Poughkeepsie Journal - Analysis: U.S. Rated 28 out of 34 in Fiscal Responsibility Report

News Article

By Chuck Raasch

The fiscal health of the U.S. government ranks 28th out of 34 developed and developing nations, a report released Wednesday by deficit hawk and former Comptroller General David Walker concludes.

Walker told reporters the nation has two to 16 years to prevent a debt crisis that could result in economic conditions "worse than a recession" and trigger "dramatic and Draconian" actions by the federal government to deal with the rising unemployment, higher interest rates and devalued dollar that would ensue.

The "Sovereign Fiscal Responsibility Index" was compiled by Walker and four Stanford University graduate students. They looked at overall government debt versus the size of each country's economy, projected how many years each could avoid fiscal crises on current fiscal paths and rated each government's ability to deal with fiscal problems.

"We must change course and we must do it soon," said Walker, who worked for Democratic President Bill Clinton and Republican President George W. Bush.

But that sense of urgency, while felt in Congress, has resulted only in minor action. Congress has been unable to agree on a current year spending target, and so the federal government has operated since October on a series of continuing resolutions that have resulted in less than $10 billion in cuts in spending, little of it controversial.

Walker accused President Barack Obama of being "missing in action" in the budget debate.

"President Obama is not just the commander in chief of the United States military; he is the chief executive officer of the United States government," Walker said. "The enterprise that he serves as CEO for has serious financial problems. It is on an imprudent and unsustainable path."
Panel suggested solutions

Asked to comment on the report, Meg Reilly, a spokesman for the Office of Management and Budget, said: "We have been engaged intensely from the start and discussions with the Congress are ongoing. ... We have already agreed to meet the Republicans halfway (on a spending plan for the fiscal year that ends Sept. 30) and we have agreed to do more, and we will continue to urge Republicans and Democrats to come together to find common ground and get this done."

Many analysts believe decisions on long-term fiscal problems, such as Social Security, will be postponed until after the November 2012 election. Gradually raising the Social Security retirement age to 69 was one of the recommendations of Obama's own deficit commission last year. That commission also suggested a combination of spending cuts and higher taxes that would reduce anticipated deficits by $1 trillion by 2020.

Walker said that had the U.S. enacted the deficit commission's recommendations it would have ranked 8th rather than 28th in his new report. The 34 nations ranked by Walker and the Stanford graduate students, T.J. Augustine, Alex Maasry, Dami Sobo and Di Wang, include most of the nations with the biggest or fastest-growing economies, although the authors said they could not get enough accurate fiscal information from Russia, Switzerland, Turkey and the Czech Republic to rank them.

Walker, whose Comeback America Initiative is financed by billionaire businessman Pete Peterson, told reporters that Congress should attach fiscal spending cut goals when it votes on raising the federal debt limit above $14 trillion this spring.
Obama urged to join talks

Some members of Congress have been talking about doing that. Sen. Bob Corker, R-Tenn., has introduced legislation that would cap federal spending at less than 21 percent of gross domestic product at the end of 10 years. Spending now is about 24.7 percent of GDP. Other members of Congress, primarily in the Senate, are reportedly working on plans that would trigger automatic cuts in the federal budget if Congress itself could not reach certain budget-cutting goals over the next two years.

Last week, 32 Republican and 32 Democratic senators signed a letter urging Obama to get more involved in budget negotiations.

In the Stanford-Walker report, the U.S. only ranked higher than Hungary, Japan and four countries in fiscal crisis: Greece, Portugal, Ireland and Iceland.

The best rankings went to Australia and New Zealand, which both dealt with financial crises in the 1990s. Walker said the two nations streamlined and cut government, made surviving federal programs more results-oriented, and reformed their tax codes to increase revenue and fairness. Both are on a reasonable budget for at least four decades, the Stanford-Walker report said.

"I would respectfully suggest that if New Zealand can do it, the United States can as well," Walker said.

Taxation levels are not a factor in the report's findings, graduate student Maasry said, pointing out that high-tax Sweden and low-tax Chile ranked fourth and sixth, respectively.

"The size of government can vary from country to country," he said. "There are cultural differences. The important thing is that you act fiscally responsible."

Source