Chairman LEWIS. Thank you, Mr. Frelinghuysen. Mr. Culberson. NATIONAL PER CAPITA DEBT Mr. CULBERSON. Thank you, Mr. Chairman. I want to compliment you, too, Mr. Walker. The testimony you have given to this committee and in front of other committees has been superb, very helpful and a good measure that we can use against other sources and information. I find your reports to be extraordinarily helpful. Could you talk a little bit, based on the analysis your office has done, the national debt per person, both direct and indirect, and the effect of contingent liabilities on the amount of the national debt per person? Mr. WALKER. First, in fairness, I think the way that we currently keep score both for financial reporting and budget purposes does not provide a full and fair view of where we are and where we are headed. Both are in need of reform, and I have testified on that on more than one occasion. For example, let's take fiscal year 2004. At the end of fiscal year 2004, we had total national debt of about $7.4 trillion. But in addition to the debt, if you look at promised but unfunded benefits, like Social Security, Medicare, civilian and military pensions, retiree health care and such like items, and if you look at the difference between how much we have promised and what dedicated revenues we have to fund those promises, for example, payroll taxes on Social Security, that $7.4 trillion, just considering the next 75 years alone, our total liabilities and unfunded obligations rose to $43 trillion. Therefore, you would have had to have had $43 trillion invested at Treasury rates at September 30, 2004, to deliver on that promise. That $43 trillion comprised about $3.7 for Social Security, $27.8 for Medicare, and that $43 trillion went up over $13 trillion last year alone. Mr. CULBERSON. As a result of Mr. WALKER. Primarily Medicare and Medicare prescription drugs. Medicare prescription drugs had a price tag of $8.1 trillion. Now, when I say discounted present value, that is how much money you would have to have today invested at Treasury rates. That number goes up every day. So it is not the total cost. It is how much you have to have today. Mr. CULBERSON. So every American today would have to purchase how much in Treasury bills in order to get rid of the debt? Mr. WALKER. Well, today $155,000 per American, $350,000 per full-time worker, roughly, and that is before taxes. So in other words, it is not tax-deductible. The median household income in the United States in 2003 was about $42,000 to $43,000. It is a big number. Mr. CULBERSON. It is terrifying. I have heard these before, and I wanted to be sure that the Committee heard it as well, because I have double-checked your numbers. I found them to be very credible. And the MIT Press has recently published a book called The Coming Generational Storm. Are you familiar with it? Have you Mr. WALKER. I am familiar with it. I haven't read it yet. I have read a lot of them, but I haven't read that one yet. I have written a few, too, but not as Comptroller General, I might add. it. Mr. CULBERSON. Right. Sure. I just didn't know if you had seen I wondered, if you could, to comment on its accuracy, because it raises a lot of these same concerns. And if you look at the demographics on top of it, it really becomes particularly disturbing, something that we all need to be aware of. Mr. WALKER. I will read it and let you know what I think privately in your office. I have read a number, including Running on Empty, which was published by Pete Peterson, who is a friend of mine, that came out last summer. I would recommend it to you. TOTAL FEDERAL GRANTS PER ANNUM Mr. CULBERSON. If I could, Mr. Chairman, one more? Thank you. I wanted to ask, if I could, how much money in Federal grants does the Congress send out each year; do you know? Ballpark. Mr. DODARO. I would have to provide that for the record, but there are over $400 billion in grants to State and local govern ments. Mr. CULBERSON. Over $400 billion. Mr. DODARO. Yes. Mr. CULBERSON. The bulk of that all flows through this committee? Mr. DODARO. The appropriation committees? Mr. CULBERSON. Yes. Mr. DODARO. Yes. Except for the amounts on the mandatory spending. Some of that is Medicaid grants. ROLE OF WAYS AND MEANS COMMITTEE Chairman LEWIS. The Ways and Means Committee does it. Probably 90 percent of it is through Ways and Means. Mr. CULBERSON. Right. Other than the inspector general's analysis-I want to ask quickly, because I know the time is limitedother than the inspector general's analysis of the effectiveness of those grant programs, is there any other check or review of the ef fectiveness of these programs. I am asking because in Texas we have a sunset review process. I would hate to create a new bureaucracy. Wouldn't the State legislatures be the best informed as to whether or not a particular grant program is working in their State, and what would be your opinion of, for example, legislation that would allow the State legislatures to decide whether or not to accept a Federal grant program and the strings that are attached to it so that they would be in the position of reviewing the effectiveness of the program? If they decide it is not effective, then they could reject the money and the strings. Mr. WALKER. Well, a couple of comments real quickly. Number one, I think it is very important that for every major Federal policy, program, function and activity, whether it involves the States or not-in your particular example it might involve the States and localities that we have clearly defined objectives, that we have certain outcomes that we are looking to achieve, and that we periodically review and evaluate whether or not the programs are effec tive based upon those measures. That is not being done right now to a great extent. Second, and in closing, I think it is not only important to do that with regard to the activities that you have to do deal with through the appropriations process, I think it is important to do that with regard to mandatory spending. I also think it is important to do that with regard to tax preferences. In many years the total value of tax preferences exceeds total discretionary spending, and yet they are off the radar screen. People are not looking at them. We need to look more holistically, which could help give you more flexibility in doing your job, Mr. Chairman. Mr. CULBERSON. Thank you, Mr. Chairman. Could you provide us a copy of that report that summarizes what you testified to about the national debt and the promised but unfunded liability? Mr. WALKER. I would be happy to. [The information on the Federal debt follows:] Section 2: What Is the Relationship between the What does it mean to have a budget surplus or 15 Budget and and debt held by the public as a share of the economy?.... 16 What is the role of trust funds in measuring budget 1 |