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David Walker pens valuable new warning about federal government finances

October 29, 2020

David Walker, former comptroller general of the United States, has written a new book titled “America in 2040: Still a Superpower?” 

Bill Owens, retired Navy Admiral and former Vice Chairman of the Joint Chiefs of Staff, introduces the book with a useful foreword. Owens cautions that current events have been distracting us from addressing the most important challenges facing the nation today, first among them the financial condition of the federal government. Under current (and intransigent) law and policy, interest payments on the national debt are likely to mushroom in the years ahead, posing threats to taxpayers as well as recipients expecting future federal spending, including Social Security and Medicare. 

Owens underlines Walker’s concerns about the longer-term consequences of Federal Reserve monetary policy in recent years, and also highlights Walker’s critical review of the structure, management and finances of the U.S. Department of Defense. He “concludes” his introduction with a second for Walker’s motion that we adopt an amendment to the U.S. Constitution to stabilize the national debt, and labels the debt burden “our greatest national security threat.”

On the latter point, Walker expresses concern that rapid future growth in entitlement spending, interest on the national debt, and a declining value of the U.S. dollar will threaten the funding for the Department of Defense. He calls for significant downsizing of the Pentagon bureaucracy and organizational and procurement reforms to provide “the best possible capability for the defense dollar.”

Coupled with the implicit message in the book’s title, one might question whether the end justifies Walker’s recommended means. Pursuing and maintaining “superpower” status might also be viewed as imperial overstretch, with related military spending one source of the deterioration of overall federal government finances.

Walker does not let state and local governments go unscathed. In terms near and dear to our hearts at Truth in Accounting, he lambasts municipal budgeting practices and misleading claims to balanced budgets. He cites how 49 of the 50 states have balanced budget requirements, 

“While you might think that such a requirement would ensure that states do not get into financial trouble, such is not the case. Why? Because of the way most states define a ‘balanced budget.’ Most define it according to a cash basis of accounting rather than an accrual basis. As a result, states just need to ensure they have enough cash to make required payments for the year.”

Walker cites Truth in Accounting approvingly as a public resource, one reason I am writing this review today. But I recommend Walker’s book, period, and recommend a book in turn to Walker, if he hasn’t read it already. It’s a book from 1952, by Senator Paul Douglas, titled “Economy in the National Government.” Douglas, an unabashed liberal, delivers a credible and passionate plea for fiscal responsibility in that valuable volume, one we all can learn from today. One of his lines was “a liberal is not a wastrel,” and Douglas dedicated no small portion of the book to identifying waste and inefficiency in the Defense Department. 

Douglas, a Democrat, was also a Cold Warrior, and his primary goal was not to reduce military capability per se, but to improve the productivity of defense spending. Douglas’ concluding chapter for that book was “The Budget Must Be Balanced!” In that chapter he outlined how forces later documented by the “public choice” of economics feast on government to feed special interest groups with targeted benefits, at long-run general expense.

Walker’s recommendations include a call for consideration of a new “Fiscal Responsibility Amendment” to the U.S. Constitution. He doesn’t do so with blinders on, cautioning how balanced budget requirements can be gamed, and how pathetic the federal “debt limit” has proved to be in practice. The amendment recommendation arrives in a chapter titled “Budget Process and Controls,” which begins with the observation that “It should be clear the federal government has lost control of the nation’s finances, and neither political party is dedicated to fiscal responsibility.” 

Walker warns that the amendment should not be geared to “balanced budget”-type approaches, given how easily they can be gamed, and recommends using a debt-GDP framework for any constitutional constraint. But any future amendment development efforts on this score should include careful consideration how that framework itself can be subject to uncertainty, and manipulation.

Walker has always been a prodigious and diligent worker, and this book shows that off. He started it in May 2020, amidst the arrival of the pandemic, and his thorough volume arrived just four months later. Walker has made fabulous contributions to federal government financial management in his career, particularly in his leadership of the U.S. Government Accountability Office. With this provocative and inspirational book, he continues to make that contribution.

 

 
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