Former U.S. Comptroller General David Walker on the Federal Fiscal Crisis
David Walker: We are mortgaging the future of our children, grandchildren and
future generations while at the same time reducing relevant
investments in their future at the time that they’re going to have
increasing competition. That’s not only irresponsible, it is
immoral.
Nick Gillespie: Hi, I'm Nick Gillespie with Reason TV. Today we’re talking to
David Walker the President and CEO of the Peter G. Peterson
Foundation and former US Comptroller General. David, thanks for
dropping.
David Walker: Good day with you Nick.
Nick Gillespie: You talk about a lot about federal financial responsibility. What is
the magnitude of the problem facing us in terms of fiscal
responsibility or lack thereof?
David Walker: Well last year fiscal of 2009, we had a 1.4, two-trillion dollar
deficit, this year it’s going to be 1.3 trillion plus. The debt has
more than doubled in the last 10 years. It’s scheduled to more than
double again the next 10.
Nick Gillespie: Isn't that kind of growth good?
David Walker: That type of growth is not, that’s called negative growth and our
liability is not going to promise is if tripled in the last 10 years as
well.
Nick Gillespie: What are the major drivers of this auto control government
liabilities?
David Walker: Medicare is $38 trillion under water. Social Security is $78 trillion
under water. Those would be the two biggest.
Nick Gillespie: What are the types of spending restraints that are meaningful that
we might put in or Congress might put in on itself and then how do
we say, not necessarily say, who do we make Social Security and
Medicare ether less horrible disasters or more viable growth?
David Walker: Well, first we need to learn from the past. We need to re-impose
tough statutory budget controls and discretionary spending. We
need to be able to have mandatory reconsideration of spending
programs and tax policies when they reach a certain size.
Nick Gillespie: What does that mean?
David Walker: Well what that means is, is under the past spending controls that
we have, we control what was called discretionary spending which
is defense in other spending. But we didn’t have any controls at all,
that over 60% of the budget that there's in there by law. There are
the mandatory spending programs, Social Security, Medicare,
Medicaid and agricultural programs. A trillion dollars worth of tax
preferences, deductions, exemptions, exclusions and credits, those
just grew on auto-pilot wasn’t subjected to any constraint or any
oversight. We also need to have pay as you go rules that are
meaningful pay as you go rules, the one that are there right now
have trillions of gaps in them.
Nick Gillespie: Speaking of Pay-go, President Obama has said, “We’re not going
to spend a dime unless we’ve cut a dime.” One of the recent issues
is the constant re-upping of federal unemployment benefits. Jim
Bonning became a national laughing stock when he said, “If you
want $10 million to pay for this, take it out of whatever it is, four-
trillion dollar budget and he was laughed at more recently in a
Congress just again agreed to redo or spend more on
unemployment benefits without cutting anything. How do you
make this thing stick? How do you make pay as you go work?
David Walker: Well first, it’s very difficult to be able to constrain federal
spending especially in the area of unemployment benefits when
you almost have 10% unemployment and you got so many
Americans that are hurting if you will. But I think this is kind of an
example of when things aren’t going well, people want to do more
and they may have justification for doing more. But when things
are going well, they don’t want to end up making tough choices to
be able to eliminate a bunch of things that aren’t working, and that
is what we have to do. I mean we have to be more future focus,
more results oriented. Government has grown way too big. We
have a lot of federal government spending programs and tax
policies that don’t work.
Nick Gillespie: Was there in recent memory, was there a time when Pay-go rules
actually worked or were Congress restrained at least the growth in
spending if not absolute cut?
David Walker: From 1990 to 2002, during the efforts of President George Herbert
Walker Bush and William Jefferson Clinton. We have tough
statutory pay as you go rules, discretionary spending cuts etcetera
and by and large they worked. They help provide discipline. They
help to give a basis for people to say no.
Nick Gillespie: Why did they disappear?
David Walker: They disappeared because as you know we have a surplus for four
years. People thought that we didn’t have a problem anymore and
frankly people didn’t want to be constrained with regard to
spending or tax cuts. They wanted to be able to do both and they
did a lot of both and now we’re in much worst shape than we’ve
ever been.
Nick Gillespie: Talk about Social Security, how big is the problem and what do we
do to adjust things?
David Walker: Social Security does not face an immediate crisis but it is paying
out more in benefits than it’s taking in cash revenues.
Nick Gillespie: And that will never reverse right?
David Walker: Well it’s supposed to reverse for a few years, less than five years
after we came out of the recession. But it’s permanently going to
be negative cash flows starting in about 2017. We need to
recognize that it’s proven to solve the problem sooner than later.
We need to gradually increase the normally early retirement agents
and then index in the increases in life expectancy. Strengthen the
benefit from people near the poverty level, provide not quite as
much from middle and upper income. We need to add an automatic
savings account on top of a solvent, sustainable, secure define
benefit program.
Nick Gillespie: Let’s talk about Medicare. What do we do with Medicare? This is
the thing that will bring us to our needs, right?
David Walker: Well, there are a lot of things we have to do with Medicare. We
need to move away from fee for service payment systems. We got
to go more evidence space practices. We can’t write a blank check
for Medicare which we do now. We need to be more realistic about
what type of services should be covered under Medicare. We need
to get out of the business of providing subsidies for billionaires and
very wealthy people who voluntarily sign up for Medicare’s, out
patient, physician payment and prescription drug programs.
Nick Gillespie: Should we get rid of the prescription drug benefit? I mean this is
one of Bush’s big legacies. It’s a total black hole and it really
shovels money from relatively poor and young people to relatively
well off.
David Walker: I think the federal government was on the wrong business for
healthcare. I think the federal government over the next 20 years or
so should be in the business of making sure that every American
has preventative, wellness and catastrophic. So guaranteed
insurability and group rates for those things but beyond that I think
that there ought to be choices. There will be options and
Americans shouldn’t be required to take it beyond that. I think if
we did something like that, we could do something it would be
affordable and sustainable for our broad base societal benefit but
what we have now and frankly what we recently did, I think is
going to compound our problem.
Nick Gillespie: So that and I mean obviously, essentially what the healthcare
reform and a lot of ways was just what pass is really creating
Medicare for everybody now. It’s certainly massively expend in
the governments role at regulating and quite possibly, ultimately in
delivering healthcare. What do we do to pull that back? How do
you reach people to say, these systems are unsustainable now.
Medicare is unsustainable. Adding another trillion dollars in
healthcare spending over the next decade or more is unsustainable.
What do you do?
David Walker: Well, what Washington just did is they added a new wing to a
healthcare account house that is structurally unsound mortgage for
more than its worth and headed for foreclosure. Sooner or later
people are going to realize that and we’ll have to have an honest
discussion debate with the American people about what level of
healthcare coverage is appropriate, affordable and sustainable, and
how to best finance it. All the tough decisions dealing with that
were really punted and I think it’s probably going to be 2013
before we come to make those decisions but we must make them.
Nick Gillespie: There is no way that economic growth is going to save us.
David Walker: No there's something called Math in order for us to be able to grow
our way out of this problem. It would take double digit real
economic growth every year for decades. It hasn’t happen. It’s not
going to happen and we also can’t inflate our way out either.
Nick Gillespie: Talk briefly about the Peter G. Peterson Foundation. What's its
mission and what's your role there.
David Walker: Well the Peter G. Peterson Foundation is named after a great
American Pete Peterson who puts his money where his mouth is
and his time where his heart lies. We’re about promoting federal
financial responsibility. We want to make sure it’s not an oxy
moron. We want to be able to promote more responsibility and
accountability today so we can help create more opportunity.
We’re focused on fiscal issues, savings issues, and balance and
payments issues, basically trying to help save the republic.
Nick Gillespie: Are you optimistic about the future or pessimistic?
David Walker: I'm an American, so by definition I'm optimistic. At the same point
I'm a realist and my view is, yes we can turn this thing around but
only if the first three words of the constitution come alive, we the
people.
Nick Gillespie: But aren’t the people the problem? I mean, everybody wants
something. You're talking about if it’s a 75% subsidy on
healthcare. I'm paying a quarter, I'm getting a box worth.
David Walker: Look, human nature being what it is. Everybody wants as much as
they can get and not have to pay for it. But what they have to
understand is not just an economic issue, this is a moral issue. We
are mortgaging the future of our children, grandchildren, and
future generations while at the same time reducing relevant
investments in their future at a time that they’re going to have
increasing competition. That’s only irresponsible, it is immoral and
it’s also taxation without representation on a massive scale.
Nick Gillespie: Thanks David for talking.
David Walker: Good to be with you, Nick.
Nick Gillespie: With David Walker of the Peter G. Peterson Foundation and
former Comptroller of the United States, I'm Nick Gillespie for
Reason TV.
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