Q and A: Former comptroller general says the clock is ticking on the nation's debt
This article first appeared in the St. Louis Beacon, Sept. 17, 2012 - By his calculations, the nation’s financial burden grew by about a quarter of a billion dollars during the Beacon’s interview with David Walker, the former U.S. comptroller general who is bringing his "$10 Million a Minute” tour to Washington University on Tuesday.
That figure was determined by watching the online digital count-up clock on Walker’s website, during a 25-minute phone interview on Friday. Depending on how quickly you read, you can watch that debt burden grow by another $100 million or so, while you read this interview with Walker, who is hauling around a 22-foot version of the clock to the public events on his month-long bus tour.
“It’ll scare the bejesus out of you, right?” Walker said. “It makes for a great photograph. When we started, it was $70,410,400,000,000. [Read: 70 trillion, 410 billion, 400 million dollars] It’s going up $14.4 billion a day, $10 million a minute. And that’s what the name of the tour is.”
Walker is the CEO of the Comeback America Initiative (CAI), a nonpartisan nonprofit that preaches fiscal responsibility. His message: The U.S. needs to take action in 2013 to cut its national budget deficit in what he describes as a “grand bargain” to decrease government spending and increase revenue.
Walker’s “Burden Barometer” paints a gloomier picture than the National Debt Clock that he says fails to take into account the nation’s total liabilities and unfunded programs.
While there are various incarnations of the national debt clock, the most well-known is probably the New York model that was erected by Seymour Durst in 1989 and is now spinning past $16 trillion. The U.S. Treasury also has a webpagedevoted to the national debt.
Walker will be joined at Washington University by Joseph Minarik, who was chief economist of the Office of Management and Budget during the administration of President Bill Clinton. Minarik, currently with the Committee for Economic Development, has served on national commissions about the nation’s growing debt.
Walker, who puts his age at a “youthful 60,” said he turned down offers to work on Wall Street after his government service because he believes in the importance of his fiscal mission. Citing transparency, he includes on his CAI website the organization’s 990 nonprofit organization tax form, which puts his salary at about $300,000. He donated his speaker’s fees and book royalties to the initiative -- more than $200,000 in tax year 2010.
Protestors take aim at tour
A coalition of Missouri retirees and veterans has announced plans to protest David Walker’s “$10 Million a Minute” bus tour at Washington University Tuesday, objecting to what they say is a call for “severe cuts in Social Security, Medicare and veterans’ benefits.”
The protest will include members of the Grass Roots Organizing, Missouri Alliance of Retired Americans, Gray Panthers of Kansas & Western Missouri, Veterans for Peace, Social Security Works, and the National Committee to Preserve Social Security & Medicare.
Judith Parker of St. Louis, who is with the Missouri Alliance for Retired Americans, said the groups take issue with Walker’s group Comeback for America Initiative, which is funded by billionaire Peter G. Peterson, co-founder of the Blackstone Group.
Parker said the groups oppose changes to Social Security and Medicare that would negatively impact seniors, veterans and people with disabilities who are served by the programs.
“Any time you start changing the system and removing some parts of it, the system begins to fall apart,” she said. “There are too many people out there who rely on these programs to stay out of poverty.”
The Peter G. Peterson Foundation gave Walker’s Comeback America Initiative a three-year grant that funds most of its operations, but Walker said the “$10 Million a Minute” tour is not being funded by foundation chairman Peter G. Peterson. Walker said the tour is being paid for with contributions from individuals of “different political affiliations” who will be identified in his next 990 tax form.
Walker headed the Peterson Foundation until departing in 2010 to found the CAI.
Peterson, who served as U.S. secretary of commerce under President Richard M. Nixon, is a billionaire who co-founded the Blackstone Group, a private equity firm. He established the Peterson Foundation in 2008 to promote fiscal responsibility and funded it with a $1 billion endowment. The Peterson Foundation financed and distributed the 2008 documentary "I.O.U.S.A.” which offered a grim look at the nation’s economic picture.
Here are excerpts from the Beacon's interview with Walker:
Explain the difference between your Burden Barometer and the National Debt Clock.
Walker: The debt clock serves to understate our problem because it does not include unfunded pensions and retiree health obligations, unfunded Social Security and Medicare promises, as well as a range of other items that are in the financial statements of the U.S government. When you add all those numbers up the more accurate number is over $70 trillion and growing by $10 million a minute.
But here’s the key: The biggest part of those numbers are things that can be changed. A lot of people refer to Social Security and Medicare and Medicaid as entitlements. That is not correct. They are not entitlements. The Supreme Court has already stated that they can be changed at any time. They are social insurance programs and they are important social insurance programs, but they are not entitlements.
Part of the problem is we’re using vernacular that is inaccurate and misleading and serves to basically cause problems in trying to do some of the things that we need to do. Just as the same language is used in the area of spending where people talk about cutting spending when what they’re really talking about is reducing the rate of increase.
Your tour has focused a lot on university campuses; what is the response from college students?
Walker: Our typical format is a 15-minute presentation presenting the base case that our financial condition is worse than advertised. It’s getting worse rapidly by doing nothing and we need to make a lot of tough choices. After we make the presentation, we ask the audience -- no matter if it’s business executives or college students -- do people believe we have a problem? I think it’s been unanimous that we have a problem and that we need to do something about it.
Then we talk about what we are going to do about it. Many young people think they’re not going to get Social Security. They’re wrong. They are going to get it. The real question is at what age, what amount and what form. You’ve got young people who don’t really understand that to the extent that you have deficits and debt that those basically represent deferred taxes, absent a change of course. They better get more informed and involved because ultimately they’re going to get the tab.
What do older Americans think about this? Unemployment statistics show that 50something Americans took a hit in the Great Recession and have not recovered. Some of these folks are looking at Social Security as a lifeline.
Walker: Our proposal is we need to do a grand bargain in 2013. If we do that, you can leave people who are 55 and over for Social Security, largely unaffected. And there are several reasons for that: They don’t really have time to make adjustments and secondly from a practical standpoint it would be politically difficult to try to do anything else. But the longer we wait the higher that age is going to have to be.
Social Security doesn’t face an immediate crisis; it’s not our biggest problem but there is still a lot of disinformation about Social Security. You still have people who say it hasn’t added a dime to the deficit. That’s false. It started running negative cash flows in 2010. It’s increasingly worse. It used to be funded through the payroll tax but then Congress gave this 2 percent across the board payroll tax relief and so now we’re pumping general revenues into Social Security; and the trustees in the latest report say it’s underfunded $11 trillion and it will go up several hundred billion a year.
We make it clear that if you’re 55 and older, there would be little to no change. The younger you are, the better off you are financially the more you’ll be affected, but then again the more time you’ll have to adjust and the more means you’ll have to be able to deal with the changes. We get virtually unanimous support for the kind of Social Security reforms we’re talking about.
What is the grand bargain you propose for 2013?
Walker: The grand bargain is that we need to have both spending reductions and additional revenues. My personal view is about 3-to-1 enforceable spending reductions, not promised to additional revenues. If you look at the overview statistics, right now the government is spending at about 24 percent of GDP [Gross Domestic Product]. The historical average of taxation is 18.3 percent, but the government is scheduled to spend 37 percent of the economy by 2040 without a change. And taxes are scheduled to be about 25 percent of economy in 2040, absent the change.
I believe we can solve this problem and meet the six principles that we lay out -- criteria that need to be met in order to achieve sustainable success with smaller government. Spending less than 24 percent of GDP. But we can’t do it without more revenues than the historical average of 18.3 percent.
We can solve this problem, but that’s only if we act soon and that’s only if we avoid a debt crisis because if we have a debt crisis things are going to spin out of control. The biggest risk that we have is an interest rate risk because interest rates are at an all-time low. We’re adding debt at record rates and for every 1 percent increase in interest rates that’s another $160 billion in spending for which we get nothing. Right now interest rates are 4 to 5 percent and so the fastest growing expense is interest and that’s without a significant increase. We’ve got to be able to make progress before we pass the tipping point where interest rates start going up a lot.
What is your reaction to Federal Reserve Chairman Ben Bernanke’s announcement last week that the Fed will buy mortgage-backed securities at a rate of $40 billion a month to stimulate the economy?
Walker: I’m surprised they’re making such an announcement in the middle of a general election campaign. I believe the Fed has been politicized and I’m not talking about Bernanke. I believe the Fed is doing things that are short-term gain but increase risk of long-term pain, and they’re doing it in large part because the Congress and executive branch aren’t doing their jobs. And because the Fed’s mission was changed in 1978 to require that it not just focus on economic growth and combating inflation but also short-term employment. And I think that’s politicized the Fed.
I think both our monetary policy -- which is the Fed -- and our fiscal policy, which is tax and spending -- Congress and the executive branch -- are frankly out of control. And they both need to be reigned in. I have a higher degree of confidence in Chairman Bernanke and the Fed being able to make necessary adjustments, but the Congress and the president need to start doing their jobs.
Most people don’t realize that the single largest holder of U.S. debt is the Federal Reserve and basically they’ve just announced that they’re going to buy most of the new U.S. debt in order to keep interest rates down artificially. That’s short-term gain, but over time it’s a Ponzi scheme. I’m very troubled with what’s going on right now both as to fiscal policy and monetary policy. Both need to be corrected.
What do you believe voters should be listening for from political candidates this election year?
Walker: We pass out a “Serious 7” booklet: serious questions for serious candidates. It’s basically posing more direct questions about what they propose to do in several areas dealing with our federal finances. What do they propose to do on budget controls, on taxes, Social Security, Medicare, Medicaid, defense. While it’s clear that the economy, jobs and fiscal response are a top issue in the campaign, these issues have not been dealt with, with enough substance and solutions-oriented approaches.
In my view the only way that we’re going to avoid a debt crisis is if we get extraordinary leadership from the president, whether it’s Barack Obama’s second term or Mitt Romney’s first. And people putting pressure on members of Congress to solve the problem or else lose their jobs. If the presidential candidates don’t talk with more substance and solutions in the debates then the American people aren’t going to be able to make informed decisions. And if they don’t talk with more substance and solutions they’re not going to be able to credibly claim they have a mandate, even if they win. You can only claim you have a mandate if you actually campaign on something.
President Obama says he has a plan. His plan presumably is his budget. It’s been rejected unanimously by the Senate and the House the last two years. If that’s his plan it was unanimously defeated. In the case of Romney, he hasn’t provide enough specifics for his plan about what he plans to do in regard to some of the tax deductions. How he’s going to be able to generate the revenue he needs if he ends up cutting tax rates across the board 20 percent. He hasn’t provided specifics about how we’re going to be able to afford the level of defense spending that he wants to make and still put our finances in order.
What we’re trying to do is address the three needs that exist that so far neither candidate has adequately addressed: truth, leadership and solutions.
It’s the fourth anniversary of the meltdown of major U.S. financial institutions. In your opinion, where do things stand?
Walker: Four years ago we were losing jobs at a record rate and so we’ve at least stopped that bleeding. But if you ask the average American are they better off and is the country better off than where we were four years ago the answer is no. Our trends are better but our position is worse.
Let me clarify. President Obama is correct in his campaign that we were losing hundreds of thousands of jobs a month and there was great uncertainty about what was going to happen with the banking system, etc. That‘s been reversed. But if I look at my family, with what happened in 2008, my daughter lost a job and has never really recovered from that experience. My son lost a house, and my wife and I lost a significant percentage of our net worth. And the truth is nobody has been held accountable -- and that is an outrage.
I think there are a lot of common denominators between the Occupy Movement and the Tea Party and I talk about this publicly. Both of them are concerned with a lack of integrity and accountability. The Occupy Movement is concerned about Wall Street and the Tea Party is concerned about government and the truth is they’re both right.
Why is this such a mission for you?
Walker: Because I love my country and I love my family and I’m very concerned about both. My family came to this country in the 1680s; I have relatives who fought and died in the Revolution. I am only the second person in my family to graduate from college.
I see what’s happening to our country. We’ve strayed from the principles and values that made us great. I see what’s being done to my children and grandchildren; their future is being mortgaged. Their investments are being cut. They’re going to have a lot tougher time than I did, given the state of the world and our situation and I just think it’s irresponsible. It’s unethical. It’s immoral and I want to do something about it.
I decided a long time ago that life was about a lot more than making money, and I decided a long time ago that I was going to dedicate my life to making a difference. I’ve turned down offers to go to Wall Street and to do a number of things because of what I just said. One of the things I do in a lot of my presentations is I show a picture of my three grandkids because that visualizes what this is all about. They’re too young to vote. They don’t have a voice; so I’m their voice.