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- 2008 - May - 21st -

Top economists warn things must change

Max Marbut

“If you were with us this morning, we ruined your breakfast. Now we’re going to ruin your lunch and if you join us later today, we’ll ruin your dinner, too.”

That’s how Robert Bixby, executive director of the Concord Coalition, began his remarks Monday at the Rotary Club of Jacksonville’s weekly meeting. He was joined by Andrew Biggs, former deputy commissioner of the Social Security Agency; Paul Cullinan, research director for Budgeting for National Priorities (an initiative of the Brookings Institution); and David Walker, former Comptroller General of the United States and current president and CEO of the Peter G. Peterson Foundation.

The four men were in Jacksonville as part of the Arlington, Va.-based Concord Coalition’s “Fiscal Wake Up Tour” that in the last two years has been to 47 cities in 26 states and the District of Columbia. They presented to three groups Monday.

In addition to lunch with the Rotarians, in the morning they addressed the Florida Government Finance Officers Association Annual Conference, a group of about 1,000 city, county and state accountants, auditors and budget officers, then finished the day with a presentation to faculty members and guests at Jacksonville University’s Davis College of Business.

Their message is America is headed for financial trouble and something must be done now to avoid a catastrophe in the future.

Other points of the coalition’s agenda include that the current federal fiscal policy is unsustainable, solutions will require bipartisan cooperation and public engagement is vital to problem-solving.

Bixby said Social Security, Medicare and Medicaid are areas of particular concern with the three programs currently representing 42 percent of the federal budget. That share is likely to increase due to demographic changes that are already underway.

“In the next 25 years, the percentage of the population age 65-plus will jump from 13 percent to 20 percent,” he said. “And health care costs are rising 2.5 percent per year, which is faster than the economy is growing. This is an unsustainable trend.”

Walker, who was Comptroller General of the United States until he resigned in March, painted a relatively dire picture.

“We’ve got some big numbers for you and none of them are good,” he said. “The bottom line is the financial condition of the United States is worse than advertised. The problem is not the deficit or debt. The problem is off balance sheet obligations including $34 trillion for Medicare and that’s going up by $2 trillion a year by doing nothing.”

As for the Social Security Trust Fund, Walker said, “You can’t trust it and there is no fund,” but added he believes “Social Security would be easy to fix.”

He said he supports little or no change for people already receiving benefits but the retirement age will likely have to increase and younger workers will have to have a “mandatory supplemental retirement plan.”

That would be a fundamental change in the way Americans think about their financial future and retirement.

“Only half of full-time workers have a pension plan and America has the lowest (personal) savings rate of any industrialized nation,” said Walker, “The supplemental accounts would allow us to smooth the costs through prefunding future benefits, but that’s a tough choice a lot of people don’t want to make.”

In addition to future challenges involving an aging population and ever-rising health care costs, the group is also concerned about the country’s debt and that half of that debt is held by foreign lenders.

“We have put a growing mortgage on our national income and interest payments on the national debt is probably our biggest foreign aid program,” said Bixby.

Part of the Concord Coalition’s mission is to improve the visibility of America’s impending financial future among the citizenry. Another part is to make a call to the electorate that people running for office, particularly those seeking the chief executive position, should be addressing the issues and making solutions part of their platforms.

“The United States is not in the top 20 in the world when it comes to math skills and it shows, especially among presidential candidates,” said Walker. “There is a disconnect in Washington between the political class and the economists. All three of the major presidential candidates are U.S. senators, so they are fully aware of the problem,” said Cullinan.

“On the positive side, we believe all three (candidates) have the leadership capabilities to deal with the issues. One of the key criteria for the evaluation of a presidential candidate is their knowledge of fiscal issues. We look at arithmetic not ideology,” said Bixby.

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