The giant red digits on the “U.S. Burden Barometer” outside the auditorium where David Walker spoke Friday provided the numbers behind this prominent CPA’s message: The United States urgently needs significant government financial reform.
Counting upward at a feverish pace, the barometer represented an estimate of what Walker, a former U.S. comptroller general, calls the “federal financial sinkhole,” combining explicit liabilities, commitments and contingencies, and obligations to Social Security and Medicare.
Shortly before Walker began his presentation, the number stood at $70,821,389,917,073.
“It’s 70.8 trillion dollars, going up 10 million a minute, a hundred billion a week,” Walker told an audience consisting primarily of CPAs at the University of North Carolina at Chapel Hill. “So the federal financial sinkhole is much bigger than the politicians admit. It’s growing rapidly by them doing nothing, and they’ve become very adept at doing nothing. And something has got to be done.”
Walker, a political independent, headed the U.S. Government Accountability Office from 1998 to 2008. As CEO of the not-for-profit Comeback America Initiative, he is promoting fiscal responsibility and seeking solutions to federal, state, and local fiscal imbalances in the United States.
His tour, which is barnstorming 16 states in 34 days, ends Tuesday and positions Walker as one of the leading sentinels in a growing chorus of concern over the economic direction of the United States at an important time. With a presidential election closing in on its final days, one of the most persistent questions both candidates face is how they will handle the economy, taxes, and the federal deficit.
Educating the public about the deficit and the important, difficult, disciplined action that could bring it under control is Walker’s passion. He warns of the impending “fiscal cliff” the nation faces in January 2013 as the result of the scheduled expiration of various tax provisions, and says a U.S. debt crisis is possible within two years.
He comes armed on his tour with statistics that demonstrate the financial peril that government spending and deficits have brought for the United States. His PowerPoint slides show that:
- Federal spending as a percentage of GDP has grown from 2% in 1912 to 24% in 2012.
- Total government debt in the U.S. is estimated to be 137.8% of the economy, when intra-governmental holdings are included, in 2012.
- Publicly held federal debt as a percentage of GDP is projected to grow to 185% by 2035, according to one scenario in the Congressional Budget Office’s long-term outlook.
“The federal government has grown too big, promised too much, lost control of the budget, waited too long to restructure, and it needs fundamental restructuring,” Walker said during an interview before the event. “Not nip and tuck. Radical reconstructive surgery done in installments over a period of time.”
Walker showed that defense spending in the United States in 2010 exceeded the combined total spent by 15 other nations, including China, Russia, France, the U.K., Japan, Saudi Arabia, India, and Germany. And he showed that U.S. per capita health care costs ($7,960) were more than double the OECD average ($3,361) and far outpaced those of Canada ($4,363) and Germany ($4,218).
He wants to reform budgeting, Social Security, health care, Medicare and Medicaid, defense spending, and the tax code.
He envisions measures that tie debt to GDP targets as needed reforms of federal budget controls. He advocates suspending the pay of members of Congress if they fail to pass a budget. With regard to Social Security, he would raise the taxable wage base cap, gradually raise the retirement eligibility ages, and revise the benefit structure based on income.
Walker would guarantee a basic level of health coverage for all citizens, revise payment practices to be evidence based, and phase out the tax exclusion for employer-provided health insurance, which he says estimates show will cost the federal government a total of more than $650 billion from 2010 to 2014. He would impose an annual budget for Medicare and Medicaid spending, and make Medicare premium subsidies more needs based.
He would reform the military by requiring cost consideration in defense planning, “right-sizing” bases and force structure, and modernizing purchasing and compensation practices. He also would reform individual and corporate federal income taxes, increasing the effective tax paid by the wealthy and decreasing the number of citizens who pay no income tax.
At an event whose sponsors included the AICPA, the North Carolina Association of Certified Public Accountants, and the N.C. Chamber of Commerce, Walker said CPAs have an important role to play in bringing about these changes.
“I believe that CPAs have a disproportionate opportunity and an obligation to be informed and involved here,” Walker said. “They’re good with numbers. They’re respected by the public. And I think that our profession, really, ought to be leaders in this area.”
The AICPA has long been a leading advocate for comprehensive reform that would simplify tax laws without reducing the productive capacity of the economy. In addition, the AICPA works as a proponent of personal financial literacy and fiscal responsibility through efforts such as 360 Degrees of Financial Literacy and “What’s at Stake.”
Anthony Pugliese, AICPA senior vice president–Finance, Operations and Member Value, said Walker’s message was on point with the Institute’s initiatives promoting financial literacy and responsibility at the consumer, business, and government levels.
“We hope our members can make a difference. We know they can make a difference with the clients they serve and small business owners around the country and individual consumers,” Pugliese said. “We hope this message is spread, and I think we have a vital role to play in this.”
Walker said that political changes need to be made in order to bring about all these other transformations that would put the United States on a better fiscal path. He encourages development of a strategic framework for the federal government and creation of a government transformation task force. He calls for Congressional redistricting reform, integrated and open primaries, campaign finance reform, and term limits.
He says these changes are necessary to ensure economic prosperity for future generations. He has focused his bus tour on presidential election swing states where he hopes voters will consider his stance, demand answers from politicians, and make informed choices at the polls.
“The problem that we have right now is that we have Democratic spending policies and Republican tax policies,” Walker said before the presentation. “Big spending, low taxes. The numbers just don’t work…We need to put everything on the table, and we need to act sooner rather than later.”
After the conclusion of the presentation, about 105 minutes after Walker started speaking, the budget barometer was still whirring. It read $70,822,452,919,199. It had increased more than $1 billion in less than two hours.
“Ignorance and apathy is a toxic mix,” Walker said before the presentation. “We need to solve this problem…if we want America to stay great.”
—Ken Tysiac (email@example.com) is a JofA senior editor.