Showing posts with label GAO. Show all posts
Showing posts with label GAO. Show all posts

Thursday, March 29, 2007

One man's campaign against federal debt

UPDATE: March 30, 2007 Editor's note: I am posting at the secondary blog(also see March 29th articles at the overblog blog, the secondary blog and here below).
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Story Highlights

•Top accountant touring the country to warn people about the federal debt
• Debt has risen from more than $2 trillion in 1986 to nearly $9 trillion in 2007
• Baby boomers will soon stretch U.S. finances even further

By Kyle Almond
CNN

(CNN) -- He has recently made stops in Iowa, New Hampshire and South Carolina, giving speeches and holding town hall meetings. But he's not seeking the presidency.

David M. Walker, the nation's top accountant, is instead touring the country to warn Americans about the consequences of a federal debt he says is on an unsustainable course.

Walker, who heads the General Accountability Office (GAO), has visited college campuses, spoken to lawmakers in Washington and toured 19 states in the last year and a half.

He plans to continue through next year and is focusing on states that could affect the 2008 presidential race, in hopes that candidates will heed his message.

"If [the candidates] don't make [the debt] one of their top three priorities, in my opinion, they don't deserve to be president and we can't afford for them to be president," he told CNN.

The federal debt has soared during the last two decades -- from $2.13 trillion in 1986 to $5.22 trillion in 1996 and $8.51 trillion in 2006.

The federal debt now stands near $9 trillion.

The way programs such as Social Security, Medicaid and Medicare are structured, the government will incur an additional debt of $50 trillion during the next 20 years, according to GAO figures.

The $50 trillion total amounts to about $440,000 per American household, Walker said.

The primary drivers behind the additional rise in spending are the baby boomers, who start becoming eligible for Social Security in 2008 and Medicare in 2011.

"We are talking about an unprecedented change in the demographic landscape of America," Walker said. "And we are not prepared for this oncoming wave."

The consequences of federal debt

The federal debt increases every time there is a budget deficit at the end of the fiscal year. A budget deficit occurs when the government spends more than it receives in revenue, as it has for the past five fiscal years and 16 of the past 20, according to the Office of Management and Budget.

The causes for such deficits range from tax cuts and spending increases to congressional earmarks in appropriations bills, costs associated with the wars in Iraq and Afghanistan and catastrophes like the 9/11 terror attacks and Hurricane Katrina.

The government makes up the difference by printing and selling Treasury bills and bonds, which are increasingly being bought by overseas investors looking to profit from the interest.

More than three-quarters of the federal budget deficit from March 2001 through September 2006 was underwritten by overseas investors, according to Christian Weller, the senior economist at the Center for American Progress, a Washington-based, left-of-center think tank.

Such financing is not necessarily a bad thing for the average American because it has helped keep interest rates relatively low, Weller said.

"The budget deficit brought in all of this foreign cash, and that foreign cash basically washed into the credit market, [making] it easier for homeowners and for others to borrow money," Weller said.

Observers are concerned, however, that interest rates could rise if the federal government doesn't show more fiscal responsibility.

For example, a country that typically lends money to the United States could begin charging higher interests rates on the loan out of concern for what it sees as an uncertain U.S. financial future, said Bill Beach, an economist associated with The Heritage Foundation, a conservative think tank.

"So we [would] all end up paying more for mortgages, more for cars and so forth," Beach said.

Beyond interest rates

In the worst-case scenario, other countries -- instead of just charging higher interest rates -- could decide to take their money elsewhere, which could spur inflation and increase financial uncertainty.

However, several things would need to happen -- such as a series of international crises or a collapse in U.S. home values -- for countries to move their investment out of the United States, according to Beach.

Meanwhile, as a result of existing debt, the United States has less money to spend on infrastructure, technology and education -- improvements needed for the country to remain competitive in the global market, Weller said.

"With the government running massive deficits and spending large amounts on debt service, we have less money available to address those concerns, to really face the challenges of the future," he said.

Though economists of different political persuasions agree the federal debt is a growing problem, the solutions they recommend differ. Some ideas include caps on government spending and repealing certain tax cuts.

The GAO's Walker believes reforms of health care and programs like Social Security are the most important steps.

"The fact is that we could eliminate the Iraq war tomorrow. We could eliminate every dime of pork-barrel spending. And we wouldn't come close to solving our problem," he said.

Walker said it is necessary to balance the budget within the next five years, make a down payment on the $50 trillion imbalance and begin reforming government programs.

"It's going to take us probably 20 years to do all the things that need to be done, " he said. "But we need to get started now because the clock is ticking and time is working against us."

GAO Looking Into Faulty N.O. Pumps

Related
Failed New Orleans Levees Blamed On Army Corps
The report says that decades of errors, including not knowing the elevation of New Orleans, allowed the situation in which the levees failed.
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The final report volumes are available on the Internet at https://ipet.wes.army.mil/.
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Thursday March 29, 2007 12:01 AM

By CAIN BURDEAU

Associated Press Writer

NEW ORLEANS (AP) - Government Accountability Office investigators are meeting with Army Corps of Engineers officials to ask questions about drainage pumps that were installed before last year's hurricane season even though they apparently were defective.

The pumps were produced by a Florida company under a $26.6 million contract awarded after Hurricane Katrina. They provide flood protection by draining water from this largely below sea level city.

An engineer for the Corps working on the pumps project warned in a spring 2006 memo that the machinery had problems that likely would keep them from performing under hurricane conditions. Last year was a mild hurricane season, so the pumps were not tested in an emergency scenario.

Anu Mittal, the GAO's director for water resources, said a large team of investigators has been assembled to ``expeditiously'' satisfy a request by U.S. Sen. Mary Landrieu.

Landrieu, D-La., has asked the GAO, Congress' investigative and auditing arm, to investigate if there was improper influence in the way the pumps contract was awarded and handled. She also wants to know what danger the pumps posed to New Orleans, and the Corps' rationale for installing them.

Mittal said the GAO is considering Landrieu's questions and is aiming to have a report to her by the middle of May, but would not guarantee it.

The Corps did not immediately respond to questions on Wednesday. Since the memo was disclosed two weeks ago the Corps has insisted that the pumps would have worked if they had been pressed into service last year and that the city was never in danger of flooding.

The Corps has said it decided to install the pumps, and then fix the machinery while it was in place, believing that some pumping capacity was better than none. And it defended the manufacturer, which was under time pressure.

The pumps were manufactured by Moving Water Industries Corp., a Deerfield Beach, Fla., company owned by J. David Eller and his sons. Eller was once a business partner of former Florida Gov. Jeb Bush in a venture called Bush-El that marketed MWI pumps.

The U.S. Justice Department sued the company in 2002[was Jeb a partner at the time?], accusing it of fraudulently helping Nigeria obtain $74 million in taxpayer-backed loans for overpriced and unnecessary water-pump equipment. The case has yet to be resolved.

Since the pumps were installed, the corps and MWI have struggled to get the heavy-duty pumps to work properly; they have been pulled out and overhauled because of excessive vibration, Corps officials said. Other problems have included overheated engines, broken hoses and blown gaskets, according to the Corps memo last year.

Sunday, March 18, 2007

Several large US military projects under fire

by David Dieudonne Sat Mar 17, 1:36 PM ET

The Pentagon is facing mounting criticism over the awarding of several large contracts because of deficiencies and irregularities in the procurement of new age military machines.

Thursday, the US Government Accountability Office, a congressional agency responsible for keeping tabs on federal spending, revealed delays in developing an advanced combat Joint Strike Fighter and costs had swollen 12 percent.

"Total JSF program acquisition costs (through 2027) have increased by 31.6 billion dollars," the GAO said.

Wednesday, the US Coast Guard withdrew a contract from Lockheed Martin and Northrop Gumman to steer the procurement of 12 patrol boats, saying it could better "ensure full and open competition, and control costs" by doing the work in-house.

The 24-billion dollar "Deepwater" project launched after the September 11, 2001 attacks in the United States was to provide for progressive modernization and recapitalization of the aging Coast Guard fleet over 25 years.

In December, the New York Times exposed several deficiencies in the program, launched in June 2002 to better protect America's coasts against possible terrorist attacks. They included hull cracks, engine breakdowns, design flaws and electronic equipment that was not sufficiently waterproofed.

The construction of the high-speed vessel was already scrapped once because they were deemed too heavy, guzzled too much fuel and problems with their propulsion systems arose, the newspaper said.

"You will see changes shortly in the Coast Guard in our acquisition organization," fleet commander Admiral Thad Allen had predicted then. "It will be significantly different than we have done in the past."

Late February, doubt was coast over another major military purchase worth 10 billion dollars -- Boeing's construction of 141 combat search and rescue helicopters (CSAR) for the US Air Force.

The GAO recognized that Boeing competitors Sikorsky (United Technologies) and Lockheed Martin had valid concerns about the current bidding process.

"We recommend that the Air Force amend the solicitation to clarify its intent with respect to evaluation of Operations and Support costs, reopen discussions with offerors consistent with our conclusions above, and then request revised proposals," the GAO said.

But Boeing chief executive Jim McNerney told the Financial Times in March: "I do not think there will be a full-blown re-compete on the helicopter competition."

These complications come at the worst time for the Air Force.

Already facing a poor rating over contracts granted to Boeing for the renewal of its supply aircrafts, then canceled, the Air Force is under intense scrutiny by Congress.

The House Armed Services Committee held hearings on March 7 on the Air Force's procurement plans, some accusing the Pentagon of rigging the bidding process for supply planes to favor Boeing over consortium EADS/Northrop.

Wednesday, January 10, 2007

Grim picture of Iraq from US government watchdog

Grim picture of Iraq from US government watchdog

Tue Jan 9, 4:22 PM ET

US government auditors released a grim report card of the American record in violence-wracked Iraq, on the eve of President George W. Bush's televised rollout of a new strategy.

The report by the Government Accountability Office (GAO) ran a critical rule over a previous failed US plan for victory, the malfunctioning Iraqi government government and security forces and fearsome insurgent and sectarian violence.

It said the Pentagon had failed to allow proper congressional oversight of Iraqi armed forces, and warned of an increasing strain on US forces pressed into repeated tours of duty and shortages of military supplies.

Though admitting that Iraq experienced three successful elections, adopted a constitution and installed its first elected government since the 2003 US invasion, the report underlined systemic problems in the US record in the country.

"Increasing Iraqi security forces and transferring security responsibilities to them have not resulted in reduced violence," David Walker, US Comptroller General wrote in an accompanying letter to Congress.

"Rather, attacks increased throughout 2006. Although more Iraqi troops have been trained and equipped, high absenteeism and divided loyalties have limited their overall effectiveness."

As Bush prepared to lay out his new strategy on Iraq in a prime time televised address on Wednesday, the GAO audit said his previous plan for victory in Iraq contained serious flaws.

Though the "National Strategy for Victory in Iraq" unveiled in November 2005 was an improvement over previous plans, it failed to identify key government agencies supposed to carry the strategy out, the report said.

It also did not address how the US will integrate its goals with those of Iraqis and foreign nations, and only partially identified current and future costs of US involvement in Iraq, the report said.

The survey, intended to prepare lawmakers to mount effective congressional oversight of Bush's new strategy for Iraq, also warned that oil and electricity production in Iraq were falling well short of US goals.

As Democrats who won control of Congress in November warn that Bush will have no "blank check" to continue operations in Iraq, the GAO said the United States is likely to incur costs in the foreseeable future "in the hundreds of billions of dollars."

The report also raised new questions as to the combat readiness of US-trained Iraqi troops and security forces, crucial to the prospect of the US forces returning home.

As of December 2006, around 323,000 members of the Iraqi security forces had been trained and equipped, and 128 army units had specific security responsibilities, the report said.

But the GAO raised questions about the quality of the units. It said the Pentagon had repeatedly refused access to Transition Readiness Assessments (TRA) prepared by coalition advisors embedded with the units.

"This serves to limit congressional oversight over the progress achieved towards a critical US objective," the report said.

Wednesday, December 6, 2006

Official Iraq war costs don't tell the whole story


Posted on Tue, Dec. 05, 2006

McClatchy Newspapers

WASHINGTON - During a recent visit to a military family center at Fort Hood in Texas, Joyce Raezer was dismayed to find a sign in a stall in the ladies' room. It asked women to clean up because janitorial service had been cut back.

"What message does that send to a family member when they walk into a family center?" asked Raezer, the director of government relations for the National Military Families Association.

At Fort Leonard Wood in Missouri, swimming pools closed a month early this fall, and shuttle vans were sharply curtailed in an effort to trim spending. At Fort Sam Houston in Texas, unpaid utility bills exceeded $4 million, and the base reduced mail delivery to cut costs.

Belt-tightening at the bases is only the beginning. As the United States spends about $8 billion a month in Iraq, the military is being forced to cut costs in ways big and small.

Soldiers preparing to ship to Iraq don't have enough equipment to train on because it's been left in Iraq, where it's most needed. Thousands of tanks and other vehicles sit at repair depots waiting to be fixed because funds are short.

At the Red River Army Depot in Texas, the Fort Worth Star-Telegram reported in October that at least 6,200 Humvees, Bradley Fighting Vehicles, trucks and ambulances were awaiting repair because of insufficient funds.

There's a virtual graveyard of tanks and fighting vehicles at the Anniston Army Depot in Alabama. Depot spokeswoman Joan Gustafson said that the depot expects to repair 1,885 tanks and other armored vehicles during the fiscal year that began on Oct. 1. That's up from the 1,169 and 1,035 vehicles repaired in the prior two fiscal years.

Some of the depot's private-sector contractors haven't been able to supply enough parts in time to make all the repairs, she said. The depot is trying to reduce the time it takes to get repair and replacement parts from 120 days to 60 days.

Tanks and helicopters are one thing; the toll on America's warriors and their families is another.

More than 73,000 soldiers returning from Iraq and Afghanistan have been diagnosed with post-traumatic stress disorder (PTSD) and with problems such as drug abuse and depression. That's enough people to fill a typical NFL stadium.

Internet blogs written by soldiers or their wives tell of suicide attempts by soldiers haunted by the horror of combat, civilian careers of reservists who've been harmed by deployment and redeployment, and marriages broken by distance and the trauma of war.

"Back-to-back war deployments has changed both of us - to where it's as if a marriage does not exist anymore," wrote a woman calling herself Blackhawk wife on an Iraq war vets Web site. "We just go through the daily steps of life and raising children as best we can."

A mother of a returning soldier posted this: "Since he has been back, he has had 3 DUIs, wrecked his truck, attempted suicide, been diagnosed with PTSD" and is being kicked out of the Army.

The length of the war in Iraq has strained all aspects of the armed forces, said Dov Zakheim, who was the Pentagon's chief financial officer from 2001 to 2004.

"In 2003, I don't think anybody predicted it would go as long as World War II and the wear and tear on equipment would be as intense," said Zakheim, now a vice president for global strategy consultant Booz Allen Hamilton Inc. "When I left the department, we were spending less than $4 billion a month on Iraq. Now it's pretty much doubled."

The length of the Iraq war surpassed that of World War II last month. The costs of the wars in Iraq and Afghanistan and the global fight against terrorism are expected to surpass the $536 billion in inflation-adjusted costs of the Vietnam War by spring. That's more than 10 times the Bush administration's $50 million prewar estimate.

Through the fiscal year that ended on Sept. 30, Congress authorized about $436 billion in war spending, according to the Government Accountability Office, the investigative arm of Congress.

In October, President Bush signed legislation that tacked on $70 billion, bringing the total to more than $506 billion. That number will rise again once Congress appropriates Iraq stabilization and reconstruction funding.

The armed services, seeking to replace aging equipment and address quality-of-life issues for military families, are believed to be seeking $100 billion to $160 billion in a supplemental spending bill for spring.

If that's approved, war funding - three-quarters of it going to Iraq-related operations - would reach nearly $700 billion. If U.S. troops remain in Iraq through 2010, it will approach $1 trillion.

In January, Nobel Prize-winning economist Joseph Stiglitz released a study that said the true costs of the Iraq war could exceed $1 trillion and perhaps reach $2 trillion.

"When I saw that figure, I thought it was an exaggeration. I no longer think it's an exaggeration," said Rep. John Murtha, D-Pa., a decorated Vietnam veteran who's criticized how the war has been fought and funded.

The Stiglitz report focused on hard-to-measure things such as lifetime care for injured soldiers and the economic effect of higher oil prices as a result of the war. But his final numbers for unofficial costs are on pace to be matched by the official costs - which don't add the intangibles.

"We were very conservative on the numbers, and the numbers have repeatedly come in higher than we estimated," said Stiglitz, a former chief economist of the World Bank, in a telephone interview from Spain. "Those costs continue to pile up: the health care costs, the disability costs, the replacement costs - and there's obviously an open question now if we ever reconstruct" Iraq.

Here's a look at some of the costs:

-RESET

Until recently, little of the authorized war funding went toward reset, the military term for replacing fighting vehicles, tanks, helicopters and other equipment that are wearing out from heavy use.

"We have a backlog of maintenance work to reset, fix, retool all our equipment, and at the same time we have to take care of our civilian soldiers," said Rep. Solomon Ortiz, D-Texas, who in January will become chairman of the House Armed Services subcommittee on readiness. "Many of the units in the United States Reserve or National Guard do not have any equipment because their equipment stayed in Iraq ... Humvees, weapons, trucks, tanks. You name it, they need it."

Gary Schmitt, a defense expert for the American Enterprise Institute, a conservative think tank, said the problem existed before 2001. "The war has obviously made that much worse," he said. "People would be surprised, but the reality is the increases in defense spending have been personnel and operational," not for upgrading or modernizing the armed forces.

The October bridge funding, which bridges the gap that occurs when the fiscal year begins before funds have been appropriated, included $24 billion for reset costs across the armed services. The Army's deputy chief of staff, Lt. Gen. David Melcher, told Congress in March that he expected reset costs of at least $12 billion a year while troops are in Iraq and for two years after withdrawal. In the 2006 fiscal year, the Marine Corps' reset request was three times bigger than its regular procurement budget.

The nonpartisan Congressional Budget Office estimated a $60 billion reset price tag through 2016, assuming a reduction in U.S. troops in Iraq by 2010.

"As long as the current level of intensity is maintained in Iraq operations, there's not going to be enough money to meet all the services' needs," said Loren Thompson, a defense analyst at the Lexington Institute, a military think tank. "We're really burning up money over there at a furious pace."

Policymakers are stymied in their efforts to predict war costs, partly because the Department of Defense provides only vague estimates of future costs.

"DOD has provided little information about overall requirements to replace worn equipment or to upgrade capabilities, or how war requirements relate to ongoing peacetime investment," Amy Belasco, a defense budget analyst for the nonpartisan Congressional Research Service, said in a September report.

As the chief economist on President Bush's Council of Economic Advisers in 2002 and director of the CBO from 2002 until last year, Douglas Holtz-Eakin wrestled with that same problem. "It was hard to get actual cost data," he said.

-HEALTH

Between Oct. 1, 2001, and June 30, 2006, 35 percent of returning active-duty soldiers and 31 percent of Army reservists and National Guardsmen sought medical care from Veterans Affairs health centers. That figure from the Veterans Health Administration doesn't include treatment at VA hospitals.

In that period, more than 33,000 returning troops received preliminary diagnoses of post-traumatic stress disorder. Others experienced depression and drug abuse.

"The wear and tear on soldiers and the wear and tear on their families have been immense," said John Grady, a spokesman for the Association of the United States Army, a nonprofit group that lobbies on behalf of active and retired soldiers.

Problems are getting corrected, he said, "but they're getting corrected very slowly because the money is very slow in arriving."

In the first Gulf war, in which 700,000 U.S. soldiers were involved, 44 percent filed for some sort of disability compensation.

More than 1.4 million U.S. soldiers have been deployed to Iraq and Afghanistan since late 2001, and about 26 percent have filed disability claims, according to raw data provided by the Department of Veterans Affairs. That percentage could grow as soldiers leave the armed forces.

"I see the whole thing as a mini-Medicare, another huge entitlement program which is going to be sprawling out over the course of our lifetimes and our children's lifetimes," said Linda Bilmes, a Harvard University public finance professor and co-author of the Stiglitz study. "The big costs come when they get back ... they stand a good chance of being really underfunded and not taken care of properly."

Veterans groups worry that they'll be forced to compete with other government programs for funds. Not enough attention is being given to the future mental health and medical needs of Iraq and Afghanistan war vets, they say, especially given how those wars differ from previous ones.

"First, they are deployed to war longer. Second, they are being deployed to the war zone two or three times. The combat there is more intense than the Gulf War for nearly every one deployed," said Paul Sullivan, a Desert Storm veteran and director of programs for Veterans for America. "There are no rear-area jobs. Everyone is on the front lines ... cooks and clerks and truck drivers ... the entire country is a war zone."

-FUTURE READINESS

Military commanders complain that they've been forced to fight a war on the cheap, despite its large costs. That's because military spending totals about 4 percent of the broader economy, a historically low level. Some critics, including Murtha, want to see more funds dedicated to the military's long-term needs.

"As the ships get older, the airplanes get older, we won't have the deterrent capability that we need," Murtha said.

Big-ticket U.S. military programs have been delayed since the 1990s, said Schmitt at the American Enterprise Institute. There are now so many unfunded replacements and upgrades scheduled in the years ahead that the nation faces a "procurement bow wave" that could swamp the federal budget.

A "spasm of endless spending in Iraq and Afghanistan" threatens future Air Force readiness, said Rep. Neil Abercrombie, D-Hawaii, the incoming chairman of the House Armed Forces subcommittee on air and land.

Zakheim, the Pentagon's former CFO, said diverting money from acquisition programs is akin to "eating our seed corn for the future."

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For more on GAO concerns about funding and the global war on terror: www.gao.gov/new.items/d06885t.pdf

For the Congressional Research Service report on war costs, go to www.fas.org/sgp/crs/natsec/RL33110.pdf

For a military challenges report by Gary Schmitt of the American Enterprise Institute, go to www.aei.org/publications/filter.all,pubID.25097/pub_detail.asp