By Paul Craig Roberts
March 13, 2008

I’ve been watching the dollar die all my life. I sometimes think I will outlast it.

When I was a young man, gold was $35 an ounce. Today one ounce gold bullion coins, such as the Canadian Maple Leaf, cost more than $1,000.

Our coinage was silver. Our dimes, quarters, and half dollars had purchasing power. Even the nickel could purchase a candy bar, ice cream cone or soft drink, and a penny could purchase bubble gum or hard candy. If a kid could collect 5 discarded soft drink bottles from a construction site, the 2 cents deposit on the returnable bottles was enough for the Saturday afternoon movie. Gasoline was 32 cents a gallon. A dollar’s worth was enough for a Saturday night date.

Our silver coinage was 90% silver. People sometimes melted coins in order to make silver spoons, known as coin silver, which can still be found in antique shops. Except for the reduced silver (40%) Kennedy half dollar which continued until 1970, 1964 was the last year of America’s silver coinage. The copper penny departed in 1982. As Assistant Secretary of the Treasury, I opposed the demise of America’s last commodity money, but I couldn’t prevent the copper penny’s death.

During World War II (1941-1945), nickel was diverted from coinage to war, and the US mint issued a wartime silver (35%) nickel.

It is not easy to find items to purchase with today’s US coins, but the silver coins of the same face value still have purchasing power. The 10 cent piece of my youth contains $1.42 worth of silver at today’s silver price. The quarter is worth $3.55, and the half dollar contains $7.10 of silver. The silver dollar is worth 15.2 times its face value. These are just the silver values of coins that might be worth far more depending on condition and rarity. The silver in the wartime nickel is worth $1.10, which is 22 times the coin’s face value. Even the copper penny is worth 2.5 cents.

When I was a young man enjoying travels in Europe, the German mark or Swiss franc traded four to one US dollar. The euro, which is today’s equivalent to the mark or franc, costs $1.55.

People who haven’t accumulated much age have little idea of the corrosive power of “acceptable” inflation. Unlike gold and silver, fiat money has no intrinsic value. When money is created faster than goods and services it drives up prices, thus driving down the value of the money. If freely traded currencies are excessively printed or if inflation, budget deficits, and trade deficits drive currencies off their fixed exchange rates, prices of imports rise as the foreign exchange value of the currency falls.

Today the US, heavily dependent on imports, is subject to double-barrel inflation from both domestic money creation and decline in the dollar’s foreign exchange value.

The US inflation rate is about twice as high as the government’s inflation measures report. In order to hold down Social Security payments, the government changed the way it measures inflation. In the old measure, inflation measured the nominal cost of a defined standard of living. If the price of steak rose, up went the inflation rate. Today if the price of steak rises, the government assumes that people switch to hamburger. Inflation doesn’t go up. Instead, the standard of living it measures goes down.

This is just one of the many ways that the government pulls the wool over our eyes.

With the dollar value of the euro rising through the roof, today a vacation in Europe is far more costly than in the past. Thanks to China, so far Americans have been sheltered from the greatest effects of the dollar’s declining value. Our greatest trade deficit is with China. The prices of the goods from China have not risen, because China keeps its currency pegged to the dollar. As the dollar goes down, China’s currency goes with it, thus holding down price rises.

The resignation of Admiral William Fallon as US military commander in the Middle East probably signals a Bush Regime attack on Iran. Fallon said that there would be no US attack on Iran on his watch. As there was no reason for Fallon to resign, it is not farfetched to conclude that Bush has removed an obstacle to war with Iran.

The US is already over stretched both militarily and economically. An attack on Iran is likely to be the straw that breaks the camel’s back.

Paul Craig Roberts [email him] was Assistant Secretary of the Treasury during President Reagan’s first term. He was Associate Editor of the Wall Street Journal. He has held numerous academic appointments, including the William E. Simon Chair, Center for Strategic and International Studies, Georgetown University, and Senior Research Fellow, Hoover Institution, Stanford University. He was awarded the Legion of Honor by French President Francois Mitterrand. He is the author of Supply-Side Revolution : An Insider’s Account of Policymaking in Washington; Alienation and the Soviet Economy and Meltdown: Inside the Soviet Economy, and is the co-author with Lawrence M. Stratton of The Tyranny of Good Intentions : How Prosecutors and Bureaucrats Are Trampling the Constitution in the Name of Justice.

By Jilian Mincer | Dow Jones Newswires
October 14, 2007

Despite potential tax and investment problems, more investors have been borrowing from their 401(k) plans or taking hardship withdrawals in recent months, some retirement plan providers say.

Many in the field expect more borrowing in 2008, as consumers struggle with tighter credit and potentially higher mortgage payments.

“I don’t think it’s a groundswell but it’s enough to be noticed,” said Rick Meigs, president of 401khelpcenter.com, which provides information on 401(k) plans.

Increased borrowing on 401(k)s could be because of the credit crunch and slumping housing prices. To be sure, the indications are preliminary; it’s too early to say why it’s happening, according to the Hartford Financial Services Group.

Borrowing against your retirement nest egg may seem tempting but it presents a host of problems. It could significantly reduce your savings at retirement and create an expensive tax bill if you can’t repay the loan when it’s due.

Almost all plans allow borrowers to take money out of their 401(k) accounts and repay it plus interest, which is typically 1 or 2 percentage points above prime. Although plans vary, the most you can borrow typically is the lesser of 50 percent of a vested balance or $50,000.

Employees usually must repay money borrowed for a mortgage within 15 years, and money used for other purposes within five years. Most loans also have a $50 to $100 fee.

If you fail to pay back the loan on time and are younger than 59 1/2, you are subject to regular income tax and a penalty tax of 10 percent for early withdrawal.

“A few years ago, the buzz was about borrowing from a 401(k) to buy a second home,” said Jeff Carbone, a financial adviser in Cornelius, N.C. “Now it’s people looking at their 401(k) because they’ve extended themselves on their homes and credit lines.”

Even though his clients typically have investable assets of at least $750,000, Carbone said some have “maxed out their credit” and feel the pain of higher payments for a home-equity line of credit.

Pamela Hess, director of retirement research at Hewitt Associates, sees “a marginal uptick” in borrowing. “The economy isn’t as strong as it was a couple of years ago,” she said.

Indicative of some of the stress, the amount of calls to Principal Financial Group Inc. about hardship withdrawals, while small, has jumped significantly in recent months, company officials said. Not all 401(k) plans permit hardship withdrawals, but the IRS allows them for, among other things, medical or funeral expenses, purchasing a primary residence, or avoiding eviction from or foreclosure on a primary residence.

The number of calls asking about withdrawals to prevent a potential foreclosure or eviction doubled in August over July, said Janet Fossell, director of individual investor services for Principal. There were fewer calls in September than August, but still more than in July.

“I think a lot of individuals are looking for different options,” she said. “This is really a last resort.”

Jamie Cornell, senior vice president, employer marketing at Fidelity Investments, which hasn’t seen a loan increase, said: “This should be the lending source of last resort.”

About 20 percent of Fidelity 401(k) investors have a loan, a figure in line with the industry.

Loans on 401(k)s are popular, said Bill Arnone, a partner at Ernst & Young, because there’s no credit check, making them easy to obtain.

Even a person who pays such a loan back on time, and therefore avoids the 10 percent penalty, is getting taxed twice, Arnone said — once when repaying the loan with after-tax dollars, and a second time when the money is withdrawn at retirement.

People who take the loans also lose out on potential retirement earnings while the money isn’t invested.

T. Rowe Price has calculated that someone with a balance of $150,000 who borrows $10,000 at age 40 would see an $83,137 difference at 65 even if the loan is repaid, given an 8 percent return on investments and a 7 percent interest rate on the loan.

Should you lose your job, the costs could be even higher.

“The biggest reason [not to borrow] is the consequence if there’s a separation from your employer,” said Stuart Ritter, a financial adviser for T. Rowe Price.

Borrowers who are fired, laid off or quit typically have to pay off the loan within 90 days, Ritter said. If they don’t and are younger than 59 1/2, they face income tax and penalties.

And the income could throw you into a higher tax bracket, said Linda Leitz, a financial adviser in Colorado Springs.

“What I’m finding is Americans in general are spending more than they make,” Leitz said.

“And as the mortgage industry implodes, they look for where else they can borrow.”

David Wray, president of the Profit Sharing/401(k) Council of America, a non-profit association of companies that sponsor plans, expects that higher payments on adjustable mortgages will have people “looking for ways to make up that gap.”

He warns people not to use their 401(k) savings if they’re going to end up in bankruptcy. That’s because in most plans, the 401(k) assets are protected in bankruptcy.

“The real issue is, what are people facing foreclosure going to do?” he said. “You don’t want to tap the plan just to buy time because then you lose your home and your retirement.”

http://www.chicagotribune.com/business/yourmoney/chi-ym-borrowing-1014oct14,0,5181066.story

By Richard Wolf, USA TODAY
2007-10-08

EARLEVILLE, Md. — When Kathleen Casey-Kirschling signs up for Social Security benefits Monday, it will represent one small step for her, one giant leap for her baby boom generation — and a symbolic jump toward the retirement system’s looming bankruptcy.

Casey-Kirschling — generally recognized as the nation’s first boomer (born in Philadelphia on Jan. 1, 1946, at 12:00:01 a.m.) — won’t bankrupt the Social Security system by taking early retirement at 62. But after her, the deluge: 80 million Americans born from 1946 to 1964 who could qualify for Social Security and Medicare during the next 22 years.

The first wave of 3.2 million baby boomers turns 62 next year — 365 an hour. About 49% of the men and 53% of the women are projected to choose early retirement and begin drawing monthly Social Security checks representing 75% of the benefit they’d be entitled to receive if they waited four more years to retire.

In 2011, they’ll turn 65 and be eligible for Medicare. In 2012, those who didn’t take early retirement benefits will turn 66 and qualify for their full share.

“Once it starts to happen, and it’s going to start in January, you’re going to see millions of baby boomers starting to take it,” says Casey-Kirschling, a retired seventh-grade teacher and nutrition consultant.

By 2030, Social Security’s caseload will be 84 million people, up from 50 million today. Medicare will go from 44 million beneficiaries to 79 million. That will leave barely more than two workers paying payroll taxes for every retiree.

The boomer retirements have demographers, actuaries and economists worried as they prepare for an estimated $50 trillion in future obligations over the next 75 years. Social Security will rise from 4% to 6% of the nation’s economy. Medicare will go from 3% to 11%.

“This,” says Brian Riedl of the conservative Heritage Foundation, “is the single greatest economic challenge of our era.”

Medicare’s hospital insurance fund now pays out more than it takes in. Barring action by Congress, Social Security will start doing so in 2017. In 2019, the hospital insurance fund is projected to run out of funds. In 2041, the Social Security Trust Fund will run dry.

All the while, Medicare’s payments for doctors and prescription drugs are projected to rise faster than the nation’s overall economic growth. Beneficiaries’ premiums, deductibles and co-payments will rise faster than their incomes, the government says.

It’s a coming financial implosion that Washington hasn’t mustered the will to confront. Fixing Social Security solely with higher taxes or cuts in spending would mean a 16% increase in the payroll tax or a 13% cut in benefits. Medicare’s needs would be far greater: a 122% payroll tax hike or a 51% reduction in spending, just for hospital care.

Each year action isn’t taken, the prognosis gets worse and the cure more expensive. It’s “the power of compounding,” says David Walker, the nation’s comptroller general. “Right now, it’s working against us.”

On this one issue, liberals and conservatives agree: It’s an unsustainable path, it must be altered, and Democrats and Republicans must do it together.

“Partisanship on this issue is as foolish as a food fight on the Titanic,” says Rep. Jim Cooper, D-Tenn. Adds Rep. Frank Wolf, R-Va.: “It’s not red or blue.”

So far Washington has done little.

President Bush and Congress cut taxes in 2001 and 2003, which has left federal revenue at a level that Walker says will not support promises to future retirees. Congress added $768 billion over 10 years to Medicare in 2003 by creating a prescription-drug benefit. Two years later, lawmakers nicked Medicaid’s projected cost by $5 billion over five years, but the Congressional Budget Office still projects the program to grow by about 8% a year.

Bush tried to overhaul Social Security and create private investment accounts in 2005 but was blocked by Democrats, who said it would drain money from the Social Security Trust Fund. Last week, his administration renewed an effort to charge upper-income seniors more for Medicare’s prescription-drug coverage — a plan Congress ignored earlier this year.

Now a few lawmakers and budget analysts are sounding the alarm. Three commissions have been proposed to study the issue, recommend changes and, in two cases, force Congress to vote.

Walker is headlining a group of analysts from the political left and right on a nationwide “Fiscal Wake-Up Tour,” speaking to dozens of Rotary clubs and newspaper editorial boards. Pollsters are holding focus groups in which citizens, once informed of the nation’s fiscal future, usually say they’ll accept tax increases or cuts in benefits.

Casey-Kirschling recently moved with her husband, Patrick Kirschling, a university professor who turns 62 in March, into what had been their summer home on Maryland’s Bohemia River. After years of working, they want the good life: time with family and friends, volunteer work, a villa in Florida and a 42-foot trawler to get them there. Its name: “First Boomer.”

In deciding when to take Social Security benefits, the couple did the math and agreed Casey-Kirschling would take the money next year. They estimate she will get $240 less per month than she would have if she waited four years, but the money she’ll receive — she wouldn’t say precisely how much that will be — initially will stop her from having to tap other investments, she says.

“I could be dead next year,” she says, “so why not take it this year?”

A retiree for every couple

The imbalance between workers and beneficiaries didn’t happen overnight. In 1945, a decade after Social Security was created, there were 42 workers paying into the system for each retiree. Today, there are three. By 2030, Riedl says, “Every couple will have their own retiree to support.”

Lawmakers have long known this. But in recent years, the short-term deficit picture has improved, masking the long-term problem.

The annual budget deficit dropped from $413 billion in 2004 to about $161 billion this year, but much is not included in that calculation: money owed to the Social Security Trust Fund, future federal and military retirement costs, obligations to veterans and more.

Nothing drives the problem home better than the baby boom generation. The impact of baby boomers on the Social Security and Medicare systems started in about 1990, when they began entering their 40s and were more prone to getting hurt or sick. The number of Americans claiming disability benefits doubled from 4.2 million in 1990 to 8.4 million in 2006.

“This has been going on for some years already,” says Rick Foster, Medicare’s chief actuary.

Now the boomers are readying for retirement. The Class of 1946 features some big names: President Bush, Laura Bush, former president Bill Clinton. (Hillary Rodham Clinton follows a year later.) Also turning 62 next year are five U.S. senators and 22 House members.

In each retiree’s case, the decision on whether to take Social Security benefits now or later hinges on two issues: life expectancy and investment acumen. Those who take Social Security at 62 will get only 75% of their full benefit each month for the rest of their lives. Those who put off receiving the benefits get a higher percentage of their full benefit, up to 100% for those who wait until age 66 to retire. Those who wait up to age 70 can get 132% of their full benefit.

If you expect to live to a ripe old age, financial planners say, it may be worth waiting for the larger benefit at age 66 or later. But if you’re investment-savvy or can put the money to good use now, it may be worth taking early retirement.

“Most people are claiming (benefits) in their early 60s,” says Andrew Eschtruth of the Center for Retirement Research at Boston College. Average age: 63.

The actuaries at Social Security have accounted for such decisions. Because benefits are reduced for early retirement, the choices retirees make won’t affect the long-term solvency of the system, says Stephen Goss, Social Security’s chief actuary.

The Medicare situation is far worse. As baby boomers age, so will the average age of beneficiaries, and with it the medical costs that accompany longevity. Recognizing that health care costs present the greatest threat to the federal budget and economy, the Congressional Budget Office has revamped its operation to find new ways to lower costs.

Taking the show on the road

While bickering over $22 billion that Democrats want to add to Bush’s 2008 budget of $2.9 trillion, the White House and Congress realize bigger issues lie ahead.

“In 10 years, Social Security will turn upside down,” says White House budget director Jim Nussle, referring to when paid benefits will outweigh taxes coming in. “Anything we can do to wake people up to this challenge is important.”

That’s where the “Fiscal Wake-Up Tour” comes in. The presentation by the traveling troupe of policy watchdogs — hardly anyone’s idea of entertainment — has appeared in 22 states so far, seeking to ignite public interest and political action. “The American people are starved for two things: truth and leadership,” Walker says.

Robert Bixby of the Concord Coalition, which organized the tour, opened a recent event in Manchester, N.H., with a reference to that state’s first-in-the-nation presidential primary. “The first thing I want to do is assure you that none of us is running for president,” he said. “After you hear what we have to say, you’ll understand why.”

During the next hour, the local chamber of commerce was treated to a series of PowerPoint presentations with arrows that invariably pointed the wrong way. Negative savings rates. Rising health care costs. An aging population.

Pushing aside her chicken and rice in the back of the room, Manchester insurance agent Kathy Sousa, 55, started jotting down fixes she would be willing to consider. The first one was profound: stopping heroic care for the terminally ill, which costs Medicare billions. “This gets to be a very emotional conversation,” she said.

It’s getting emotional in Washington as well. Even the debate over immigration is connected, because an estimated 12 million illegal immigrants make up a growing share of the payroll tax-paying workforce. The influx of immigrants helps to slow down the inexorable decline in the number of workers per retiree.

Cooper and Wolf last month proposed a panel that would force Congress to vote up-or-down on a fiscal fix — akin to the process now used to close military bases.

That’s because the solutions aren’t pretty: raising the retirement age for full Social Security benefits past 67, the current limit for people born in 1960 or later. Charging wealthier Medicare beneficiaries more — a new reality for doctors’ care — or giving them less. Raising or eliminating the $97,500 wage cap for payroll taxes. Perhaps all of that and more.

Drinking tea on their porch, Casey-Kirschling and her husband say they’re willing to do their part on behalf of their two daughters, who are socking money away for retirement because they don’t expect much government help.

“I can’t imagine what’s going to happen with our children and our grandchildren,” Casey-Kirschling says. “They’re not going to be able to retire.”

http://www.usatoday.com/news/washington/2007-10-08-boomers_N.htm

March 4, 2007

(CBS) When the stock market plunges like it did this week, everyone pays attention. The man you’re about to meet says hardly anyone is paying attention to what really threatens our financial future. Like an Old Testament prophet, David Walker has been traveling the country, urging people to “wake up before it’s too late.”

But David Walker is no wild-eyed zealot. As Steve Kroft reports, David Walker is an accountant, the nation’s top accountant to be exact, the comptroller general of the United States. He has totaled up our government’s income, liabilities, and future obligations and concluded the numbers simply don’t add up. And he’s not alone. Its been called the “dirty little secret everyone in Washington knows” – a set of financial truths so inconvenient that most elected officials don’t even want to talk about them, which is exactly why David Walker does.

“I would argue that the most serious threat to the United States is not someone hiding in a cave in Afghanistan or Pakistan but our own fiscal irresponsibility,” Walker tells Kroft.

David Walker is a prudent man and a highly respected public official. As comptroller general of the United States he runs he Government Accountability Office, the GAO, which audits the government’s books and serves as the investigative arm of the U.S. Congress. He has more than 3,000 employees, a budget of a half a billion dollars, and a message he considers urgent.

“I’m going to show you some numbers…they’re all big and they’re all bad,” he says.

So bad, that Walker has given up on elected officials and taken his message directly to taxpayers and opinion makers, hoping to shape the debate in the next presidential election.

“You know the American people, I tell you, we’ve been to 13 cities outside of Washington with the fiscal wake up tour. They are absolutely starved for two things: the truth, and leadership,” Walker says.

He calls it a fiscal wake up tour, and he is telling civic groups, university forums and newspaper editorial boards that the U.S. has spent, promised, and borrowed itself into such a deep hole it will be unable to climb out if it doesn’t act now. As Walker sees it, the survival of the republic is at stake.

“What’s going on right now is we’re spending more money than we make…we’re charging it to credit card…and expecting our grandchildren to pay for it. And that’s absolutely outrageous,” he told the editorial board of the Seattle Post Intelligencer.

You have heard this before, from Ross Perot 15 years ago. You might have even thought the problem had been solved, when President Clinton announced, “Tonight, I come before you to announce that the federal deficit … will be simply zero.”

“Well, those days are gone. We’ve gone from surpluses to huge deficits and our long range situation is much worse,” Walker says.

“President Bush would argue that the economy is in pretty good shape, unemployment is down, the deficit is actually less than expected,” Kroft remarks.

“The fact is, is that we don’t face an immediate crisis. And, so people say, ‘What’s the problem?’ The answer is, we suffer from a fiscal cancer. It is growing within us. And if we do not treat it, it could have catastrophic consequences for our country,” Walker replies.

The cancer, Walker says, are massive entitlement programs we can no longer afford, exacerbated by a demographic glitch that began more than 60 years ago– a dramatic spike in the fertility rate called the “baby boom.”

Beginning next year, and for 20 years thereafter, 78 million Americans will become pensioners and medical dependents of the U.S. taxpayer.

“The first baby boomer will reach 62 and be eligible for early retirement of Social Security January 1, 2008. They’ll be eligible for Medicare just three years later. And when those boomers start retiring in mass, then that will be a tsunami of spending that could swamp our ship of state if we don’t get serious,” Walker explains.

To illustrate their impact, he uses a power point presentation to show what would happen in 30 years if the U.S. maintains its current course and fulfills all of the promises politicians have made to the public on things like Social Security and Medicare.

What would happen in 2040 if nothing changes?

“If nothing changes, the federal government’s not gonna be able to do much more than pay interest on the mounting debt and some entitlement benefits. It won’t have money left for anything else – national defense, homeland security, education, you name it,” Walker warns.

Walker says you could eliminate all waste and fraud, and the entire Pentagon budget and the long range financial projections barely change, in what’s shaping up as an actuarial nightmare.

Part of the problem, Walker acknowledges, is that there won’t be enough wage earners to support the benefits of the baby boomers. “But the real problem, Steve, is health care costs. Our health care problem is much more significant than Social Security,” he says.

Asked what he means by that, Walker tells Kroft, “By that I mean that the Medicare problem is five times greater than the Social Security problem.”

The problem with Medicare, Walker says, is people keep living longer, and medical costs keep rising at twice the rate of inflation. But instead of dealing with the problem, he says, the president and the Congress made things much worse just three years ago when they expanded the Medicare program to include prescription drug coverage.

“The prescription drug bill was probably the most fiscally irresponsible piece of legislation since the 1960s,” Walker argues.

Asked why, Walker says, “Well, because we promise way more than we can afford to keep. Eight trillion dollars added to what was already a 15 to $20 trillion under-funding. We’re not being realistic. We can’t afford the promises we’ve already made, much less to be able, piling on top of ‘em.”

With one stroke of the pen, Walker says, the federal government increased existing Medicare obligations nearly 40 percent over the next 75 years.

“We’d have to have eight trillion dollars today, invested in treasury rates, to deliver on that promise,” Walker explains.

Asked how much we actually have, Walker says, “Zip.”

So where’s that money going to come from?

“Well it’s gonna come from additional taxes, or it’s gonna come from restructuring these promises, or it’s gonna come from cutting other spending,” Walker says.

He is not suggesting that the nation do away with Medicare or prescription drug benefits. He does believe the current health care system is way too expensive, and overrated.

“On cost we’re number one in the world. We spend 50 percent more of our economy on health care than any nation on earth,” he says.

“We have the largest uninsured population of any major industrialized nation. We have above average infant mortality, below average life expectancy, and much higher than average medical error rates for an industrialized nation,” Walker points out.

Walker says we have promised almost unlimited health care to senior citizens who never see the bills, and the government already is borrowing money to pay them. He says the system is unsustainable.

“It’s the number one fiscal challenge for the federal government, it’s the number one fiscal challenge for state governments and it’s the number one competitive challenge for American business. We’re gonna have to dramatically and fundamentally reform our health care system in installments over the next 20 years,” Walker tells Kroft.

And if we don’t?

“And if we don’t, it could bankrupt America,” Walker argues.

You’re probably expecting to hear from someone who disagrees with the comptroller general’s numbers, projections, and analysis. But hardly anyone does. He is accompanied on the wake-up tour by economists from the conservative Heritage Foundation, the left-leaning Brookings Institution, and the non-partisan Concord Coalition. The only dissenters seem to be a small minority of economists who believe either that the U.S. can grow its way out of the problem, or that Walker is over-stating it.

“The Wall Street Journal for example calls you ‘Chicken Little,’ running around saying that the ’sky is falling, the sky is falling,’” Kroft remarks.

“Unfortunately they don’t get it. I don’t know anybody who has done their homework, has researched history, and who’s good at math who would tell you that we can grow our way out of this problem,” Walker replies.

Federal Reserve Chairman Ben Bernanke validated much of Walker’s take on the situation at congressional hearings this year, and so did ranking Republicans and Democrats on the Senate Budget Committee. Senator Kent Conrad of North Dakota is the Chairman.

Sen. Conrad thinks David Walker is “providing an enormous public service.”

Asked if he agrees with Walker’s figures and his projections, Sen. Conrad says, “I do. You know, I mean we could always question the precise nature of this projection or that projection. But, that misses the point. The larger story that he is telling is exactly correct.”

Conrad acknowledges that most people in Washington are aware how bad the situation is. “They know in large measure here, Republicans and Democrats, that we are on a course that doesn’t add up,” the senator tells Kroft.

“Why doesn’t somebody do something about it?” Kroft asks.

“Because it’s always easier not to. ‘Cause it’s always easier to defer, to kick the can down the road to avoid making choices. You know, you get in trouble in politics when you make choices,” Sen. Conrad says.

Asked if he thinks taxes should be raised, the senator says, “I believe first of all, we need more revenue. We need to be tough on spending. And we need to reform the entitlement programs … we need to do all of it.”

But he admits he doesn’t think there’s a consensus for raising taxes.

“Any politician who tells you that we can solve our problem without reforming Social Security, Medicare, and Medicaid is not telling you the truth,” Walker told an audience at the University of Denver.

Over the next year, the nation’s top accountant will be traveling to the early primary states, telling voters that we need to begin raising taxes or government revenues and put a cap on federal spending if we want to maintain our economic security and standard of living.

“If you tell them the truth, if you give them the facts, if you explain this in terms of not just numbers but values and people, they will get it and empower their elected officials to make tough choices,” Walker argues.

Asked if he knows any politicians willing to raise taxes or cut back benefits, Walker says, “I don’t know politicians that like to raise taxes. I don’t know politicians that like to cut spending, but I think what we have to recognize is this is not just about numbers. We are mortgaging the future of our children and grandchildren at record rates, and that is not only an issue of fiscal irresponsibility, it’s an issue of immorality.”

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