Q&A with: Comptroller General David Walker

On Feb. 13, David Walker, the comptroller general of the United States and head of the General Accountability Office — the government’s official watchdog when it comes to wasteful spending — stopped at the Capitol Center of the Arts in Concord as part of a “Fiscal Wake Up Tour.”

The “Wake Up Tour” bears some resemblance to former Vice President Al Gore’s “Inconvenient Truth” tour, complete with an independent film company in tow to document it. But instead of warning about global warming threatening future generations, the culprit is entitlement spending — primarily Medicaid and Medicare – which will result in “unsustainable” levels of high taxes, skyrocketing interest payments that will eat up the federal budget, or major budget cuts.

The tour was brought to New Hampshire by local sponsors, Steve Duprey, former state Republican Party chairman, and former Democratic Congressman Dick Swett.

Besides Walker, New Hampshire Business Review also interviewed tour participants Isabel Sawhill, vice president and director of the Brookings Institution, Alison Fraser, director of the Economic Policy Studies for the Heritage Foundation, and Robert L. Bixby, former director the Concord Coalition, the tour’s official sponsor. For a complete transcript featuring the comments of all participants, visit www.nhbr.com.

Q. The big deal is Medicare and Medicaid – what do you do about it?

A. The Medicare problem is six to seven times greater than the Social Security problem. First, speak the truth about where we are and where we are headed, what the consequences of inaction would be. We need to reimpose much tougher budget controls than we had in the early ‘90s because we are closer to hitting the demographic tsunami of entitlement spending. It’s only a year away, the beginning of it.

We need to re-engineer entitlement programs, and we need to reform the tax code in a way that hopefully minimizes tax burden and maximizes economic growth, but we are going to need more revenues than 18.3 percent of GDP, in the final analysis.

Q. One thing you talk about is getting more control over health care costs. Specifically, do you have a plan?

A. If there is one thing that can bankrupt the country, it is health-care costs. First, we need to reconsider the Medicare prescription drug benefit. We need to reconsider who ought to get that benefit, and for those who get the benefit what the income-related premiums are. We need to reconsider whether or not we can leverage purchasing power of the federal government with regard to health care better. We need to also move to more case management approaches, recognizing that a fairly significant cost relates to a small percentage of individuals. We are going to have to move toward developing national practice standards.

But in the longer term, we are going to need to have a national discussion about what the proper divisional responsibilities ought to be between government, individuals and employers for health care. We have never had that debate.

Q. The president has proposed taxing employer-provided health benefits. Wouldn’t that be a disincentive for employers to provide health care, and if you have more uninsured, who is going to pick up that cost?

A. The single largest tax preference of the Internal Revenue code today is that no individual, no matter how wealthy they are, no matter how much money they make pays a dime of income tax or payroll tax on employer-provided health care.

Employers need to get a full deduction, no doubt about it, because if they don’t, then they’ll get out of the business. The people who need to be more sensitized about the cost of health care is not government, it is not employers, it is individuals.

Q. What is the most wasteful parts of government? Where we could cut, where we could control costs?

A. There is no part of government that ought to be off the radar screen. There is a tremendous amount of waste in the Defense Department and also in the Department of Homeland Security, and yet there is a tendency to say, “Gee, that war, we need to give them whatever they want.”

So one of the things we have to do, bottom line, is that we have to recognize the reality that the federal government today is an amalgamation of policies, programs, functions and activities that may have made sense when they were put into place, but they may not make any sense today.

Q. There has been a move to privatize various government services. Is this saving us money?

A. Government is using contractors to an unprecedented extent today in ways we never would have envisioned a few short years ago. In some circumstances, it makes perfectly good sense to contract out certain type of functions and activities, because the private sector can do it more economically, more efficiently and more effectively.

However, what happened in recent years is that we had to rely on contractors in certain circumstances because we don’t have force in the military, or we don’t have the people with the right kind of skills and knowledge in the civil service. I think the time has come for us to step back and have a fundamental discussion and debate about where it makes sense to rely upon the private sector.

You have to have a civil servant at a minimum overseeing cost, quality and performance if it is contracted out. If that doesn’t get done, then everybody gets in trouble.

Q. You talked about not being able to go without a certain percentage of revenue, which seem to imply taxes. You already mentioned taxing health benefits. Anything else?

A. Right now, we are taxing at 18.3 percent of GDP, which is roughly the historical average. If all the tax cuts expire, if we don’t fix the alternative minimum tax then we will end up heading over 20 percent of GDP and going up.

Now, candidly, that is not going to happen. There is broad-based bipartisan support to extend some of the tax cuts, to do something about AMT. And so we need to recognize the reality to close this gap. We have to get the most money out of entitlement reform by far.

If you are going to have to pay higher taxes, who is going to pay them? There is a tremendous intergenerational impact here. Do you raise corporate taxes? Do you raise it from individual taxes? Do you raise it from other forms of taxation? Consumption taxes? So the question is: What can we do, and what can we do sooner rather than later to try to achieve that reasonable balance of spending restructuring restraint, reasonable tax levels and sustainable debt levels?

Categories: News