Sunday, August 30, 2009
This time last year, David Walker -- who quit his job as U.S. comptroller in March 2008 to sound the alarm about rising national debt -- was being called "Chicken Little." Now, not so much. Last week, the White House said that this year's federal budget deficit will approach $1.6 trillion, the highest on record, and that his spending programs over the next 10 years could require $9 trillion in borrowing -- for a total national debt that is likely to exceed the U.S. gross domestic product for the first time since World War II. Walker, whose 2008 documentary about the dangers of rising debt, "I.O.U.S.A.," is being updated and distributed free in January, spoke with Washington Post business reporter Frank Ahrens about a nation awash in a sea of red ink. Excerpts:
We've got a national debt. We've always had a national debt. Two hundred-some years later, we're still here. So what?
Good question. At the beginning of the republic in 1789, we had total debt of $75 million that was 40 percent of the economy. But we got something for that debt. We won our independence, and by the federal government assuming all the debt of the states, we were able to gain agreement on the Constitution of the United States. Today, when you consider both debt held by the public and debt held by the trust funds, we are rapidly approaching total debt of 85 percent of our economy -- over double what it was to win our independence. The question is, what have we gotten for it? And we ain't seen nothing yet, because it's scheduled to get much worse unless we end up making some dramatic and fundamental reforms.
It's critically important that we reimpose statutory budget controls tougher than the ones that we had in the 1990s, which helped to take us from large and growing deficits to large and growing surpluses. We need to do that as soon as we turn the corner on the economy. We also need to reform Social Security to make it solvent, sustainable, secure and more savings-oriented. It's really not that difficult. We need to reduce health-care costs. You can't do that by expanding coverage. By definition, expanding coverage will increase health-care costs, not decrease health-care costs.
With statutory reforms, you're talking about tough laws that require balanced budgets, right?
I'm talking about caps on discretionary spending increases, pay-as-you-go rules on both new proposed spending programs and tax actions, in addition to mandatory reconsideration triggers for both spending programs and tax preferences. Furthermore, to mandate that one has to consider the longer-term cost and consequences of major legislative proposals before they're enacted into law. For example, not just what the cost is over 10 years, but what are they likely to do beyond 10 years? Because all too frequently people will play games with the scorekeeping to be able to enact things into law that we might be able to afford in the short term but there's no way we can sustain over time. . . . We can't wait till we get a crisis with the federal government's finances. Because if we do, it will start with a D, not an R.
What does that mean?
Depression, not recession, okay? We must take steps to avoid a crisis. Now, we can do it, and frankly, President Obama has said things publicly that leads one to believe that he wants to do it. He said when he was taking office that he didn't want to kick the can down the road anymore. He talked about making tough choices. And within the last month he acknowledged in an interview that it may take a special commission to put elected officials in a position where they can make those tough choices.
So the debt-to-GDP ratio now is about 85 percent, closing in on 90.
Well, let's calculate it real quick. If you take 11.7 trillion dollars and if the GDP is about 14 trillion, roughly, okay, that's 83.6 percent. We're approaching 85 percent by the end of this fiscal year, and we'll be approaching 90 to 95 percent by the end of next fiscal year.
The national debt rose consistently during President Bush's eight years. Did you do everything you could have in your former job?
Yeah, I did. . . . I spoke out, I did unprecedented things as a comptroller general. Unprecedented, including going to the National Press Club in September of 2003 before things got really bad and before Congress passed the prescription drug benefit bill, and I blew the whistle on what was going on, and quite frankly, the press just didn't cover it enough.
That's it, blame the media.
It's not just the media, okay, but the fact of the matter is that I am not the typical government person who waits until after they get out of office before they say something.
Have you thought about running for office?
I've thought about it. I've actually been recruited by both parties at various times in the past. I'm a political independent. I wouldn't have any interest in running for the House for a variety of reasons. The Senate's not what it used to be. It might be worthwhile at some point. But I don't have any plans to run for office at the present time.
Is there anything you would have done differently as comptroller?
Bush 41 and Clinton deserve a significant amount of credit. They both broke campaign promises with regard to taxes; they both supported statutory budget controls; they both restrained from increasing entitlements; they both kept the lid on discretionary spending; they did those things and more, okay, and even though they paid a political price, they did the right thing for America. Now, the statutory budget controls that helped us go from those large and growing deficits to large and growing surpluses expired at the end of fiscal 2002. And things got totally out of control after that. It was significant increases in discretionary spending, not all of which related to the global war on terrorism. It was two conflicts that were not paid for, nor were the American people asked to pay for them.
The line in Washington from Democrats and even Republicans now is: Listen, we know the debt is rising dangerously. But these are desperate times. What do you think about that?
There's absolutely no question that some level of stimulus was both necessary and appropriate. However, only about a third of the American Recovery and Reinvestment Act meets the definition of stimulus -- namely, that it is timely, targeted and temporary.
Instead of massive deficit spending, should Congress and the president have passed tax breaks for consumers and businesses?
Well, they did pass some tax breaks, although a lot of those tax breaks represented wasted money because the amount of money involved was so insignificant it really wasn't going to have any meaningful effect on the economy. Furthermore, we've seen that a lot of those very modest tax rebates were saved rather than spent. Secondly, a lot of the infrastructure programs have been used to do short-term projects that don't necessarily enhance economic growth and longer-term potential. A significant amount of the stimulus money has also been used to prop up the status quo in state and local governments rather than to help, and has delayed their fundamental need to restructure themselves, just as the federal government is going to need to do itself in the not-too-distant future.
So in other words, it's just life support instead of actual change.