Econ-Omy

If you live in North America, you have a great need to have your eyes opened wide and your brain informed about what is really going on in the economy.

And THIS is the interview you need to read. Go straight to the source.

Read on, Glenn Beck's interview with the chief accountant in the land...

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David Walker interview about the economy

January 18, 2008 - 12:17 ET

From Radio City in Midtown Manhattan, the third most listened to show in all of America. Hello, you sick freak. My name is Glenn Beck. Dow is down 300 points. Still people are in denial that our economy is in real, real trouble and the reason why I say normally, I would tell you that, you know, we go through these cycles and it happens. I cannot tell you that now and I have been telling you this for at least a year. I've been really ringing the warning bell since August on what was coming with our banking systems and everything else because of the underlying problem that we have in our government's recordkeeping, the way our government is spending. An avalanche is right around the corner and there is no escape and no one is willing to talk about it. None of our politicians will address it and so no matter what kind of Band-Aid you put on this economy, you must address certain issues, and the biggest issue is not the peanut museums but Social Security, Medicare, Medicaid. What is coming around the corner. Today all of our politicians are talking about spending packages, giving out more money to help this economy. It will be short lived and in the end do much, much more damage because the underlying problem is we have spent too much money as it is.

Now, I tried to get this guy on the radio for you to listen to for quite some time. David Walker is the comptroller general of the United States of America. Basically he is our chief accountant. This is not a political position. He was appointed originally by Reagan, reappointed by Clinton but always unanimous in the Senate. He never spoke out. He has finally said an avalanche is coming and no one's willing to talk about it and so he will tell you what really is coming. I beg you to listen to this man because he's the only one telling you the truth about what's happening in Washington because he's the guy who keeps the books. It is an honor, sir. David Walker, welcome to the program.

WALKER: Good to be with you, Glenn. Like your theme song.

GLENN: Thank you very much. David, do you get a lot of heat from political people for speaking out this way?

WALKER: Glenn, as long as I state the facts, speak the truth, don't blame any particular political party and don't blame any particular person, then I'm fine. And in fact, I'm doing elected officials a favor because the American people need to understand where we are, where we're headed, the need for tough choices and realistically elected officials aren't going to make those tough choices until the people understand the need for them.

GLENN: I don't care about the blame. I don't want to point fingers. I just, I understand the problem. Start at the beginning. Tell us how this system works. Tell us how if our Government was a business, they would all be in jail today.

WALKER: Yeah, if we were a business, we would be out of business. But the Government has the ability to do things that the companies don't. The Government has the ability to print money. The Government has the ability to tax. The Government has had the ability to borrow because at the present point in time the federal government is viewed as having the safest credit rating that you can get. However within the last two years both S&P and Moody's have said that we're headed for a junk bond rating within the next 15 to 20 years if we don't --

GLENN: What does that mean to us?

WALKER: Well, what that's going to mean is much higher interest rates that the Government will have to pay in order to borrow money which will have adverse effects on the budget, which will have adverse effects with regard to the overall economy.

GLENN: David, please, please help me out on this. I'm a former deejay. I'm a self-educated guy. I'm a recovering alcoholic, for the love of Pete, and I can understand our economy. But every -- because I look at it like my house. But every economist, every expert, every politician will say, oh, no, well, that's too simple. It doesn't seem -- you are talking about, here come crushing interest rates because we have bad credit. That's what the average homeowner who has bad credit and went out and got a risky loan is facing today.

WALKER: Right.

GLENN: Where is the difference? Why is it more complex than our personal economy?

WALKER: Frankly I think a lot of the economists want to make it more complicated than it really is. I mean, the fact of the matter is that the federal government is spending more money than it takes in. It's charging the national credit card. It's building debt in compounded interest and it's expecting future generations to pay it off. And, you know, our problem is not the current deficits. The deficits we're running now are manageable. Our current debt levels that we have now are manageable. The problem is that even though the deficits have come down for three years in a row, our unfunded promises for Social Security and Medicare have risen dramatically. In our total fiscal hole it is $53 trillion. That's $440,000 per household. So the problem's not where we are, it's not where we've been. It's where we're headed unless we end up making dramatic and fundamental reforms.

GLENN: And see, this is the problem. All the politicians make the deficit, the current deficit the issue and they say these deficit spendings, they're out of control. And I believe they are. And they've got to cut spending in Washington. But the biggest problem that we've had in the last eight years is adding another program like prescription drugs, correct?

WALKER: That was the most fiscally irresponsible act in decades. And when the congress debated that, they only considered the ten-year cost of the program, not the longer term cost. And now we know the price tag for Medicare prescription drugs is over $8 trillion. There's twelve zeros in line with that eight.

GLENN: Give some example. These numbers honestly, David, I think that trillion, I believe growing up, I believe when I was in second grade I think I made up the word trillion and zillion. I didn't think they were real words. So give some concept of what $8 trillion means.

WALKER: Well, I'll give you the $53 trillion that I talked about which is the total unfunded obligations for Medicare, which is $34 trillion. The total unfunded obligation for Social Security which is about 7 plus our debt and other liabilities. $53 trillion is $440,000 per American household. Median household income in America, believe it or not, Glenn, is less than $50,000 a year. So it's like if we just want to continue on our present path, it's like every American household having a mortgage of nine and a half times their annual income for the median household but no house to back that mortgage. That's in addition to all the other debt that they have.

GLENN: It's my understanding when people say tax the rich, they need to pay more, it is my understanding that you could take all of the income, income, not income tax, all of the income generated in this country and still not afford what we have coming.

WALKER: Well, to put it a different way, the $53 trillion is 90% of the estimated total net worth of every American, including Bill Gates, Warren Buffett and every billionaire. You are not going to tax your way out of this problem. You're not going to grow your way out of this problem. You are not going to do it by con training spending. You are going to have to do a combination of things and the biggest thing is going to be entitlement reform, Social Security and Medicare, healthcare being a much greater challenge. And we need to start soon because time's working against us. That $53 trillion number is going up $2 to $3 trillion a year by doing nothing.

GLENN: Tell me about the -- and listeners, because I don't want to make this political. It tell you, though, behind-the-scenes story on the Menu of Pain on a later episode of the program. But let's just keep it nonpolitical here. Tell me about the Menu of Pain that actually was supposed to be in a federal budget but was buried in a group of actuary tables in the back of the Social Security budget, if I'm not mistaken, but this is telling. It tells you the real story of what you've got to do.

WALKER: Well, we're going to have to do several things. Number one, we're going to have to bring back tough budget controls, tougher than the ones we had in the 1990s. Those ones worked. They took us from deficits to surpluses but they all expired in 2002 and there's been no constraint since then. And so we've got to bring back tough controls. But in addition to that we're going to have to reform Social Security, which frankly is easy and we can talk about that if you want. We're going to have to engage in dramatic healthcare reform in installments and we're going to have to --

GLENN: Wait, wait, wait. Wait, wait, wait, dramatic healthcare installments, what's that mean? Can we afford anybody's plan of universal healthcare?

WALKER: Well, the current plans that we have right now, the numbers don't add up and here's what we have to recognize. We have already promised in Medicare alone $34 trillion more than in revenues that we have to deliver on those promises. $34 trillion in today's terms, okay? So when people talk about, gee, I want to do this on healthcare, I'm going to pay for it by not extending the Bush tax cuts or whatever, what about the $34 trillion hole? You can't just be in a situation to talk about I'm going to pay for my additional promises. We need to address the $34 trillion hole. And that was the problem with Medicare prescription drugs. We were in the hole about $20 trillion and it went up another $8 rather than going the direction it needs to go.

GLENN: On the Menu of Pain it was several different things. You can reform Social Security, you can raise taxes and every year that slips by because of the mounting interest, those, that menu becomes more and more painful.

WALKER: That's correct.

GLENN: Can you give us some of the realistic -- because everybody's talking about raising taxes now. Can you just give us the line of how high you need to raise taxes to be able to deal with it two years ago today and maybe two years in the future?

WALKER: Well, let's talk about today, okay? I mean, you know, you would end up having to increase taxes about $11,000 per household immediately in order to deal with this problem. Stated differently, you would end up having to -- we would end up having to tax, rather than at about 18 1/2% of the economy, which is what we're doing now, about 30% of the economy over the next 15 to 20 years and continuing to rise. And those taxes would be borne primarily in all likelihood either based upon income taxes or some type of consumption tax because payroll taxes are already burdening too many Americans.

GLENN: David, what happens if we don't address this problem in the next four years? What does it look like in four years from now, you know, ten years or 20 years from now?

WALKER: Here's my concern. I believe we have a narrowing window of opportunity to get our fiscal house in order. I believe we have five to ten years maximum in order to be able to demonstrate to the capital markets and to our foreign lenders that we will take this seriously. If we're not able to do that, then I think it's only a matter of time before those who have been borrowing our debt -- buying our debt, which is increasingly foreign players, 75%-plus of our debt bought by foreign players, will lose their appetite for our debt and that's when interest rates go up. And when interest rates go up, then believe me, we can have something a lot worse than a recession.

So my concern is that the next President, whoever that might be, has got to make fiscal responsibility and intergenerational equity one of their top priorities. They need to start talking about it in the general election campaign so that they have some basis to do something about it because the window of opportunity is closing.

GLENN: David, I will not ask you a question that will put you in an awkward situation. So answer this as generally as you can and we'll do our own homework. Have you heard any politician out there that has a shot actually talking about the issue in a way that you feel is fiscally responsible?

WALKER: First, I did not expect and I haven't been disappointed in the fact that fiscal responsibility and intergenerational equity has not been a major issue in the primary campaigns. I didn't expect that it would be because in the primary campaigns both parties are playing to their base and they are more concerned with issues like Iraq and immigration and now the changing nature of the economy and general healthcare coverage and things of that nature. I've expected and I hope that I will be right that it will be an issue for the general election campaign.

Now, without mentioning any specific names, there's at least a couple of people on the Republican side and at least one person on the Democratic side who have used some words that lead you to believe that they understand that we have a problem here, but nobody has dealt with specifics at this point and I don't expect that they will for some time. Candidly I think they need to commit to several things, Glenn. Number one: They understand that we have a big problem and they are committed to make it a priority to do something about it. Number two: They will work on a bipartisan basis to address this problem if they become President. Number three: They will not take anything off the table. They won't take changes to Social Security or Medicare or the tax system or spending policy off the table because the gap's so big, we need to have everything on the table. And ideally, number 4: That they would endorse a capable, credible bipartisan commission that would make recommendations to the next President and the next congress for an up or down vote, a forced vote to try to help us get a down payment on this big problem so we can start making progress.

GLENN: David, I only have one minute and there are a ton of nay sayers, a ton of people who say, oh, we've always faced these problems, et cetera, et cetera. Give me one fact that would peel the skin off of people's faces to wake them up.

WALKER: In 1950 we had 16 people paying into Social Security for every person retired. Now we have 3.3 to 1. We're going to have 2 to 1 by 2030. Same ratios for Medicare. We've never faced this before. This is a tsunami of spending that can swamp our ship of state if we don't get serious.

GLENN: David Walker, I can't tell you, sir. You are going to go down in the history books as a patriot. I appreciate you speaking out and don't stop. And anything we can do, you please let us know, sir.

WALKER: Thanks for your interest and efforts, Glenn.

GLENN: Thank you, sir.

WALKER: Take care.

GLENN: David Walker, the comptroller general of the United States of America. He is our chief bean counter and the first, first guy to ever come out and really talk about it. We're out of time. I wish we weren't because he'll talk to you about the three sets of books that we hold, how I think we should put these people in jail. But that's a different story.