This recent column by Jacob Sullum of Reason is worth reading in conjunction with Robert J. Samuelson's latest effort to prod us into a serious discussion of entitlement spending. (I blogged Mr. Samuelson's column in my previous post.)
Mr. Sullum's column brought to my attention a recent speech by David M. Walker, the Comptroller General of the United States. In that capacity Mr. Walker is the head of the U.S. Government Accountability Office, and thus he can be expected to know a thing or two about entitlement spending. You can use this link to download the text of Mr. Walker's speech (PDF, 124 KB).
Here's a mind-boggling excerpt to keep you awake at night:
Believe it or not, the federal government's total liabilities and unfunded commitments for future benefits payments promised under the current Social Security and Medicare programs are now estimated at $53 trillion, in current dollar terms, up from about $20 trillion in 2000. This translates into a defacto mortgage of about $455,000 for every American household and there's no house to back this mortgage! In other words, our government has made a whole lot of promises that, in the long run, it cannot possibly keep without huge tax increases.
The Medicare program alone represents about $34 trillion of our current $53 trillion fiscal gap. If there is one thing in particular that could bankrupt America, it's runaway health care costs. And don't forget, the first "baby boomers" will begin to draw their early retirement benefits under Social Security in a couple of weeks! And, just three years later, they will be eligible for Medicare. When "baby boomers" begin to retire in big numbers, it will bring a tsunami of spending that, unlike most tsunamis, will never recede.
The prescription drug benefit alone represents about $8 trillion of Medicare's $34 trillion gap. Incredibly, this number was not disclosed or discussed until after the Congress had voted on the bill and the President had signed it into law. Generations of Americans will be paying the price — with compound interest — for this new entitlement benefit. In many ways, the 2003 Medicare prescription drug episode arguably represents government "truth" and "transparency" at its worst. Unfortunately, based on adding the prescription drug benefit and other spending and tax actions, the federal government seems to be ignoring the first rule of holes in connection with its fiscal affairs. Namely, when you're in a hole, stop digging!
If trillions of dollars aren't big enough to get your attention, believe it or not, in fiscal 2007 over 62 percent of the federal budget was on "auto-pilot" and this percentage is on the rise! Shockingly, the major functions expressly envisioned by our Founding Fathers as a proper role for the federal government — things like national defense, homeland security, foreign policy, the treasury function, the federal judiciary, the Congress and the Executive Office of the President — are in the remaining 38 percent of the federal budget! And this portion of the budget is set to get squeezed.
Mr. Walker's speech was supposed to roll out a new report intended to instruct the American people about the fiscal challenges in our future. An abstract is available here, and that page contains a link to a PDF of the full report.