David Walker's Last Objective
Business Finance Magazine
June 1, 2008
by Steve Player
After serving nearly ten years as our nation's chief auditor, former U.S. Comptroller General David Walker recently resigned to meet an objective the public sector had long denied him.
Steve Player: The position of Comptroller General has a 15-year term, but you stepped down to take on this new role outside of government. What was it about this new role that you found attractive?
David Walker: The primary reason I changed was that I had accomplished all of my objectives but one at GAO and that one was how to get the Congress to make a down payment on our large and growing fiscal imbalance and start dealing with some of the key sustainability challenges facing our nation. I came to the realization that I think I actually have a better chance at being successful at this as President and CEO of the Peter G. Peterson Foundation than if I'd stayed on as Comptroller General.
You might ask why. Because (a) now I can advocate specific solutions - I couldn't do that before; (b) I've got the ability to build strong coalitions very overtly that I couldn't build before; and (c) I have the ability to engage in grassroots efforts to bring pressure on Washington to act sooner rather than later, which I really couldn't do before.
For those three reasons, I made the change. Of course, there was one more big reason, and this was the opportunity to work with Pete Peterson, who's a great American and who's putting his money where his mouth is.
SP: It certainly sounds like a great foundation, and I particularly like the advocacy of getting the debate going, regardless of the solution. We don't always seem to be having the conversations that we should be having...
Walker: You can't solve a problem until the majority of the people recognize that we have a problem that needs to be solved and that we should do it sooner rather than later. So the Fiscal Wake-Up Tour and other efforts that the foundation is supporting are designed to try to help wake up the American people to the fact that we have a serious problem, and that it's growing with the passage of time.
However, we can't stop there. We need to help design solutions, build broad-based coalitions to support those solutions, and then stimulate grassroots efforts to make those solutions become a reality, because ultimately elected officials are going to have to vote. And they're going to have to be pushed. They're not going to do it by themselves.
SP: That's the tough thing about the voting, because many of the issues you talk about - particularly Social Security, for instance - these are hard nuts to crack. They are very difficult issues, and oftentimes they're issues that politicians are afraid of. How's the reaction from the political front been on your message and getting to actually step up and have that kind of conversation?
Walker: A lot of people thought that I was probably taking heat as Comptroller General in being able to talk about these issues, but actually I wasn't because I stated the facts, I spoke the truth, I never blamed any particular person or any particular political party. Frankly, while working with others, I was trying to till the ground, to prepare the way, so that they could make tough choices without losing their jobs. Actually, I got a lot of compliments but no criticisms.
We need to make sure that the next President will make fiscal responsibility and intergenerational equity a top priority. If he or she does, we can turn this thing around. If not, it's probably only a matter of time before we have a real crisis.
SP: Does the party make any difference - whichever party wins - or is it independent of that?
Walker: We're nonpartisan, nonideological, and staunchly so. I want it to stay that way. Personally, I'm an independent, and proud of it. In fact, there are more independents in America than Democrats or Republicans.
SP: It's interesting what you said, that you're not trying to fix the blame. Oftentimes I think that fixing the blame is an impediment. If you just focus on what the problem is and how you solve it, it would seem to give you a better feel for at least having a good discussion.
Walker: That's right. Personalizing something is never a positive measure unless it's a positive comment. Remember what our mothers always said: "If you've got something good to say, say it publicly. If you've got something bad to say, say it privately." You know, our mothers were smart on a lot of other things. Remember what they said about money? "Don't let money burn a hole in your pocket." Well, frankly, for the federal government, it's gone through the pocket, through the floor, and now through the planet. We're getting our money from the other side of the planet because we're not saving, but Asia and others are saving.
SP: To what degree do the mechanics of the federal reporting process really hide the truth or prevent the transparency we need?
Walker: We've had a number of reforms in federal financial reporting that were positive, but we need more. For example, the bonds that are in the so-called trust funds are not currently deemed to be liabilities by the United States government. That's wrong, and that needs to change. Second, because of the current accounting with regard to these so-called trust funds, which really ought to be called "trust the government" funds, we understate the amount of debt that we have and we understate the significance of our deficits.
Furthermore, the problem is not really our current deficits and our current debt levels, it's our off-balance-sheet, unfunded obligations. They're not liabilities but they're unfunded promises totaling over $40 trillion and growing by over $2 trillion a year. We need to do a much better job of pulling all this together into a statement reflecting intergenerational equity and fiscal sustainability. This is something I've advocated, and I know the Federal Accounting Standards advisory board is working on it.
SP: How hard is that to actually come up with, just the mechanics of how you report on that? It seems to be a gargantuan problem. How do you get a fix on it?
Walker: It's not that tough. You know, where there's a will, there's a way. In America, anything is possible.
SP: You're certainly a positive person to attack it that way. Obviously you would be or you wouldn't tackle this job. Comment, if you would, as a former official looking at fiscal issues and those kinds of things, about your view on the current governmental budgeting process. What issues do we have with that in terms of the difficulty in getting a budget resolution passed for funding the government?
Walker: The current budget and appropriations processes are badly broken and dysfunctional even. Frankly, how they've worked in the past few years has been an embarrassment, with very adverse consequences with regard to our fiscal posture. We need to think about biennial budgeting. We also need to look at more results-based budgeting. We need to look at what the short-term and long-range costs of programs and proposals are. We also need to recognize that tax preferences cost us a trillion dollars a year in lost revenues. We can't just focus on direct spending programs, (which are about $3 trillion a year), we also have to look at the trillion dollars of forgone revenue because of tax expenditures. We need dramatic, fundamental, and systemic reform.
SP: Much of the Beyond Budgeting movement is really trying to tackle that by moving to relative targets as opposed to fixed targets and moving to rolling forecasts and dynamic resource allocation based on the demands that come on the business. Things that really have more of a matching of the decision to the forecast perspective that you look for in terms of the time horizon. How would you see these kinds of ideas playing out in the government?
Walker: I think that they have intellectual merit, and I think that they need to be part of a portfolio of ideas we look at, including things like the difference between a capital budget and an operating budget. These approaches are so far ahead of where the federal government is today. With regard to budgeting, the federal government is really still in the 19th century, much less in the 21st century.
Let's try to get them as current as we can. But we do have an opportunity to leapfrog. You don't have to go through all the stages.
SP: Some of the innovations have begun to try to make performance measurement more visible in the federal government. It brings to mind President Bush's Management Agenda, which mandated scorecarding. What's your view on the impact of that within the government?
Walker: Well, I like the idea of the President's Management Agenda, where you're taking a short list of issues to grade people on as to where they stand and on whether or not they're making progress. As part of that agenda, I think that the President's Program Assessment Rating Tool does have merit in trying to evaluate the linking of resources to results. Unfortunately, it's not used by the Congress.
In addition to that, it doesn't cover tax preferences, and looks on a program-by-program basis rather than through a whole range of programs on a particular topic. I think that it's a step in the right direction, but I think that we really need to recognize that we need to do a lot more. Congress needs to use it, because if only the executive branch uses it, but Congress has the power of appropriations under the Constitution, we're not going to get to where we need to be.
SP: You don't seem to come from a typical finance background. I know that for a while you ran the human resources practice for Arthur Andersen. For our finance community readers who are trying to figure out how they can help their organizations, tell us a little bit about your background and how you got positioned to take on this kind of audacious goal.
Walker: I started out with a bachelor's in accounting and I have had a lot of training and education since then. Next I went into public accounting. I was in public accounting with some of the biggest firms in the world: PriceWaterhouse, Coopers and Lybrand, Arthur Andersen. I also was in the human resources consulting and executive search business. I ran three major agencies in the federal government.
I recognize that my accounting background and CPA certificate are a very good foundation. However, no matter what business you're in, how you keep score and proficiency in math are important. I've used my accounting as a foundation, but I also recognize that the most valuable asset this country has - the most valuable asset that any company or entity has, including the federal government - is its people. It's all about intellectual capital.
So I moved beyond the finance area to get involved in the human capital area or the people strategy area, because that's really what's going to determine whether we're going to win over the long term, whether it's collectively or individually.
SP: You seem still pretty optimistic about this, although the challenge ahead of you looks quite daunting. What gives you the optimism to keep attacking this?
Walker: First, I'm basically an optimist by nature, but I'm also a realist. I know how to do math. I also know when people aren't telling the truth. The answer to your question is that if we look at America's history, America has faced great challenges in the past, and it's always overcome them when the first three words in the Constitution came alive. "We the people" - these are the most important and powerful words in the Constitution. My view is that we can solve this problem if we the people take it on, because the answer is going to come from outside of Washington. Yes, elected officials in Washington have to vote, but they're not going to do it. Too many people are vested in the status quo, unless and until we the people demand change.
SP: As the CEO of the Peter G. Peterson Foundation, what are the kinds of activities you're going to be engaged in?
Walker: The Foundation is focused on a number of issues, but our three top priorities are to deal with our nation's budget, savings, and balance of payment deficits; the need for entitlement reform (e.g., Social Security, Medicare, and other programs); and the need for comprehensive healthcare reform.
We're going to try to identify solutions, build strong coalitions, and stimulate grassroots efforts to accelerate change in Washington. We're going to focus disproportionately on young people, because they will pay the price and they will bear the burden if others don't act; on the business community at large; and on the media, both traditional and new. Ultimately, we want to measure success by asking the questions: Do things happen? Do we get things done? Over time, it's all about achieving results.
SP: If people are interested in that message, how can they become involved? What could they do at the grassroots level to help you with the mission?
Walker: We're going to roll out a new Peter G. Peterson Foundation Web site in mid-June: www.pgpf.org [1]. People will be able to go onto the site and sign up. By that, I mean to show that they care about these issues, and would like to stay informed and involved. We're not going to ask for a dime. We are calling on at least one million Americans to come forward and to say that they want to be part of the solution because they know that their country's, their children's, and their grandchildren's futures are at risk.
The United States is a great country, probably the greatest in the history of mankind. But we're not as great as we think we are, and our future is at risk. We have a number of serious sustainability challenges, several of which the Peter G. Peterson Foundation is planning to address. It's important that America wake up. It's important that people become informed and involved. It's important that they help us try to achieve major reforms in Washington, and it's also important that they understand that they're going to have to assume more personal responsibility and accountability for their own financial future. When that happens, we will all be in a better position and we will be able to effectively discharge our stewardship responsibilities to this great country and to our families.
*Note: The Peter G. Peterson Foundation was established in February 2008 by former U.S. Commerce Secretary and Blackstone Group Senior Chairman Peter G. Peterson to raise public awareness and accelerate action in connection with selected key economic and social challenges facing the United States.
Published on Business Finance (http://businessfinancemag.com)
