David Walker

The upbeat numbers the White House released Wednesday on the federal budget are good news, but not nearly good enough to make much of a difference in the country's long-term financial health.

Meanwhile, the Pentagon is doing a poor job keeping track of the billions of dollars it is spending in Iraq.

Those are the views of David Walker, Comptroller General of the United States. In that role, Walker serves as auditor of the government's financial statements.

Earlier this week, the White House Office of Management and Budget (OMB) said that the federal budget deficit for the year ending Sept. 30 would be $333 billion. That is $94 billion less in red ink than the OMB had projected in February. The improvement was due in large measure to higher-than-expected tax revenues. The administration said it was now ahead of schedule in its effort to halve the deficit before President Bush leaves office.

"Obviously lower short-term deficits are much better than higher short-term deficits. I think that is a positive note," Mr. Walker said at a Monitor breakfast with reporters.

But Walker, who heads the Government Accountability Office (GAO), cautioned that, "it is important to recognize the reality that our long-range deficits are large and growing." The real problem, he argues, is a major long-term imbalance between the income available to the government and the scope of promised benefits in programs like Social Security, Medicare, Medicaid, and private pension insurance.

The gap between promises made and funds to cover those promises, "is much worse today than it was two years ago and it is getting worse every day and the clock is working against us," Walker said. One cause for the deterioration: The prescription drug bill passed by Congress in late 2003 added $8.1 trillion to the government's unfunded liabilities.

While OMB director Joshua Bolten stressed the lower budget deficit for fiscal year 2005 at a White House briefing for reporters on Wednesday, he did note, "We face an enormous challenge from huge unfunded liabilities in our entitlement programs" over the next 15 to 20 years.

As head of the nonpartisan GAO, Walker has more freedom than members of the administration or Congress to speak plainly about financial issues.

Walker, whose son has served with the US military in Iraq, said, "We are having extreme difficulty in getting the Defense Department to be able to provide a full and proper accounting of what they are spending," in Iraq. "If the Defense Department was a business, they would be out of business. They have absolutely atrocious financial management."

He is similarly outspoken on the role the public plays in perpetuating the nation's financial problems. "America suffers from a serious case of myopia or nearsightedness both in the public sector and the private sector. We need to start focusing more on the future, we need to recognize the reality that we are on an imprudent and unsustainable fiscal path and we need to get started now," Walker says.

The government's top auditor spoke approvingly of the 25-year jail sentence for corporate accounting fraud given Wednesday to Bernard Ebbers, the founder and former chief executive officer of WorldCom Inc. "That will send a signal in the corporate community," Walker said. "My view is that every now and then you've got to give people wide-striped suits. You don't need to do it very often to send a powerful signal."