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U.S. Comptroller sees long-term need for tax hikes
Reuters
By Richard Cowan
January 11, 2007

WASHINGTON, Jan 11 (Reuters) - Tax increases are essential to avoiding long-term fiscal ruin and overcoming a "demographic tsunami" that would eventually swamp the U.S. budget with senior citizen health care and retirement costs, Comptroller General David Walker told Congress on Thursday.

At a Senate Budget Committee hearing on America's long-term budget outlook, Walker urged Congress to waste no time in cutting spending on massive government programs, many of which will grow significantly as large numbers of "baby boomers" retire.

But Walker also warned the new Democrat-controlled committee that cutting spending will not be enough.

Tax revenues at the current 18 percent of Gross Domestic Product "won't get the job done," said Walker, who heads the U.S. Government Accountability Office, the investigative arm of Congress.

Republicans have been steadfast against any federal tax increases and are hoping to make permanent a series of President George W. Bush's tax cuts that expire after 2010, despite the hundreds of billions of dollars in lost revenues.

Asked what level U.S. taxes revenues should be at, Walker said, "I can't tell you an exact number ... but more than 18.2 percent (of GDP), but below 25 percent."

Since nearly the beginning of Bush's presidency, the U.S. has suffered chronic budget deficits caused by a combination of a then-slowing economy, huge new domestic security costs, the war in Iraq, tax cuts and rapidly growing government health care costs for senior citizens.

Those deficits peaked at a record $412.7 billion in fiscal 2004 before falling to $247.7 billion by fiscal 2006.

They would be significantly higher, however, when taking into account government programs paid with annual Social Security surpluses, which will last for only 10 more years. Without this diversion of retirement money, the fiscal 2006 budget deficit would have been about $434 billion, Walker noted.

"The picture I will lay out for you today is not a pretty one and it's getting worse with the passage of time," Walker said.

For example, in 2000, the government's major future liabilities, including publicly-held debt, Social Security and Medicare and other pension-related costs, totaled about $20 trillion, Walker said. By 2006, he said that figure had grown to about $50 trillion.

Budget Committee Chairman Kent Conrad, a North Dakota Democrat, said he would spearhead a bipartisan effort this year to rein in long-term government spending. That effort, he said, would include input from the White House and would require a "supermajority" of negotiators and the entire Congress to approve. Tax code changes are likely to be part of that review.

© Reuters 2007. All Rights Reserved.

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