Story Highlights• Top accountant touring the country to warn people about the federal debt
• Debt has risen from more than $2 trillion in 1986 to nearly $9 trillion in 2007
• Baby boomers will soon stretch U.S. finances even further
By Kyle Almond
Adjust font size:
(CNN) -- He has recently made stops in Iowa, New Hampshire and South Carolina, giving speeches and holding town hall meetings. But he's not seeking the presidency.
David M. Walker, the nation's top accountant, is instead touring the country to warn Americans about the consequences of a federal debt he says is on an unsustainable course.
Walker, who heads the Government Accountability Office (GAO), has visited college campuses, spoken to lawmakers in Washington and toured 19 states in the last year and a half.
He plans to continue through next year and is focusing on states that could affect the 2008 presidential race, in hopes that candidates will heed his message.
"If [the candidates] don't make [the debt] one of their top three priorities, in my opinion, they don't deserve to be president and we can't afford for them to be president," he told CNN.
The federal debt has soared during the last two decades -- from $2.13 trillion in 1986 to $5.22 trillion in 1996 and $8.51 trillion in 2006.
The federal debt now stands near $9 trillion.
The way programs such as Social Security, Medicaid and Medicare are structured, the government will incur an additional debt of $50 trillion during the next 20 years, according to GAO figures.
The $50 trillion total amounts to about $440,000 per American household, Walker said.
The primary drivers behind the additional rise in spending are the baby boomers, who start becoming eligible for Social Security in 2008 and Medicare in 2011.
"We are talking about an unprecedented change in the demographic landscape of America," Walker said. "And we are not prepared for this oncoming wave."
The consequences of federal debt
The federal debt increases every time there is a budget deficit at the end of the fiscal year. A budget deficit occurs when the government spends more than it receives in revenue, as it has for the past five fiscal years and 16 of the past 20, according to the Office of Management and Budget.
The causes for such deficits range from tax cuts and spending increases to congressional earmarks in appropriations bills, costs associated with the wars in Iraq and Afghanistan and catastrophes like the 9/11 terror attacks and Hurricane Katrina.
The government makes up the difference by printing and selling Treasury bills and bonds, which are increasingly being bought by overseas investors looking to profit from the interest.
More than three-quarters of the federal budget deficit from March 2001 through September 2006 was underwritten by overseas investors, according to Christian Weller, the senior economist at the Center for American Progress, a Washington-based, left-of-center think tank.
Such financing is not necessarily a bad thing for the average American because it has helped keep interest rates relatively low, Weller said.
"The budget deficit brought in all of this foreign cash, and that foreign cash basically washed into the credit market, [making] it easier for homeowners and for others to borrow money," Weller said.
Observers are concerned, however, that interest rates could rise if the federal government doesn't show more fiscal responsibility.
For example, a country that typically lends money to the United States could begin charging higher interests rates on the loan out of concern for what it sees as an uncertain U.S. financial future, said Bill Beach, an economist associated with The Heritage Foundation, a conservative think tank.
"So we [would] all end up paying more for mortgages, more for cars and so forth," Beach said.
Beyond interest rates
In the worst-case scenario, other countries -- instead of just charging higher interest rates -- could decide to take their money elsewhere, which could spur inflation and increase financial uncertainty.
However, several things would need to happen -- such as a series of international crises or a collapse in U.S. home values -- for countries to move their investment out of the United States, according to Beach.
Meanwhile, as a result of existing debt, the United States has less money to spend on infrastructure, technology and education -- improvements needed for the country to remain competitive in the global market, Weller said.
"With the government running massive deficits and spending large amounts on debt service, we have less money available to address those concerns, to really face the challenges of the future," he said.
Though economists of different political persuasions agree the federal debt is a growing problem, the solutions they recommend differ. Some ideas include caps on government spending and repealing certain tax cuts.
The GAO's Walker believes reforms of health care and programs like Social Security are the most important steps.
"The fact is that we could eliminate the Iraq war tomorrow. We could eliminate every dime of pork-barrel spending. And we wouldn't come close to solving our problem," he said.
Walker said it is necessary to balance the budget within the next five years, make a down payment on the $50 trillion imbalance and begin reforming government programs.
"It's going to take us probably 20 years to do all the things that need to be done, " he said. "But we need to get started now because the clock is ticking and time is working against us."
Quick Job Search