U.S. Comptroller General David Walker has issued a warning that the federal budget is in much worse shape than most of us know and the deficit hole is growing deeper. Our projected budget deficits are not manageable without significant changes in taxes or spending, Walker told the National Press Club. We cannot simply grow our way out of this problem. President Bush maintains his tax cuts will create many new jobs and lead to economic growth. Walker said present government accounting systems do not reflect the true severity of the governments fiscal problems. The time has come for all responsible parties to recognize reality, Walker said. Our nation has a major long-term fiscal challenge that is not going away. The administration, on the other hand, contends that tax cuts are important and deficits dont really matter. The bottom line is, Walker said, there is little question that deficits do matter, especially if they are large, structural and recurring in nature. The days of surpluses are gone, and our current and projected budget situation has worsened significantly. The Treasury Department last week reported the federal deficit reached $400.5 billion for the first 11 months of the current budget yeartwice what it was in the same period a year ago. President Bush blames the soaring deficits on the recession, the wars in Iraq and Afghanistan and more spending on homeland security, not on his tax cuts. Walker responded: Its true that deficits are understandable and sometimes necessary in times of recession and/or war. However, while it may not seem like it to those who are out of work or underemployed, we have not been in a recession for almost two years. Walker added that the deficits projected far exceed the costs associated with Iraq, the global war against terrorism and any incremental homeland security costs. It is time to admit we are in a fiscal hole and to stop digging. White House spokesman Claire Buchan said the president must focus right now on economic security and waging the war on terrorism. Those priorities are more important at this point. Buchan added that Its important that we make every effort to grow the economy, because a growing economy will help reduce the budget deficit. The Congressional Budget Office reported last month that the federal deficit would reach $480 billion next year, far surpassing the previous record of $290 billion in 1992. The CBO also said annual budget shortfalls would hit nearly $1.4 trillion over the next decade, a sharp reversal from the 10-year, $5.6 trillion surplus predicted in 2001. Walker said those figures dont convey the real scope of the problem because they fail to reveal the impact of entitlement programs such as Medicare, Social Security and Veterans Benefits. These additional amounts total tens of trillions of dollars, he said. They are likely to exceed $100,000 in additional burden for every man, woman and child in America today, and these amounts are growing every day. Another aspect of the gloomy economic picture was pointed out last week by the International Monetary Fund (IMF). The IMF said the mammoth U.S. trade deficit is a noose around the neck of the economy and warned the dollar would collapse at any time. The fund said the U.S. could not continue to run a current account deficit of 5% of Gross Domestic Product. Kenneth Rogoff, IMF chief economist, said its just a matter of time before the dollar begins a steep slide. If we were looking at a poor developing country, the world gives them just enough rope to hang themselves. A country like the United States, they give them enough rope to tie the noose around their neck several times, but it does happen in the end, Rogoff said.