Poor David Walker… Howling in the Wilderness…


The “ultimate sell signal,” is how our old friend Bill Donoghue describes it.

“Government’s lone fiscal watchdog resigns,” is the relevant headline. It refers to David Walker, head of the Government Accountability Office. Mr. Walker has been alarmed at the growing indebtedness of the U.S. government for a long time. He regularly travels, doing what he calls the ‘Fiscal Wake-Up Tour”, warning all who will listen that the United States is headed for big trouble if it doesn’t get its finances under control.

(Both Walker, and the Fiscal Wake-Up Tour, are featured prominently in the documentary Addison and Short Fuse have been working tirelessly on, called I.O.U.S.A. Get all of your documentary updates here.)

The basic problem is well known and has been frequently illustrated throughout history. Democracy responds to the mob of voters; and the mob wants bread and circuses – at someone else’s expense, of course. In America, circa 2008, Congress responds to the desires of people who vote in current elections. The voting age has been lowered to 18, but the next generation, the unborn generation, has no voice in modern government. Not even a whimper. Inevitably, politicians pander to the living in order to get votes… and inevitably the next generation gets the bills.

The last time we looked, the shortfall between what had been promised – in the form of Treasury bonds, Medicare, Medicaid, Social Security and the like – and what might reasonably be collected in taxes toted up to some $50 trillion, or about a half a million dollars per family. In other words, the whole country is bankrupt… and the financial obligations of the U.S. federal government should be regarded by investors as though they were subprime debt. It is a huge debt that the debtor cannot pay.

As headman at the General Accounting Office, David Walker, has been fretting about this for years… and trying to get the politicians to cut spending and balance the budget. He might as well have been trying to get a pack of wolves to eat Greek salads for lunch. It has been a thankless, frustrating job, especially during the Bush II years. This ‘conservative’ administration added more to America’s burden than all the administrations since George Washington – put together.

During an interview for I.O.U.S.A., Addison found out that Mr. Walker had read our book – Empire of Debt – on his own accord. This, we believe, is what pushed him over the edge. So, now he’s resigned… but isn’t giving up on the cause he’s been fighting for all of those years at the GAO. Pete Peterson, Commerce Secretary under Richard Nixon and founder of the Blackstone Group, has set up a foundation and given Mr. Walker a job. He’ll have $1 billion to work with… and the impossible task of trying to bring U.S. government finances in order.

Of course, we’d be delighted to see him succeed. But there’s a big gap between what we’d like and what we’ve got. The former may be public spirited; but the latter is definitely bloody-minded. The former may wish to imagine that the United States will cut spending, balance the budget, encourage savings and restore America’s economic vigor. But the latter knows the voters wouldn’t stand for it. We wish him luck.

History must run its course, says The Daily Reckoning, with a superior air. Old empires must decay and collapse, so as to make room for new ones.

Sic transit gloria mundi.

Sell the United States. Buy Japan. Buy Latin America. Buy gold.

Bill Bonner
The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Bill Bonner

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