Nation's former top accountant eyes debt warily
NEW YORK • The economy is slowly growing, the government's yearly budget deficit falling. But the nation's former top accountant doesn't buy the idea that everything is OK.
David Walker, who for a decade ran the Government Accountability Office, the watchdog group charged with overseeing how the government spends taxpayer money, is as adamant as ever that Washington is out of touch and out of control with the nation's finances.
Next month he'll present a major report for the nonprofit 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 stocks his pockets with fake trillion-dollar bills to pass around because, as he says, "Washington spends a trillion dollars like it's nothing." He shows up for an interview sporting two pins on his lapel one for the Sons of the American Revolution, and one that says CPA, in honor of his accounting vocation. "It means I'm a patriot who knows math," he says, "and there's not many of them."
The government estimates the national debt at about $17 trillion, but Walker argues it's closer to $73 trillion, once all the unfunded promises for future Social Security benefits and other obligations are added in. And he envisions a bleak future if the U.S. doesn't stem the financial sinkhole: painful inflation, larger gaps between the rich and the poor, even threats to national security.
He rattles off proposed solutions. Among them: 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.
CAI will wind down after next month's report on the state of the nation's finances, partly because Walker promised his wife he'd take it easy, partly because he's not sure the Washington establishment Republicans and Democrats alike is ready to listen.
In an interview with The Associated Press, Walker also expounded on why the stock market doesn't matter, why the sequester isn't helping and how he got roped into dancing the Harlem Shake. Excerpts have been edited for length and clarity.
Isn't some of your message just scaremongering? You keep comparing the U.S. to Rome?
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 the 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.
OK. So how bad is it?
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.
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.
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. So yeah, the stock market is at a record high but on the other hand, gaps are growing between the haves and have-nots. 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.
There's a video circulating the Internet of you dancing the Harlem Shake to raise awareness about the debt (with a group similar to CAI called The Can Kicks Back). Did you pick out the curly white wig you wore?
Oh, no no no no no. They asked me to wear it. I'm a member of the Sons of the American Revolution, and there are some very nice Revolutionary War wigs available. That was clearly not one of them.
Do you get invited to many parties in Washington? Because you're kind of a doomsayer.
The difference is I have answers.