TEN YEARS HENCE
Ten Points About America’s Fiscal State
FEBRUARY 20, 2009
On Feb. 20, 2009, David Walker, President and Chief Executive Officer of the Peter G. Peterson Foundation, presented "Keeping America Great," which contained the following excerpts:
- We have strayed from our Founding Fathers’ intent. They believed that to the maximum extent possible, the federal government should only do those things that state and local governments cannot do and that we should not expect the private sector to do, because the private sector has a duty of loyalty to their shareholders, not to the country, not to the greater good.
- In the 1980s, we became addicted to conspicuous consumption and debt. As a nation and as individuals, we are spending more money than we make, charging it to the national credit card or individual credit cards. Today, bankruptcy is a strategy. Some corporations and individuals view it not as failure but as a tactic to walk away from obligations.
- In the last eight years, we’ve gone from $5.6 trillion in debt to about $10.8 trillion and are climbing dramatically. But the real problem is the off-balance sheet obligations such as unfunded promises for Medicare at $36 trillion, Social Security at $7 trillion, and unfunded pensions and retiree health care. As of Sept. 30, 2008, that total was $56.4 trillion: four times the size of the economy, or $184,000 per person.
- Economic stimulus spending should be timely, targeted and temporary – it should not expand government benefits. The Troubled Assets Relief Program (TARP) had no clearly defined objectives or conditions in place before the money went out the door. We spent $350 billion and we don’t know if we got anything out of it.
- With life expectancies now in the upper 70s and rising, retirement age for Social Security (still age 62 for early retirement) should be gradually raised over a 20-year period and indexed to life expectancy to make it fiscally sustainable. We also need people to work longer for a strong labor force growth.
- Our current health-care system will bankrupt the nation on its current path. We need to reduce the rate of increase in costs, increase competitive bidding, and reduce advertising of prescriptions, which fuels demand and cost. Reform should give universal coverage for essential health care that is affordable and sustainable over time. We need a budget, practice standards, dramatically reduced litigation risks, and increased personal responsibility.
- We need tax reform that is streamlined, simplified, and more competitive with other countries. We need a more broadly based income tax to keep rates as low as possible, as well as fewer brackets. Income tax should still be progressive, however. There should be no increase in payroll tax, and more consumption-based taxes.
- We need to close tax loopholes and address perverse incentives for corporations. But the private sector is the engine of growth and innovation in our economy. Our corporate tax system has to be competitive globally because otherwise corporations will move.
- We don't know long and deep this recession will be, but we must avoid what I call “The Big One” – a super subprime crisis, with foreign lenders losing confidence in the ability of the United States to get its financial house in order. They would charge us much higher interest rates on loans. It might result in a global depression.
- We now have career politicians who don't want to tell people the truth because they are focused on being re-elected. We need a system where nonpolitical people are involved in decision making to protect the taxpayers’ interests. We can achieve needed reforms, but it can’t happen without presidential leadership and people demanding real, fundamental change.
As president and CEO of the Peter G. Peterson Foundation, David Walker advocates increasing public awareness of several key challenges in America's future, and encourages grassroots efforts to pressure Washington to act. He was Comptroller General of the United States and head of the Government Accountability Office from 1998 to 2008. Prior to his appointment to the GAO, Walker served as a partner and global managing director of Arthur Andersen LLP and in several government leadership positions. He is the subject of the critically acclaimed 2008 documentary film on the national debt, “I.O.U.S.A.”