For David Walker, one of the nation’s leading deficit fighters, the bad news is the good news these days.
Walker has been ringing the alarm bell for years about the federal government’s growing debt. Most Americans tuned out.
But now, with the federal budget deficit soaring, many more are listening. Walker says the escalating deficits and rising debt have become the No. 2 issue behind the economy and jobs. That’s a big change from the 2008 presidential campaign, when the deficits barely registered on many voters’ radar screens.
Walker returned to the Twin Cities Tuesday, once again to discuss what he sees as a gathering fiscal storm.
The anti-deficit crusader warned that the nation’s rising debt has put it on “an unsustainable path” in appearances before a joint session of the Minnesota Senate’s Tax and Finance committees, at the Economic Club of Minnesota and the Citizens League, and on an hour-long Minnesota Public Radio discussion.
He added that the soaring federal debt will also have a worsening “ripple effect” on the budgets of Minnesota and other states.
Walker noted that the federal budget has swung from a $230 billion surplus in fiscal 2000 to a deficit of more than $1.5 trillion now. He said the country can’t climb out of this hole by relying on just one of the three standard deficit-cutting strategies: cutting spending, raising taxes or depending on economic growth to generate more tax revenue.
“The math just doesn’t work, over time,” he said. Instead, he says reining in the deficit will require a mix of all three strategies. Among other moves, he recommends a consumption levy in the form of a value-added tax, a later retirement age for Social Security beneficiaries and a tightening of Medicare benefits. So far, politicians — and much of the electorate — have rejected these options.
Walker is a former U.S. comptroller general. In 2008, he left that job two-thirds of the way through his 15-year appointment to become president and CEO of the Peter G. Peterson Foundation. The foundation, created by former U.S. Commerce Secretary and private equity titan Peter G. Peterson, promotes more awareness of federal fiscal issues.
Both he and Peterson have been the targets of criticism — from the left, for wanting to cut spending, and from the right, for wanting to raise taxes instead of cutting them.
Sen. Richard Cohen, DFL-St. Paul, chair of the Senate Finance Committee, said Walker has significant insights and experiences on federal budget issues and that his comments were helpful. “What he talked about at the federal level is what we’re going through at the state level,” he said.
Former Minnesota Congressman Tim Penny, who has been involved in numerous deficit-fighting efforts over the years, accompanied Walker as he made his rounds here. Three years ago, Walker made similar talks in the Twin Cities.
Last year, he outlined his fiscal concerns and his playbook for dealing with them in a book, “Comeback America.”
At the Senate gathering, attended by about 50 legislators and others, Walker said politicians’ over-promises have led to taxation without representation. But he argued that the unrepresented are not so much today’s voters and taxpayers — 42 percent of Americans pay no federal income tax at all. Rather, they are our children and grandchildren, too young to vote but eventually facing soaring interest costs for the accumulating federal debt to be passed on them by today’s voters.
Walker calls the debt situation much worse today than in 1992, when presidential candidate Ross Perot famously used charts and graphs to show that the deficit was getting out of hand. Among the differences: Various measures of today’s debt are much higher than then; the United States owes half of its debt to foreign governments now, as opposed to a minimal share then; and huge numbers of baby boomers who generated large tax revenues then are now starting to retire.
He favors President Obama’s move this year to establish a federal deficit reduction commission, but he is not optimistic about its prospects for success. He said the panel doesn’t have the statutory power that a proposed commission rejected by Congress would have had. He also noted that it requires a supermajority vote by commissioners to make recommendations and lacks a meaningful process for engaging the public.
Walker said Obama was dealt a bad hand: soaring deficits caused by fighting two wars without taxing for them, significant tax cuts and domestic spending increases, and a deep recession that sharply reduced tax revenue. He added that the president had no choice but to boost spending to stimulate the economy, thereby shoring up tax revenues. But he warned about the impact of Obama’s health care proposal on the deficit.
Meanwhile, as if to confirm his concerns, Moody’s Investor’s Service issued another warning about the nation’s fiscal picture. In a report Monday, Moody’s said the nation’s long-held and much-treasured Triple-A credit rating for U.S. Treasury bonds has moved substantially closer to a downgrade. A lower rating would saddle taxpayers with higher interest costs.
Dave Beal writes about business and the economy. He can be reached at davebiz (at) q (dot) com.