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A Man With a Plan to Defuse the Debt Bomb

If the United States ever defuses the debt bomb that threatens to implode our economy, one of history’s heroes will be David Walker, the former comptroller general who’s been sounding fiscal alarms for nearly a decade.

He won’t be the only hero, of course. A few Members of Congress have long made it their goal to ward off fiscal catastrophe — Sen. Kent Conrad (D-N.D.), former Sen. Judd Gregg (R-N.H.) and Rep. Frank Wolf (R-Va.).

And Walker has had bipartisan allies in groups such as the Concord Coalition, the Committee for a Responsible Federal Budget and the Heritage Foundation.

Members of President Barack Obama’s debt commission, especially Co-Chairmen Alan Simpson and Erskine Bowles, will deserve a place of honor, along with the current “gang of six” Senators striving to put its recommendations into action.

The federal debt has now grown so huge and menacing that containing it is a major preoccupation of both political parties, but now ideological differences threaten to block action and continue the country’s vulnerability.

Conceivably, partisan differences could bring on catastrophe within months if there’s no agreement on raising the federal debt ceiling, leading the government to default on its payments to creditors.

In an interview, Walker — who moved from the Government Accountability Office in 2008 to head the Peter G. Peterson Foundation and now leads the Comeback America Initiative — outlined a framework for breaking that deadlock.

And he said that he will be out with recommendations in June for solving the nation’s structural fiscal crisis.

He said he fears that both Obama and Congressional Republicans are more interested in setting up campaign issues for 2012 than solving the debt problem.

“I’m concerned that, while I think Obama has the political advantage now for a variety of reasons, I think we’re going too early into the campaign and forgetting that people are elected to govern.”

(Obama’s advantage, he says, lies in having proposed a budget approach looking “more reasoned and reasonable” than both Wisconsin GOP Rep. Paul Ryan’s  spending-cuts-only plan and Medicare privatization, and the Democratic base’s preference for no entitlement cuts and only tax increases.)

To govern, Walker said the seven-member deficit panel appointed by Obama and headed by Vice President Joseph Biden should “focus like a laser” on “coming up with a deal on raising the debt ceiling with appropriate conditions.”

Republicans, as their price for raising the debt limit, are demanding passage of a constitutional amendment requiring a balanced budget and a system of automatic spending cuts if government outlays exceed 21.5 percent of gross domestic product.

Democrats are talking vaguely about deficit “benchmarks.” Walker favors a “plan B for both parties” that targets federal debt as a percentage of GDP and, if it exceeds an agreed level, requires both spending cuts and a temporary tax surcharge to reach the goal.

He’d have the system take hold in 2013, leaving time for Congress and Obama to agree on a long-term budget plan.

Walker also thinks time is needed for the public to be educated about the debt crisis and accept realistic measures to contain it. Polls suggest majorities think deficits can be closed just by eliminating foreign aid and taxing the rich.

Walker objects on two grounds to a proposal by Sens. Bob Corker (R-Tenn.) and Claire McCaskill (D-Mo.), which is gaining strength in Congress, that would automatically cut spending if it exceeded 21.5 percent of GDP (it’s now 24 percent).

He thinks 21.5 percent is too low, considering that the population is aging and health costs are rising, and he prefers allowing for tax increases as well as spending cuts.

There’s no bill in Congress yet targeting debt-to-GDP, but Walker says he’s working with both White House officials and Members to advance one.

Walker said he hoped Congress and the White House would tackle Social Security reform before the 2012 election “to show ourselves and the world that we can solve our problems,” but he fears that idea was set back by Ryan’s proposal on Medicare, which has agitated seniors.

For the long term, Walker’s June proposal will contain plans A and B.

Plan A will be mix of entitlement and spending cuts “more aggressive” than those proposed by Simpson-Bowles and options for tax reform and health care re-reform all designed to bring the debt-to-GDP ratio down to 70 percent by 2020 — it’s now scheduled to be 100 percent by then — and 50 percent by 2035.

He’ll also propose a “small” consumption tax to close the gap, but only if all spending targets have been met.

Plan B will be a “draconian” set of options for what will need to be done if debt targets aren’t met — such as reductions in Social Security and Medicare payments.

Walker said that his principles for long-term budget reform are that it make economic sense and be socially equitable.

“It’s got to be politically feasible in Washington and understood outside the Beltway, so that people will accept the kind of reforms we’re talking about and elected officials will be able to make them without fear that they’ll lose their jobs.”

For years, Walker and his allies weren’t listened to. Now they are, but politicians want things done their way and their way only. Walker now is offering ideas that bridge the gaps. Unless the gaps are bridged, the country could fall into a fiscal chasm.

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