Former U.S. comptroller David Walker has long been a leading advocate of fiscal sanity, and I called him today to get his take on the latest CBO budget-deficit projections ($1.2 trillion for next year, trillion-plus deficits for years to come). “If trillion-dollar deficit numbers for several years in a row don’t wake up Washington and America to the nature of our fiscal problems, then I don’t know what will,” he says.
Walker says, “For the first time in the history of the U.S., the federal government owes more in liabilities [including unfunded commitments for Social Security and Medicare] than American households are worth.” And that gap is widening, he says. “The fiscal hole is getting deeper, and household worth continues to decline.”
Walker says, “We should not just engage in timely and targeted stimulus. We need to put a process in place that will enable elected officials to make a range of tough decisions that have been delayed for far too long.” On entitlement spending, Walker says that Obama should consider something like the Cooper-Wolf plan, which calls for a commission on entitlement reform whose recommendations would be guaranteed hearings and a vote.
Walker, who currently works on these issues as the president of the Peter G. Peterson Foundation, says, “Deficits and debt levels are going to go up significantly in the short term, and there’s no way of avoiding that, so we’re not saying there shouldn’t be a stimulus. We’re saying that for the nation’s long-term fiscal health, we need to start treating the disease and not just the symptoms. The discussion should focus not just on how to revive the current economy, but on how to put our economy on a more sustainable path for the future.”
Walker says he likes Obama’s promises to do a baseline review of all government spending and look for places to cut back, but that “the real litmus test will be not what the words are, but what are the actions that are taken.” He also objects to Obama’s characterization of entitlement-spending reform as a “longer-range” problem. “We’re going to have to deal with entitlement programs,” he says. “Those problems are not longer-range anymore.”
He adds, “We need to realize that the same factors that led to the subprime crisis — too much debt, too little attention to cash flow, ineffective risk management, and waiting to do something until the crisis hits the door — those same factors exist for the federal government’s fiscal situation, with one big difference: No one is going to bail out America.”