HON. DAVID WALKER: Hang In There Because Real US Debt-to-GDP is Terrifying
Managing Editor’s note: We’ve invited our Irrational Economic Summit keynote speaker, Senior Strategic Advisor for the public sector practice of PricewaterhouseCoopers (PwC), the Honorable David M. Walker, to write you today for insight on what he sees happening in today’s debt-laden economy.
Mr. Walker brings an experienced perspective on the global economy, fostered through his position of guiding government transformations and making governments more economical, more efficient, more effective and more respected.
We are thrilled to have him speak at our October Irrational Economic Summit; be sure you don’t miss him.
By: Hon. David M. Walker, Senior Strategic Advisor, PwC
First, I want to thank all you Dent Research readers out there for taking the time to check in with us today. This is one of two posts I’ll be writing about geared toward the state of the economy, as we accumulate more and more national debt.
I know that Harry has already pointed out the United States holds about $19.4 trillion in outstanding debt, or about 104% of GDP. And though that number’s daily rise is a cause for concern, the U.S. government and most of our population is looking at the wrong number.
Nineteen-trillion-dollars-plus is just the tip of the iceberg. Looking at the consolidated financial statements of the U.S. government, we should add unfunded civilian and military pensions, retiree healthcare, environmental cleanup obligations and other traditional liabilities on top of that.
We also have to include some trillions in unfunded obligations for Social Security, about many trillions more in unfunded obligations for Medicare, and a range of other commitments and contingencies established through Generally Accepted Accounting Principles (GAAP) to total between $65 and $103 trillion depending on the time horizons you use… and counting.
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With those figures and a current GDP of about $18.5 trillion, the U.S. currently maintains a burden ratio between 361% and 555%.
And so, what we have to focus on Friday from a fiscal perspective is not deficits, not debt, but debt as a percentage of the economy.
It’s too high now and it’s moving higher absent a change of course.
We need to get it down to a reasonable and sustainable level by around 2030 to 2035. And that means enacting pro-growth policies with fiscally responsible solutions.
It also means taking a candid look at healthcare and realizing that we cannot write a blank check for healthcare. We’re the only industrialized nation that does this, but it doesn’t make sense and it could bankrupt the country.
And you won’t have to take my word for it. It won’t matter that after 10 years as the United States Comptroller General, from 1998 to 2008, I’m as certain of this as I am that the sky is blue. Because we’ll see it eventually absent a change of course; it’s only a matter of when.
It’s clear that the Affordable Care Act (ACA) is not politically or economically sustainable in its present form. Already several Texas insurance companies, just for one example, are seeking premium hikes of up to 60%. Countless subsidies are falling away from the ACA and the initial “sticker shock” for many medical visits will quickly turn to more consumer debt, and more uninsured patients who’ll exacerbate our serious healthcare challenge.
Again, all of this is just the tip (on the tip) of the iceberg. But I believe that with pro-growth policy and fiscally responsible approaches, we can achieve fiscal sustainability by 2035. We need to do so, but it won’t be easy.
I’ll share details with you on this challenge, and how to address it, at the Irrational Economic Summit this October in Palm Beach, Florida.
Together with Dent Research, we’ll map out a few things and navigate a way forward together.
Hon. David M. Walker
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