Wednesday, November 3, 2010
My discussion with David Walker
I went to Fox yesterday and who do I bump into? None other than David Walker, former Comptroller General of the U.S. and now the president of the Pete Peterson Foundation. Walker is the leader of Deficit Terrorist Nation and he has been on a mission, backed with Peterson’s money, to scare the daylights out of the citizens of this country and our political leadership into believing that Social Security is insolvent and that the nation itself faces bankruptcy unless we reign in runaway spending and the deficits that are accruing.
Back in 2008 I had Walker on as a guest on my radio show on Biz Radio and I got him to admit that there is no solvency issue and that the checks were never going to bounce. As far as I know, I was the only one who has ever gotten him to say that publicly. (I have often asked Neil Cavuto to pose that question to Walker the times when he is on his show and I have personally given Neil the audio clip of that interview, but he hasn’t done it.)
Anyway, when I went into the green room and saw him sitting there, I walked right up to him and introduced myself and asked if he recalled that exchange we had back in 2008. He actually said that he did. So I asked him why he continues to go around saying that social security is facing insolvency.
He said to me that he doesn’t say that.
I questioned him as to what would happen if those deficits were not closed as per his warnings and if the government just kept writing checks. He said that interest rates would rise. Note: he didn’t say we’d go bankrupt; just that interest rates would rise. I asked why he thought interest rates would rise if the Fed sets rates? He said the Fed only sets short term rates, but not “market rates.” I asked him if he was aware that the Fed has been guiding long term rates lower by buying bonds. I tried to explain to him that the Fed could set rates anywhere along the curve, by exactly the same manner of operations that it uses to set short rates. He seemed confused and not fully understanding that the Fed could keep rates low for however long it wanted. Then I brought up the example of Japan, where debt was far higher than in the U.S. and where rates have been virtually at zero for two decades.
He said Japan has no “foreign debt.” I say neither do we, because our “foreign debt” is our own debt—in dollars. Same exact thing as Japan. He had a hard time with that.
Then I asked him if he truly believed that a nation that issues its own currency and where its debts were denominated in that currency could go bankrupt? He responded, “No, that can’t happen.”
Then I followed up by trying to make him see that Social Security or Medicare or any obligation of the government doesn’t face solvency risk by that same logic.
So I asked him why he keeps saying it’s going broke?
He says he doesn’t say that. He said that he never says it’s insolvent. (Which is bullshit, because he does say that!)
I told him about what Greenspan said back in 2005 during Congressional testimony, when he was asked that very question, about Social Security solvency. Greenspan said that the Federal Gov’t can pay any amount of money to whomever it wants, but the real issue was whether or not the real assets were going to be there for people to consume. In other words, would we end up having inflation.
Walker seemed to understand this. Then I said that if we were going to have a realistic dialog and discussion about Social Security, we should not frame it in context of risk of insolvency, but rather, whether or not the crediting of bank accounts (issuing checks) was going to lead to inflation down the road. I said that no real examination of that potentiality was ever done. He agreed.
I said that since he is the voice of deficit reduction and fiscal responsibility, he should refrain from using words like bankruptcy and insolvency and reframe the discussion so that people start talking about the real issue; which is whether or not there is a risk of inflation if the government keeps writing checks.
He agreed and said that he won’t talk about solvency. HE SAID HE WASN’T GOING TO TALK ABOUT INSOLVENCY! He also agreed with me that it’s not about interest rates!
In the end he said it’s about inflation and the value of the currency. (I’m not even sure it is about the value of the currency, but I gave him that one!)
So in the end, David Walker, Deficit Terrorist in Chief, basically agreed on all points espoused by the MMT community. He said to me he would characterize it in that way. He said I should ask Neil Cavuto to ask him that question. (I promptly sent an email off to Neil.)
Then he walked out to the studio to do an interview with Fox Anchors David Asman and Liz Claman. Not more than two minutes into this interview, he was talking about restoring SOLVENCY to Social Security.
What a disingenuous, lying, douche bag!