Dave Walker's Speech: Fiscal and Defense Transformation Challenges
MIT Seminar XXISeptember 8, 2008
By Hon. David M. Walker, President and CEO of the Peter G. Peterson Foundation
and Former U.S. Comptroller General
Thank you for the opportunity to be with you this evening. To those of you who are new fellows, congratulations. This is an important milestone in your career which you should be both proud of and thankful for. To those of you who are alumni of this program, you can attest to the truth of my statement.
Your country or company has invested in each of you by sending you to MIT. You have received additional knowledge for which they should receive a return on their investment. I'm sure that each of you will do your best to make sure they do.
This evening, I'd like to provide a brief history lesson to illustrate why your new knowledge and leadership abilities will be so important both for today and for our future. Let me start with some positive comments. The United States is a great nation, possibly the greatest in the history of mankind. This is due in part, because our country was founded based on some of the most sound and timeless principles that were ever written.
The United States Constitution is arguably the greatest political document of all time. This document was the product of some of the best leaders of their era: people like Washington, Adams, Jefferson, Madison, Franklin and others, just to name a few.
We have come a long way since the Founding of our republic on many fronts. From a geographic perspective, our nation now spans from sea to shining sea on the North American continent and even includes some states and territories beyond. Our liberty has been enhanced to abolish slavery and to extend voting and other rights to women and minorities. We have come from a fledgling nation to the world's sole superpower today. We're the world's oldest democracy and a beacon of liberty and freedom for all mankind.
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These are all positive things that we should be both proud of and thankful for. However, our nation and many others also face a range of serious sustainability challenges that, to-date, our elected leaders have not taken seriously enough. These include fiscal, foreign relations, entitlement programs, energy, environmental, health care, immigration and infrastructure challenges. In my view, we have also strayed from what the Founders intended in a number of fundamental ways. I'll just mention a few.
o. We've gone from a limited role for the federal government to a large and expanding role. Believe it or not, at the outset of our republic in 1789, the federal government only represented about two percent of our overall economy. Today, it represents over 20 percent and it's headed to 30 percent plus based on our current trends and existing commitments. Clearly Ronald Reagan was right when he said, "The closest thing to eternal life on this earth is a federal program";
o. We've gone from a focus on basic federal roles like national security, domestic tranquility, foreign policy, judicial, treasury, postal, and the Congressional and Presidential functions to a situation today where only 38 percent of federal spending relates to functions expressly envisioned as a role for the federal government. The other 62 percent is on auto pilot and has already started to squeeze out some of the more critical investments for our future. For example, the relative size of federal investments in research and development, education, training, and infrastructure has been on the decline. Given past history, they are likely to decline even further when the real budget crunch hits, and that crunch is coming;
o. We've gone from paying close attention to Washington's caution to not involve ourselves in foreign conflicts, to a point where the United States has actually engaged in it's first ever preemptive intervention in a foreign land in a "war" that was never declared by the Congress;
o. We've gone from an abhorrence of debt and the existence of debtors' prisons to a state where today both America and too many Americans have become addicted to debt. America is an over $53 trillion financial hole that grows $2-$3 trillion a year on autopilot even with a balanced budget. Unfortunately, our deficits are headed in the wrong direction and federal spending is set to escalate dramatically when "boomers" retire in big numbers;
o. We've gone from a time where people left their normal occupations for a relatively short period of time to serve the people in elective office, to where today too many elected officials view their position as a job and they want to make a career out of it; and finally,
o. We've gone from a country built on hope, opportunity, hard work and strong values to one where, for the first time in American history, a majority of Americans think that the future will not be as good for their children as themselves. Furthermore, too many Americans today believe they are entitled to many things and too much attention is focused in the press, in television and in the movies highlighting immoral acts rather than promoting responsible behavior.
Yes, we've strayed from a number of the basic principles and core values on which our country was founded. In addition, as I noted previously, we also face a range of serious sustainability challenges that our elected officials are not taking seriously enough. One might ask, why do we face so many sustainability challenges today? The sad but simple truth is that America and too many Americans suffer from a combination of myopia, tunnel vision and self-centeredness. And in several cases, as my good friend Dr. Jack Rowe would say, we have been diagnosed with "mural dyslexia". Namely, the inability to read the handwriting on the wall! Unlike at our nation's outset, we currently face a serious leadership deficit as well. In fact, I believe that our leadership deficit is probably the largest and most serious deficit we face.
We need to get back to the basics and separate the wheat from the chaff in connection with what the federal government should do, who should do its business, and how it should measure success. We also need to quit eating this nation's seed corn! This will require a new type of leadership. That's where you come in.
Washington needs to re-define its proper role. It must also go about performing all of its activities in a more economical, efficient, effective, ethical, equitable and sustainable manner. In this regard, the federal government needs to target its efforts and activities on areas that represent the greatest current need and those that represent the greatest long-term societal benefit. The federal government also needs to kill or reduce federal spending programs, regulatory approaches and tax policies that are outdated, ineffective and/or inequitable. In doing all of this, the government needs to recognize the important roles the state and local governments play and what the private sector should and should not be expected to play.
National security is one of the basic constitutional roles for the federal government. Importantly, national security is about more than have a strong military. It also involves having a strong economy and a robust and credible foreign policy. From an economic perspective, if you don't maintain a strong economy you won't have a strong military over time. In addition, from a foreign policy perspective, we need to recognize that even though we are currently the world's sole superpower, this status is only temporary. Therefore, we should partner for progress with other countries on issues of mutual interest and concern.
What about the Defense Department? In my view, the department wastes billions of dollars each and every year by having a bloated bureaucracy, by not taking a future-oriented and enterprise-wide approach to separating true risk-based needs from much greater individual service-based wants, and by not employing best-practices to contracting design, management and oversight. Finally, the Department of Defense has thousands of legacy and non-integrated information systems that cost too much and don't generate enough timely, accurate and useful information to make informed business decisions on, on a day-to-day basis. In fact, the Pentagon's use of the term "requirements" for a weapons system need bears little resemblance to the definition of the word in Webster's Dictionary!
The difference between the number and nature of the many platforms and proposals that are on the various services' "wants" list and what the defense budget will likely be able to support and sustain over time is large and growing. If this is not addressed, one day when the budget crunch comes, we will find ourselves with a number of things that individuals wanted but not enough of what are needed as a nation.
Beyond acquisition and contracting-related issues, there are a number of other serious issues that need to be addressed, including whether the current "all-volunteer force" and the current business model for guard and reserve forces are sustainable over time. Finally, health care costs are eating into the defense budget at an alarming rate. These and other challenges must be addressed "head on." They have been allowed to linger far too long. In my view, the Defense Department needs a full-time Chief Management officer (CMO) to focus full-time on the key of business and other transformation challenges and opportunities facing the department.
In fairness, while the Executive Branch, in general, and the Defense Department, in particular, needs to change how they do business, the Congress does too. Congress contributes to the waste and inefficiency in connection with the federal government in a variety of ways. These include a large number of highly questionable congressional directions, also known as earmarks, and passage of legislation relating to pay, health and other benefits in situations that can be based on short-term political considerations rather than prudent policy choices. All too many elected officials have discovered that it's easy to spend someone else's money, especially when they are too young to vote or may not have been born yet. This is in large part what is going on today. It's another form of taxation without representation. It's also not only fiscally irresponsible, it's unethical and arguably even immoral.
Yes, Washington is badly broken and it's time for a "wake-up call' and for some "tough love" to be occur within the "Beltway". As we look to the future, we must also learn various lessons from the past if we expect to avoid making the same mistakes in the future. For example, we must heed the lessons from the fall of the Roman Empire. Rome fell for several key reasons. Specifically, a decline in moral values and political civility at home; overconfident and overextended militarily around the world; fiscal irresponsibility by the central government, and; an inability to control its borders. If that sounds familiar, it's time that we learned from history and took steps to make sure that we are the first republic to stand the test of time.
In addition to learning lessons from history, we must focus on the future if we want to stay strong economically, socially and militarily. To do so, we will need to engage in a number of major transformations and change management efforts, and they will be very tough. Why? Because most human beings don't like to change and some won't change until they are forced to. Unfortunately, that is particularly the case on government and monopoly organizations because they don't have the type of competitive pressures that force change. As a result, it requires real, inspired and sustained leadership to be successful. In that regard, as I have said in the past, when making tough changes it's not just what you do, but how you go about doing it that matters. In addition, as a change agent, your experience will progress from patience to persistence, to perseverance, to pain before you prevail.
What do I mean by transformation? Transformation involves taking steps to learn from the past in an effort to create a more successful and sustainable future. In government, this includes taking steps to improve economy, efficiency, effectiveness, ethics and equity while doing a much better job of linking resources to results.
Unfortunately, most organizations, especially governments, do not have enough true leaders and change agents to achieve sustainable success. It is this leadership deficit that I would ask that each of you do your part to address. As you look to the future, please do your best to be the type of leader that we need more of today. Namely, leaders who have the courage to state the facts, and to speak the truth even though it may not be popular. Leaders who have the integrity to lead by example and practice what they preach. Leaders who have the wisdom to learn from the past, and the vision to see new ways of addressing old problems, while helping others to see the way forward. Leaders who will break down hardened silos and who partner for progress both domestically and internationally. Leaders who will put the nation's interest before their party's interests or their own personal career. Finally, a leader who recognizes that it's not enough just to generate positive results today, but who will also strive to be a good steward and leave things better off and better positioned for the future when they leave than when they came, whether it is in their current position or on this earth.
Please join me in an attempt to do your best to be a "true leader". If we all work together and with others, we can stay strong and create a future that is better than our past.
In closing, as the American actor Woody Allen once said, "More than anytime in history, mankind has reached a crossroads. One path leads to despair and utter hopelessness, the other to total extinction. Let us pray that we have the wisdom to choose correctly!" Frankly, I'm a lot more optimistic than Woody. After all, America has faced great challenges in the past and we have always found a way to successfully address them once "We the People" demanded action.
We can, we must, and I believe that we will ultimately rise to meet our fiscal and other key sustainability challenges. We just need to do it sooner rather than later. I believe that we have a relatively small and closing "window of opportunity" to address these challenges. That's why I left my job as Comptroller General of the United States in order to become President and CEO of the new Peter G. Peterson Foundation. In my new position, I'll have more flexibility and financial resources to turn up the heat and pump up the volume to drive change on the issues of interest to the Foundation. As I have said, committed Generals don't leave the fight, but they may change their position on the battlefield. That is exactly what I have done and I hope that you will join me by signing up under the Citizen Action section of our web site at www.pgpf.org.
Congratulations again on your achievement, and thanks for listening to my remarks this evening. May God bless each of you, our families, and the United States of America.
© 2008 The Peter G. Peterson Foundation
