan are both warning Members of Congress, the press and the rest of the American people of the long-term lack of sustainability in entitlement programs such as Social Security and Medicare. They say the cuts are necessary to reduce the deficit and to keep the programs ï¿½solvent and sustainable.ï¿½

In a recent speech at The National Press Club, Walker said that our nationï¿½s financial condition is ï¿½worse than advertised and tough choices lie ahead.ï¿½ Walker also observed that, ï¿½Americans can no longer take for granted that current federal entitlement programs will continue in their present form.ï¿½

ï¿½Further, Chairman Greenspan ï¿½ in prepared written testimony before the House Committee on the Budget ï¿½ said with respect to the changing ratio of covered workers to retirees, ï¿½This dramatic demographic change is certain to place enormous demands on our nationï¿½s resources ï¿½ demands we almost surely will be unable to meet unless action is taken. For a variety of reasons, that action is better taken as soon as possible.ï¿½

"TSCL is also concerned about the future of both Social Security and Medicare, and agrees that action is best taken sooner rather than later. However, we are concerned with Chairman Greenspanï¿½s suggestion that Congress might consider a chained consumer price index upon which to base Social Security COLAs. TSCL believes that such a change would reduce COLAs for seniors at a time when seniors can ill afford smaller increases because of double-digit increases in Medicare premiums and health care spending.

Recently, The Washington Post reported that a corporate tax bill making its way through Congress has been widely criticized for ï¿½its mountain of special-interest loopholes and other provisions.ï¿½ A recent study by the General Accountability Office (GAO) found that nearly two-thirds of the companies operating in the United States didnï¿½t pay any federal taxes from 1996 through 2000. Those were years when the economy boomed and corporate profits were soaring. Since then the economy has gone through a recession and corporate tax receipts have shrunk to just 7.4% of the overall federal revenues, down from 32% in 1952.
The New York Times has reported, ï¿½After two rounds of Bush tax cuts, taxes fell to a percentage of the economy not seen even in the deepest recessions, since 1955. Even if the economy recovers fully, the country would have to revert to a 1957-era government to break even. In 1957 Medicare did not exist, much less a war on terrorism.ï¿½

With recent record-high gasoline prices, as well as rising food and health care costs, TSCL is concerned that some seniors may be going without necessities for healthy living. TSCL recently became the first seniorsï¿½ organization in the nation to support legislation for a Constitutional Amendment, H.J. Res. 88, which would lock away surplus Social Security and other retirement trust fund payroll taxes from the federal deficit. The League believes this is the first step in giving a more accurate accounting of our nationï¿½s finances. The government would not be able to use surplus Social Security taxes to make the deficit appear smaller.

ï¿½In addition, TSCL vigorously opposes the concept of a chained CPI as currently being discussed. Rather, we support legislation (H.R.2262) that would base the Social Security COLA on a consumer price index for the elderly (CPI-E), which we feel would more accurately reflects the portion of their income they must spend on health care costs.

Sources: ï¿½Financial Literacy: Understanding Both Our Nationï¿½s and Our Own Financial Future,ï¿½ David M. Walker, Comptroller General of the United States for the National Press Club, May 17, 2004. ï¿½Why Companies Pay Less,ï¿½ Steven Rattner, The Washington Post, May 18, 2004. ï¿½Talking Deficits,ï¿½ The New York Times, May 23, 2004. "Testimony of Chairman Alan Greenspan Before the Committee on the Budget, U.S. House of Representatives, February 25, 2004."

July 2004