Walter Storholt 0:15
Flying high above the metropolis. It’s the Roth guy with holistic wealth advisor Jude Wilson.

Marc Killian 0:26
It’s time for another edition of the Roth guy with Jude Wilson, and we’re super excited. We got a very, very special guest this week on the podcast. We have David Walker joining us, former US Comptroller General, and just a wealth of great information. So I’m going to be quiet. Let them get into it. Great conversation on the way here on the Roth guy. Jude, how you doing, my friend?

Jude Wilson 0:46
I’m doing excellent, because I am so excited I’ve been I’ve been thinking about this particular episode for a long time.

Marc Killian 0:53
Yeah, me as well. So I’m looking forward to it. Mr. Walker, thank you for being here, sir. How are you?

David Walker 0:57
I’m doing well today. Good to be with you. Jude, I look forward to the interview.

Marc Killian 1:01
Yeah, absolutely. Well, I’ll let you guys get into it. Jude, take it away. Let’s, uh, let’s hear what Mr. Walker has to say.

Jude Wilson 1:06
Absolutely. Well, we’re gonna have some fun, and we’re gonna educate people and hopefully bring a lot of value. First, I want to again. Thank you, David, because I’ve been following your career since when you you didn’t even have a mustache, it was the first time I saw you.

David Walker 1:20
I’ve had them twice in my life. You know, the color is a little bit different now than it used to be. But, you know, you you got to grow it where you can grow it. Judy,

Jude Wilson 1:33
well, I love to have a little bit of fun, but what we’re here to talk about is also very serious and very educational. The other kind of interesting point that that makes this such a small world. I read that you are a graduate of Jacksonville University. You spent some time in Jacksonville, Florida.

David Walker 1:49
I did. My wife was born and raised in Jacksonville, Florida. She also graduated from ju she’s a distant relative of somebody called Ponce de Leon, who I think had something to do with the discovery of Florida, but I’m originally from Alabama, but I was raised in Alabama and Florida, and so you are correct, and I’m actually in their Hall of Fame, and I have an honorary doctorate degree from Jacksonville University.

Jude Wilson 2:17
Now that I did not find out my sister was is a graduate of Ju, and we lived when I was a child right down the street. I rode my bike to ju and played racquetball on the courts and looked at the St Johns River there. So we’re connected.

David Walker 2:32
It’s got a beautiful campus, and I used to be on their board of trustees at one point in time, in the past as well.

Jude Wilson 2:38
Wonderful. Well, let’s get into it, because I know our viewers really want to hear what you have to say. And I first have to start by saying we don’t talk politics on this particular podcast, but I tell clients, and I tell our viewers, we have to talk about policy, because policy is the reality. And I was especially interested in talking to you, because I see you as a person that calls balls and strikes. You’ve worked under Republican administration, Democrat administrations. I think I had read that you had your first presidential appointment was with Ronald Reagan, who is your favorite president. And correct me if I’m wrong. And I think I read once that you said the most fiscally present, responsible president that you work for is Bill Clinton. So how do you go from Ronald Reagan to Bill Clinton? I don’t know, but you’ve been able to manage that well.

David Walker 3:30
They were both excellent communicators. Ronald Reagan was right of center, and Bill Clinton was center. They both worked on a bipartisan basis. They, they both, you know, got things done. You know, we haven’t had a fiscally responsible president since Bill Clinton. You know, in the case of Ronald Reagan, you can’t, you can’t say that he was fiscally responsible, but he had an objective that he was trying to achieve. And those two major objectives was were to get the economy moving and to beat inflation, which he did okay, and secondly, to defeat the Soviet Union, which he did. And so at least we got something for some of the deficits that he ran. Nowadays we’re getting nothing. We’re running $2 trillion deficits, and yet you have politicians on both sides of the aisle wanting to promise more tax cuts, more spending increases without without having any credible way to close the gap between what we’re already receiving and what we’re already spending, and that’s just irresponsible.

Jude Wilson 4:44
Well, that leads that couldn’t be a better lead into how I want to structure this conversation with you. I’d like to look at three ways of talking today, talking about, number one, what’s our current condition? What’s the problem? Then let’s move on to talking about, what does the future look like if this problem isn’t addressed? Which, which leads into your book, and we’ll get into that a little bit later. And then lastly, what? What can we do as Americans individually? As you said, we can’t control the politicians. We can all go out and vote, but what they do once they’re in office is not under our control. So what personal responsibility can we take? What actions can we take to protect ourselves from what potentially may be a grim future? Let’s break it down. So our current condition, when you look at our deficit and where we’re at now. Tell me more about where you see us today as a country.

David Walker 5:47
Well first what I look at, when I look at fiscal metrics and fiscal meaning, tax and spending, is I look primarily at three things, how much debt do we have as a percentage of the economy? Because not all debt is bad. Some level of debt is sustainable, but too much debt is not secondly, what percentage of the budget have we written a blank check for so called mandatory spending? And then, thirdly, what percentage of the budget is interest? So I’ll take those one at a time when you count total debt subject to the debt ceiling, which is debt held by the public, as well as debt that we owe to Social Security, Medicare and other trust funds. It’s over $35 trillion it’s over 125% of GDP. That’s the highest we’ve ever been at. And it’s and it’s headed higher. You know, we’re running deficits or six to 7% of GDP. The economy’s, you know, growing at no more than 3% of GDP, so we’re already in record and we’re going higher. Secondly, mandatory spending, 73% of the budget up from 3% in 1912 so we’ve written a blank check for 73% of the budget, and that’s going faster than the rest of the budget. And the 27% of the budget that’s not mandatory spending, so called discretionary, which is decided every year that includes every Express and enumerated responsibility and vision by our nation’s founders in the Constitution, National Defense, Homeland Security, federal judicial system, Congress, United States, etc, and then, thirdly, interest. As percentage of the budget we’ve now passed, we’re going to spend over a trillion dollars in interest this year. It’s passed the Defense Department budget. It’s passed Medicare. What we spend on Medicare, it’s the fastest growing expense for which we get nothing. And within the next 10 years, it’s going to be the largest expense in the federal budget. So those are, I would say, three big warning signs. Yeah. And yet, when we, when we hear the candidates running for president, neither one of them have a plan for how we’re going to defuse this taking debt bomb so that. So that’s, that’s the lead off.

Jude Wilson 8:00
Yeah, that’s a, that’s a dramatic lead off. Go ahead mark.

Marc Killian 8:04
I was just gonna say a lot of people can’t even fathom David, the the interest on the national debt, right? It’s mind boggling to us. I mean, I think the average American kind of just tunes it out at this point because it’s so astronomical. But it’s, it’s something we really have to be thinking about.

David Walker 8:20
Well, I think the other thing you have to do is, you have to take off a bunch of zeros, right? Okay, talking about trillions of dollars, people can’t relate to that, so, right? So, you know, what you do is, is take a look at the federal government’s numbers. Drop about nine zeros, you know, can’t, you know, consider it as if you’re an individual, yeah, you know. And you’ll see that that dog don’t hunt.

Marc Killian 8:43
No, it’s not sustainable food, right? Yeah,

Unknown Speaker 8:46
you’re going, yeah,

Marc Killian 8:47
Yeah, exactly. Go ahead, Jude.

Jude Wilson 8:49
Yeah, we’re going bankrupt slowly. And you know when, when we think about what you just talked about, our fiscal status right? Now, many people are concerned about it, but they don’t know what that effect may have on their future and and that kind of goes into your book, America, 2040, so why should everyday Americans be concerned about direction that we’re heading in? What could be the possibilities? How could it affect them individually?

David Walker 9:24
Well, first, I think most Americans, especially politicians, are focused on today rather than tomorrow. Very true. Yeah, and you know now we have a bunch of career politicians who get elected every two years or every six years, and they’re focused primarily on getting reelected. Yeah, and, and a lot of them, you recognize that Americans like tax cuts, Americans like spending increases, and so they want to give them what they like. And they and while they know we have a problem that ultimately. Is going to explode if we don’t do something about it, their gut feeling is, it ain’t going to explode during their time in office, and so they’ll just continue to kick the can down the road. You know, the truth is, is that the biggest battle that we face right now, in my view, is not a partisan battle, it’s an ideological battle. And let me claim. Let me clarify what I mean by that. When this country was founded, it was founded on certain principles and values that are timeless, limited but effective, federal government, individual liberty and opportunity, personal responsibility and accountability, rule of law and equal justice under the law, fiscal responsibility, intergenerational equity, and a word that we don’t hear much anymore, stewardship. And what stewardship means is, you know, you don’t just generate positive results today. You don’t just leave things better off than when you leave, than when you came, but better positioned for the future. And the truth is, is that we are not discharging our stewardship, responsibility, financially, environmentally, from a number of different areas, okay? And that’s got to change. On the other hand, you’ve got a group that believe in socialist state principles, okay, grow government, increase dependency on government. Take control of education, take control of healthcare, don’t worry about deficits and debt. Those are very stark differences, okay, and, and, you know, and we’re gonna have to reconcile what we which path we think is the best path going forward. Now, what happens first, Americans, I think, recently, have found out what happens if the government ends up spending too much money, you know, spending too much money and then monetizing it, okay, through increasing the money supply. It’s called inflation. And during 2021 in 2022 when one party control all three branches of the you know, Senate, House and White House. And I’m not going to mention names or parties or whatever, people can figure that one party control all three of those they followed something called the modern monetary theory. The modern monetary theory was advocated by the chief economist of Bernie Sanders, and it says that deficits and debt don’t matter, as long as you can borrow on your own reserve currency, unless and until you excess inflation? Well, here’s the problem with that. Number one, it’s contrary to long established economic theory. Number two, it’s contrary to history. Number three, it’s based on a flawed comparison to Japan. And number four, it caused excess inflation. And so then all of a sudden, American people saw we go from 1.4% inflation to 9.1% inflation. And yes, it’s come down a considerable amount, but we’ve had 21% inflation over the last three and a half years, and it’s higher for things like housing, insurance, food, gas. So so the bottom line is, is that I think Americans, they may not have connected the dots, but the bottom line is, is that when government grows too big and when the money supply, you know, through loose monetary policies, increase, you’re going to get inflation, and people can feel that. So if we don’t put our finances in order, it’s going to get worse. You know, the number one indicator on the way up for a superpower is economic power. The number one indicator cater on the way down for a superpower is decline in economic power. If you can’t put your finances in order, you will not maintain economic power. So that’s where we’re at, okay? I mean, you know, we’ve got more time because we have the largest reserve currency, but we don’t have unlimited time, and there are all kinds of warning lights going off that people are taking seriously. One, I’ll give you one example, and then you ask me the next question. Sure, I just met with the former defense minister for India about two hours ago, and I’m on the defense business board, and one of the things we were talking about is the upcoming, upcoming meeting of the BRICS, you know, Brazil, Russia, India, China, a bunch of other countries are now wanting to join the bricks. The bricks now represent a larger percentage of global GDP than the g7 a larger percentage, okay, and more wanting to join it. And one of the things that they’re looking to do, and they may or may not be successful, what they’re looking to do is to create a new reserve currency that is backed 40% by gold and 60% by a basket of currencies. If that happens, we lose market share. If we lose market share for reserve currency, we have to we’re gonna have to pay more tomorrow. We’re gonna have less of an advantage on trade, and it’s gonna undercut our ability to impose economic sanctions. And not enough people in this country are taking this seriously.

Jude Wilson 14:53
You know, when you started to go down this route, I was mainly thinking about the potential. For increased taxation on the American citizens. But you so aptly pointed out the effects of inflation, and we’ve seen that we there. It’s not conceptual anymore. People are actually feeling it. But I think where sometimes we get confused when there’s all this talk about inflation in the news is that inflation is, is the the cost of goods and services rising, not once they’ve written risen, going back and seeing lower prices. I think that’s what everybody wants to see. But how really realistic is that?

David Walker 15:37
Well it’s not very realistic, I mean, but the bottom line is, is that we’ve gone from 1.4% inflation in January of 2021, to 9.1 in June of 2022, and now we’re what, 3.7 I have to look at what the last Yeah, so it’s coming down. Okay? It’s coming down. So, but, but what people understand the rate of increase is coming down, exactly? Prices are coming down right? And yeah, well, I think the administration misses is, yes, it’s true, the trend, it’s coming down right. It’s coming down. But what they don’t realize is people are saying, look, look how much it’s gone up in the last three and a half years, 21% at least, and for the things that I mentioned before, more than that, okay, that’s what they’re feeling. That’s what they’re feeling.

Marc Killian 16:29
And tha’ts hard for people to fathom, David, because someone who sees numbers like you do, right? You can see all this, this stuff, but for most folks out there, they’re just saying 9% even at its height, what they claim at 9% doesn’t feel right. It feels worse than that, or higher than that. And so it’s hard for us to get our brain wrapped around, oh, well, it’s now it’s back down to 3% so I should be feeling it, and they don’t realize that it’s compounding and that it’s gonna take time, and it’s, it’s very hard for the average person who just is not crazy about numbers to understand it. But boy, they feel it when they go to the grocery store.

David Walker 17:01
Well here’s the issue, okay, if we don’t put our finances in order, okay? We’re gonna have slower economic growth. We’re gonna have less individual opportunity. Yeah, we’re gonna have a growing gap between the haves and have nots. We’re gonna have less of a military capability, less international standing, we’re going to have higher inflation where, you know, I can go on, okay, but right, you talk judge Jude, you talked about something that’s important when I was growing up, when you were growing up. And obviously I’ve got a few more years on me than you do. Okay, both of you, all right, my doctor tells me my health is 20 years younger than my age, which is good. That’s great. That’s great. But anyway so. But my point is, is that we were told when we were growing up that we’re going to have a lower tax rate in retirement.

Jude Wilson 17:54
Absolutely fallacies.

David Walker 17:56
Well, guess what? That would fail the basic math test. Okay? Because ultimately, we can’t grow our way out of this financial hole. You can’t dig your way out of a hole. I keep on reminding people that you got to climb out of the hole. To climb out of the hole, we have to have pro growth policies, which we can talk about. We’re going to have to reduce future spending. Okay, because spending is a big is the biggest problem, excessive spending, and we’re going to have to raise more revenues, right? And while the problem is primarily spending problem, it’s not exclusively spending problem. We’re going to have to have more revenues. The math won’t work without it. And so it’s likely that you’re actually going to pay a higher effective income tax rate, you know in the future, then you’ve played in the past, but at least you don’t have to pay social insurance taxes if you’re not working. So that’s a big difference, right?

Jude Wilson 18:50
Well, you hit on something that I talk about in my seminars when I’m teaching about retirement planning for the future, that your personal income tax rate, even in retirement, may be higher than it is today, and I love what you so commonly say in your interview, the taxes may double in the future, and it’s based on a four letter word. And that four letter word is math.

David Walker 19:19
That’s the new four letter word in fiscal policy. And real, you know, it’s not going to double. The reason it’s not going to double is because that’s if all you do is raise taxes, you don’t do anything else. All you do is rate taxes, and that’s a number of years out, all right, but, but I do believe there’s going to be a higher effective tax rate for income taxes. You know, for most people, because of what we’ve done,

Marc Killian 19:47
That’s a that’s a great point.

David Walker 19:50
What we failed to do, we failed to diffuse this ticking bomb early enough.

Marc Killian 19:55
As always. Thank you so much for your time here on the Roth guy. Don’t forget to subscribe to. On Apple, Spotify and YouTube, hit the thumbs up and ring the notification bell for future episodes, as well as part two with David Walker. Thank you so much.

Walter Storholt 20:14
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Transcribed by https://otter.ai