Nation’s former top accountant eyes U.S. debt warily
NEW YORK — David Walker, who for a decade ran the U.S. Government Accountability Office, the watchdog group charged with overseeing how the government spends taxpayer money, insists Washington is out of touch and out of control with the nation’s finances.
The government estimates the national debt at about $17 trillion, but Walker argues it is closer to $73 trillion, once all the unfunded promises for future Social Security benefits and other obligations are added in.
Next month he’ll present a major report for the nonprofit organization he founded, the Comeback America Initiative, whose purpose is to raise awareness about the federal government’s swelling debt. It’s a chasm that isn’t top of mind for most Americans, he knows. But Walker, 61, wants it to be.
He envisions a bleak future if the U. S. doesn’t stem the financial sinkhole: painful inf lation, larger gaps between the rich and the poor, even threats to national security.
He rattles off proposed s olut i ons. Among t hem: To cut down on health care costs, make hospitals provide more information about pricing. To salvage Social Security, index the retirement age to increases in life expectancy. To bring in more tax revenue, cut down on the exemptions and deductions that disproportionately benefit the wealthy.
In an interview with the Associated Press, Walker expounded on why the stock market doesn’t matter and why the sequester isn’t helping. Here are excerpts, edited for length and clarity.
Q: You keep comparing the U. S. to Rome. Is this just scaremongering?
A: The Roman republic fell for a lot of reasons. Decline of moral values and political civility at home. Overconfidence and overextended militarily around the world. Fiscal irresponsibility by the central government and inability to control its borders. Does that sound familiar?
We tend to assume that since we’re the largest economy, the temporary sole superpower, the longest-standing democracy, that we must be No. 1 in most things. And we’re not.
We’re below average on the state of our critical infrastructure. We’re below average with regard to health care outcomes, K-12 education, the amount of public resources we’re allocating to research and development. We spend over twice per person what other industrialized nations spend on health care and K-12 education and yet we get below-average results. So the answer is not to spend more money. The answer is you’ve got to dramatically reform the system.
But Washington already cut spending. Automatic spending cuts, or the sequester, kicked in this year, when Republicans and Democrats couldn’t work out a budget compromise.
That represents a mindless, across- the- board, one-size-fits-all cut to defense and other discretionary spending, rather than separating the wheat from the chaff in terms of what works and what doesn’t work. The three things that drive our structural
deficit problems have not been addressed by the president and Congress. They haven’t addressed social insurance problems: Social Security, Medicare and Medicaid. They haven’t adequately dealt with health care costs. And they haven’t modernized our tax system to make it simpler, fairer and to generate more revenues. Until you do that, you’re rearranging the deck chairs on the Titanic. Q: OK. So how bad is it? A: Washington has a false sense of security about our nation’s finances. We have an aging society. We have longer lifespans. We have relatively fewer workers supporting a growing number of retirees. In 1950, we had about 16 people working for every person drawing Social Security. Today, it’s 3 to 1, and by 2035, it’s going down to 2 to 1. Every couple will have their own retiree to take care of.
The national debt clock says we have $17 trillion in debt, but the real problem is much bigger. If you look at the total liabilities in unfunded promises that the government has made — for future Social Security, for Medicare, for military and civilian pensions — it’s $73 trillion. That’s over $250,000 per person. People have a second or third mortgage that they didn’t know they had, and no house to back it.
Now the biggest risk that we have fiscally is interest. We’re spending (more than $200 billion) a year on interest. The president’s own budget projections say we’ll be spending (almost) $800 billion on interest (per year) in ten years. And what do you get for interest? Nothing. I say shinola. I’m from the South.
Q: How can you be so negative about the economy? There are lots of signs that things are improving. The stock market is near record highs.
A: The stock market? I quit believing in the efficiency of markets a long time ago. The stock market is not the appropriate bellwether of the state of the economy.
People on fixed income are getting killed because they can’t get a reliable return on investment. Prices are going up faster than what the government tells you because they don’t consider food and energy in the index. Last time I checked, you can’t live without food and energy.