Bankrupt

For the 11th straight year, the federal government failed its financial audit, GAO announced Monday, in a widely anticipated finding that Comptroller General David Walker used to underscore the government's troubled fiscal health.

"If the federal government was a private corporation and the same report came out this morning, our stock would be dropping and there would be talk about whether the company's management and directors needed a major shake-up" Walker said this afternoon in a speech at the National Press Club.

Just before his address, GAO issued a statement saying it could not express an opinion on the government's fiscal 2007 consolidated financial statements, mostly due to the Defense Department's financial management problems. In an announcement this morning, the agency also pointed to the government's failure to account for intergovernmental activity and balances between agencies and federal agencies' "ineffective process for preparing consolidated financial statements."

But Walker pointed to some positives. For the first time, his agency gave an unqualified opinion on the government's "Statement of Social Insurance," which deals with the most expensive programs, such as Social Security, Medicare, railroad retirement and black lung healthcare. Walker used his speech to reiterate the themes of his "Fiscal Wake-Up Tour," through which he has warned that rising healthcare costs and baby boomer retirements will cause an unmanageable increase in debt burdens.

The federal government's total liabilities and unfunded commitments for future payments related to Social Security and Medicare are now estimated at $53 trillion, in current dollar terms, up from $20 trillion in 2000, Walker said.

Medicare accounts for $34 trillion of the gap, according to GAO. Baby boomers, some of whom will start to draw early retirement benefits in a few weeks, "will bring a tsunami of spending" as they retire, Walker said.

With Bush administration officials looking on, Walker took particular aim at the White House's prescription drug benefit program and the way the administration sold the plan. Medicare is worth about $8 trillion of the gap created by Medicare, according to GAO.

"Incredibly, this number was not disclosed or discussed until after Congress had voted on the bill and the president had signed it into law," Walker noted. "In many ways, the 2003 Medicare prescription drug episode represents government truth and transparency at its worst," he added.

Walker also used the speech to criticize the spending habits of "too many Americans," the lack of serious policy debate in the media and "the widespread myopia, tunnel vision and self-centeredness in Washington."

But he noted the fiscal wake-up tour has generated positive media reaction. A commercial documentary based on Walker's message is set for general release next spring and was accepted for the 2008 Sundance Film Festival, Walker said.

"I am not planning to quit my day job for a Hollywood career," he joked.