Walker: Growing Deficit Threatens Our Future
DEBORAH AMOS, Host:
Unidentified Woman: Yes, Mr. President?
(SOUNDBITE OF MOVIE CLIP, "DAVE")
KEVIN KLINE: Unidentified Woman: Right away, sir.
KLINE: And we have a lot of work to do, so we're not to be disturbed, OK?
KLINE: I understand, sir.
CHARLES GRODIN: (As Murray Blum) I'll tell you, Dave. I've been over this stuff a bunch of times. It just doesn't add up. Who does these books? I mean, if I ran my business this way, I'd be out of business.
AMOS: Our next guest is likely to agree with that statement. He's David Walker, and he was the comptroller of the United States and CEO of the Government Accountability Office from 1998 until 2008. He's currently the president and CEO of the Peter G. Peterson Foundation, and he's the scariest CPA who's not doing your taxes.
AMOS: Turning the Country Around and Restoring Fiscal Responsibility." Welcome to the program.
DAVID WALKER: Deborah, good to be with you. And I love that movie "Dave," and it's a great name, too.
AMOS: So you have to agree, then, with Murray Blum, the fictional accountant in the movie, that the real government's books are in trouble.
WALKER: There's no question. Our financial condition is much worse than advertised. We face large and growing structural deficits that threaten our future, and we need to start doing something about them.
AMOS: Now, you've written in your book that there is a moment coming soon when most of the government budget is going to go to servicing debt.
WALKER: That's correct. The GAO, under its latest simulation, said that within 12 years, without an increase in interest rates, the single-largest line item in the federal budget would be interest on the federal debt. That means more than defense, more than social security, more than Medicare. And that's obviously not acceptable.
AMOS: You point out that when President Clinton left office, we had a balanced budget and even a surplus. So how did it get so bad so quickly?
WALKER: People lost control. The money burned a hole in their pocket, through the floor and half way through the planet. Basically, the statutory budget controls that we had in place in the 1990s through President George Herbert Walker Bush, President Clinton, and the early part of the Bush 43 administration, they expired at the end of 2002 and things got totally out of control after that.
AMOS: What do you think that the specific dangers are of running a deficit this high?
WALKER: It's OK to run a deficit in the short term, when you're in a recession, when you face serious challenges dealing with housing and financial markets. It's not the current deficit that I'm concerned about. It's the structural deficit that will exist whether the economy's growing, whether or not we're at war, no matter what the circumstances are. The dangers are that we end up losing the confidence of our foreign lenders. They end up wanting to charge much higher interest rates. The dollar declines dramatically, and the effect on that on the budget, on the economy and on, frankly, Americans, the cost of credit and other things is not a positive sight.
AMOS: You write that the seriousness of this is for future generations, that there is no way for children and grandchildren, that they can avoid higher taxes. We do. How does that work?
WALKER: There are two kinds of taxes: current taxes and deferred taxes. Deficits, especially unreasonable deficits, represent deferred taxes on our children and grandchildren with interest. That's reality, and it's also math.
AMOS: Does that mean that at some future date, no matter what, that Congress is going to have to raise taxes to pay for what we're spending now?
WALKER: There's absolutely no question that taxes are going to have to go up. When you look at the promises that have been made for Medicare, for example, $38 trillion underfunded, Social Security $7.7 trillion underfunded, plus military and civilian pensions and retiree health care, to make the numbers work, you have to restructure those programs, constrain spending, and raise revenues.
AMOS: Almost every one of your solutions includes a blue ribbon panel. And I get the idea that you're suggesting that you don't quite trust the politicians to do this.
WALKER: Ultimately, elected officials will have a vote. However, the regular order is broken. Washington can't make progress on a single difficult issue at a time, much less multiple at once. And we're in a situation now where we have to make progress on budget controls, social security, health care and taxes quickly before we lose the confidence of our foreign lenders.
AMOS: Your polls show that Americans actually take this seriously, that they think the budget deficit and the dangers are more important than global warming and even health care reform. But those very politicians, in a broken system, are the ones that would have to convince people to do things like have their health care at work taxed or have benefits from Social Security go down. How does that work? How do you get politicians to sell the kind of ideas that actually get people turned out of office?
WALKER: Well, first, the American people are ahead of their politicians, as typically is the case. Eighty percent of Americans believe that escalating deficits and debts should be a higher priority. Seventy percent of Americans believe we need some type of special blue ribbon commission to be able to deal with it. But ultimately, the elected officials are going to have to make a decision on the recommendations to the commission, whether to go with them or not, and the president will have to decide whether to sign or veto it.
AMOS: When you look at how health care - that overall process went, does that make you more or less optimistic that the American government and the American system can implement these kind of broad changes that you're talking about?
WALKER: So our health care house is already mortgaged for more than its worth, and all we're doing is adding a new wing onto it. So it doesn't give me great confidence. And my question is is when are we going to start dealing with the real problems with health care costs that threaten to bankrupt the country and to make sure that we can deliver on the promises that make?
AMOS: No one argues that what you're talking about is crucially important, but we're in an even bigger financial hole. We're in a recession. So how do you talk about balancing the budget when government spending is the very thing that the economy has needed to sort of stir jobs and to keep the country afloat?
WALKER: I think it's very important to separate the short term from the structural. It's understandable to run deficits when you have a recession, a depression or unprecedented financial services and housing-type of challenges and crises that we've had. That's not what I'm concerned about. We will ultimately turn the economy around, but what we have to do is deal with the large known and growing structural deficits that are growing with the passage of time, and they're - are not long term anymore. They are within the horizon. They are going to hit our shores and we are not prepared.
AMOS: David Walker is the author of "Comeback America." Thank you very much.
WALKER: Deborah, thank you very much. It's been a pleasure being with you.
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AMOS: Tomorrow, we'll hear from the top two senators on the Budget Committee. They want to trim the deficit by setting up another kind of blue ribbon commission.
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AMOS: This is NPR News.
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