How to fix America’s federal finances

The federal government is now at record levels of both total debt-to-GDP and mandatory spending as a percentage of the budget. It is also nearing a record for interest as a percentage of the budget. Interest expense now exceeds spending on defense and is our fastest growing expense — for which we get nothing in return.

If these facts are not troubling enough, all these figures will continue to get worse if we do not change course.

Every major federal fiscal, monetary and accountability agency has said that the federal government has been on an imprudent and unsustainable fiscal path for a number of years. We must put our federal finances in order if we want to remain the world’s leading superpower and our collective future to be better than our past.

Unfortunately, the leading presidential candidates have been silent on how they would put our finances in order and save Social Security. This is simply unacceptable.

Americans know that you cannot spend more money than you make and charge the difference to the credit card without eventually coming to a day of reckoning. No country, including the U.S., is exempt from the laws of prudent finance.

While most people focus on our more than $35 trillion in total debt, that is just the tip of the iceberg. Total federal liabilities and unfunded social insurance obligations exceed $125 trillion and are growing faster than the economy.

The truth is that our federal financial hole is so deep that we cannot grow our way out of it. Yes, we need to adopt more pro-growth policies, but tough choices regarding spending and revenues will be required to restore fiscal sanity and sustainability. At the same time, we cannot simply cut our way — or simply tax our way — out of this hole. The math and politics don’t work.

To restore fiscal health, we need to consider not just what type of reforms are needed but how to achieve the needed reforms. In my view, three things are essential.

First, we need a president who will make fiscal responsibility a priority. President Bill Clinton was the last to do so. Neither major presidential candidate in 2024 currently has a credible proposal to address this critical issue.

Second, we need a fiscal responsibility amendment to the Constitution that will limit the growth of the federal government and the amount of debt the government can take on relative to GDP, absent extraordinary circumstances. The debt ceiling has failed to constrain the growth of government and federal debt. Only a constitutional amendment can bind both current and future Congresses.

A concurrent resolution sponsored by Rep. Jodey C. Arrington (R-Tex.) is designed to bring light, heat and action to this issue, and it should be passed on Constitution Day this year. 

Finally, we need to create a statutory Fiscal Sustainability Commission that learns the lessons of the Simpson-Bowles Commission. It is unrealistic to expect that the tough spending and tax choices needed to restore fiscal sanity will occur on a piecemeal basis through regular legislative order. The House Fiscal Commission Act, which has already passed the House Budget Committee on a bipartisan basis, can become the vehicle for such a commission; however, it should be revised in at least three ways.

First, it should provide two sets of recommendations — one to restore the solvency and sustainability of Social Security and another reduce public debt-to-GDP to a stated level by a certain future year. Second, it must allow for hearings on the commission’s proposals in the House Ways and Means and Senate Finance Committees. Third, it should allow for floor amendments, so long as they do not undercut the express objectives of the commission.

Reasonable people can and will differ regarding which specific reforms should be enacted to put our finances in order. A number of illustrative spending, tax and other reforms that received support from between 77 and 97 percent of representative groups of voters are included in my latest book, “America in 2040: Still a Superpower.”

One thing is clear: Failure to adopt needed reforms will have serious adverse economic security, national security, international relations and domestic tranquility consequences.

Time is not working in our favor. We owe it to our country, families and future generations of Americans to act. Action to defuse our ticking debt bomb is needed now.

This op-ed is part of The Hill’s “How to Fix America” series exploring solutions to some of America’s most pressing problems.

David M. Walker is the former U.S. comptroller general and chairman of the Federal Fiscal Sustainability Foundation.