The Federal Budget: David Walker Lays Out Hard Choices for a Sustainable Future

By Randy Myers

To some, Washington’s inability to come up with a meaningful plan to reduce the federal debt is evidence of political gridlock. To David Walker, Comptroller General of the United States and head of the U.S. Government Accountability Office from 1998 to 2008, it’s just another sign that the United States has become a dysfunctional democracy no longer representative of, or responsive to, the public.

Walker, now CEO of the Comeback America Initiative, a non-profit organization he founded to promote fiscally responsible government, seldom pulls punches when he describes the economic challenges facing the country. He didn’t disappoint in a talk before the SVIA at its 2011 Fall Forum in November.

“We need policy, operational, and political reforms to revitalize our democracy and make some tough choices so that we can keep America great,” Walker told forum participants. “We’ve strayed from some of the key principals and values on which our country was founded, including limited but effective government, individual liberty and opportunity, personal responsibility and accountability, rule of law, and equal justice under the law, fiscal responsibility, and intergenerational equity.”

Walker told his audience that the federal government now accounts for 24 percent of the U.S. economy and is headed to 37 percent, absent a change in course. “If you add state and local governments, government would be over 50 percent of the economy by 2040,” he said. “Government is not the engine of growth, innovation, and job creation; this cannot be allowed to happen.”

While government spending was once dominated by the defense budget, Walker said, it is now dominated by social programs, most aimed at senior citizens. As the great mass of Baby Boomers born between 1946 and 1964 begins retiring, he said, the associated “tsunami of spending” will compound the nation’s fiscal problems, which he laid at the feet of both political parties. “Spending has been a problem for a while, but it went out of control over the last 11 years,” he said. “Both parties are responsible, and both have to be part of the solution.”

Walker said the United States is already worse off than some of the countries that routinely make headlines for their fiscal problems. For example, he said, “We’re less than three years from where Greece was when it had its crisis, when you count what we owe Social Security and Medicare.”

Walker explained that by the end of fiscal 2010, U.S. federal debt had ballooned to $14.8 trillion, exceeding the country’s Gross Domestic Product (GDP) for that year, which came in at $14.5 trillion. Once debt exceeds 90 percent of GDP, he warned, it starts to become a drag on economic growth. Yet over the next decade, he said, the U.S. debt could grow another $10 trillion if changes aren’t made to the federal budget.

The rub, he insisted, is that there is plenty of room to cut spending. He noted, for example, that the United States already spends double what other countries spend per person on healthcare and K-12 education. It also spends as much on defense as the next 14 nations combined. “We have plenty of opportunity to reduce defense spending without compromising security,” he said. “It’s one of the most bloated bureaucracies around.”

Walker said there’s also an argument to be made for raising additional tax revenues, in part because 51 percent of individual tax filers already pay no federal income taxes at all. “We need more people pulling the wagon,” he urged.

To begin whittling down the federal debt, Walker said Washington should pursue several initiatives: rationalizing the government’s healthcare promises to the citizenry, reducing defense spending without compromising security, and overhauling the tax code to create a simpler, fairer, and more competitive tax environment. “My view is that we need three parts spending reductions and one part revenue enhancement,” he said. “You can’t grow your way out of this problem, you can’t inflate your way out, and you can’t just cut your way out in terms of spending, or tax your way out. It’s math.”

Walker cautioned that to succeed, any actions taken by the government will have to be pro-growth, socially equitable, mathematically sound, culturally acceptable, and politically feasible, meaning they must be capable of drawing bipartisan support. “These,” he said, “are basic Management 101 questions that have never been asked by the federal government.”