Finance

David Walker’s Plan to Fix America

After stepping down as head of the Government Accountability Office, David Walker started drawing the nation’s roadmap to fiscal sustainability that’s also applicable to states and cities.
by | July 2012

David Walker wants to fix America. As the comptroller general of the U.S. and the head of the Government Accountability Office from 1998 to 2008, Walker was the nation’s chief auditor. Since leaving his post, he’s become the founder and CEO of the Comeback America Initiative, which promotes fiscal responsibility and sustainability.

While his focus is predominantly on the federal government, Walker’s middle-of-the-road fiscal policy proposals are applicable for states and cities, too. His straight talk and nonpartisan approach have gained national attention. And it may just be a matter of time until he succeeds in making long-term fiscal solvency part of the national political conversation. He sat down with Governing to talk about his ideas. Here’s an edited and condensed interview.

You’ve been trying to get people talking about the structural imbalances of government.

The federal government has grown too big, promised too much and waited too long to restructure. It needs to make a number of transformational changes in order to make it more future-focused, results-oriented, affordable and sustainable.

Like major spending cuts?

Ultimately the government will need to spend less than projected and tax more than it historically has. That means that, over time, it will do less than people are expecting and tax more than people are accustomed to. In my view, our fiscal challenge is primarily a spending problem and needs to be addressed accordingly.

What will that mean for states and cities?

Bad news flows downhill. Many states rely on the federal government for 33 to 42 percent of their revenues, and many localities rely on states. They all need to start working sooner rather than later to put their respective financial houses in order.

Starting with what?

There are a number of common denominators between the challenges that are faced at each level of government. For example, while $1.2 trillion deficits and $15.7 billion debt burdens are shocking numbers at the federal level, the real federal challenge relates to off-balance-sheet obligations that are multiple-times greater -- more than $11 trillion in unfunded Social Security obligations, almost $40 trillion in unfunded Medicare promises.

It’s the same thing at the state and local level: Off-balance-sheet obligations are multiple-times greater than what’s actually on the balance sheet, especially when it comes to underfunded employee pension plans and unfunded retiree health plans. While the pension plans have garnered considerable recent attention in the press, the unfunded retiree health plans in many cases are a much bigger problem for state and local governments, and they have not been adequately addressed.

So what would you do to fix pensions and retiree health obligations?

The unfunded obligations are so huge that it’s going to require changes to plans for new employees and current employees, as well as existing retirees. In the case of current employees, steps need to be taken to eliminate what would be perceived as abuses by a large percentage of the American public -- like the ability to count overtime, sick time and possibly even vacation time in calculating a pension, or the ability to draw more than one pension from the same or a related employer.

With regard to retirees, states need to consider having limitations on how much a retiree can receive as a pension in relation to the salary of persons who held the job from which they retired. In addition, there have to be tougher eligibility requirements and reasonable limitations on taxpayer burdens relating to retiree health commitments.

The truth is, many governments have promised pension and especially retiree health programs that don’t pass the straight-face test with the American public. There needs to be more transparency and accountability with these programs, and the related unfunded obligations need to be brought onto the balance sheet.

In terms of fixing the economy, many politicians keep saying the solution is “jobs, jobs, jobs.” You’re saying new jobs won’t fix the problem.

Jobs are only part of the solution. The three most important issues for the 2012 general election campaign are jobs, the economy and fiscal responsibility. Each of these issues is important in its own right, but they’re also interconnected and interrelated. If we don’t take steps to approach the large and growing structural deficits that lie ahead, any gains we achieve in economic growth and employment in the short term will not be sustained over time.

Furthermore, addressing our structural deficit is essential in order to avoid a debt crisis in the United States. While we have more time to address our challenges than many European nations, we don’t have unlimited time. Once Europe finally gets its act together, the world will turn its eyes to the finances of the U.S. And when they do, they will not like what they see. It’s important that we begin to make the necessary structural changes before the markets force us to. If we act sooner rather than later, we can make prudent changes that can be phased in over time. If we wait, we may find ourselves having to make dramatic and draconian changes very quickly.

You talk a lot about federalism. How would you describe the current state-federal relationship?

There are many shared challenges between the levels of government -- education, immigration, critical infrastructure, health care and outdated tax policies. Unfortunately, there’s been a significant decline in intergovernmental planning and execution in the past couple decades. It’s important that we reverse that trend and re-engage.

The time may also have come to consider what the appropriate division of responsibilities between the federal government and state governments should be. For example, it may make sense for the federal government to assume responsibility for some level of universal health coverage, while the states assume responsibility for education and critical infrastructure.

In addition to your fiscal proposals, you have some other ideas about reforming government. For example, you favor term limits in Congress, and you’ve even floated the idea of a single six-year term for the president.

Yes. We have many capable people serving in elected office, but we have way too many career politicians. That’s part of our problem, and it’s not what our nation’s founders intended.

Does that mean you think state-level term limits have been a success?

I think it’s important to learn from history and from others. While I support term limits, I believe that many of the states have term limits that are too short. Given the nature and complexity of the issues that have to be dealt with at the federal level, I have proposed 12- to 18-year term limits in order to recognize the benefits of experience but also recognize the need for new talent.

I support redistricting reform, integrated and open primaries, campaign finance reform, and term limits. The first two can be achieved without a constitutional amendment and in fact have already been achieved in California. The latter two will require constitutional amendments, which of course will take time.

What’s the advantage of integrated and open primaries?

At the present time, in the U.S. House of Representatives, there are only about 75 competitive districts out of 435. This means that 360 seats are decided in primaries, where turnout typically is very low and disproportionately represents the activists in each respective party. That results in fueling the hyperpartisanship and ideological divide that currently prevails in D.C.

So let’s eliminate partisan primaries and move to a single integrated and open primary system for all qualified candidates. Under this system, Democrats, Republicans and other parties could still endorse candidates, raise money and provide ground troops. But there would be just one primary, and the top two vote-getters would run off in the general election. That would serve to increase voter participation and dilute the impact of the extremes on both the right and the left. And it would enhance the role of political independents.

Would you advocate the same system for state elections?

Oh, absolutely. There are already a lot of mayoral and local elections that use integrated and open primaries. They’re less common at the state level, and generally don’t exist in most states at the federal level. It ought to be in place at all levels of government.

California implemented an open primary system this year.

Right. California adopted this approach thanks to a voter referendum in 2010. I’m anxious to see what the results are. Hopefully they’re positive and they’ll end up encouraging many other states to follow California’s lead.

Let’s talk about Ross Perot. He’s an acquaintance of yours, and you frequently praise the role he played in the 1992 presidential election.

Ross Perot first ran for president 20 years ago. Other than NAFTA, his focus was on four issues: fiscal irresponsibility by the central government, political dysfunctionality in Washington, declining trust in government and declining confidence in the future. Based on independent and objective data, we’re much worse off in all four of those areas than we were 20 years ago.

Ross Perot ran to help wake up Americans. While he did not see a single electoral vote, he achieved 19 percent of the popular vote and qualified for the presidential debates. His fact-based, common-language, results-oriented approach resonated with the American people. President Clinton made fiscal responsibility a top priority during his administration. We saw great progress in economic growth, job creation and fiscal responsibility between 1993 and 2000. If we did it before, we can do it again.

Some people think you’re the man for the job, including New York Times columnist Tom Friedman, who wrote earlier this year about how you’d be a “smart independent” candidate for the presidency.

I am not going to be an independent candidate for the presidency in 2012. What I plan to do is conduct an issue-oriented campaign to try to help achieve what Ross Perot did 20 years ago, without having to run for political office.

Pushing long-term fiscal solvency isn’t that sexy. Do you think your message is catching on?

Absolutely. The people are ahead of the politicians on this. They know that we’re on an unsustainable path. They want truth, leadership and solutions from their elected leaders.

Zach Patton  |  Executive Editor
zpatton@governing.com  | 

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