Follow Up to Fiscal Responsibility Summit

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I’ve been attending the annual conference of the American Society for Public Administration the past few days.  The “Fiscal Wakeup Tour” made a stop at the conference.  The Tour is co-sponsored by a range of groups devoted to sounding the alarm about the long-term fiscal crisis facing the country.  Speakers included former HHS Secretary Donna Shalala; former Comptroller General David Walker (and current head of the Peterson Foundation); Robert Bixby, executive director of the Concord Coalition; Andrew Biggs, with the American Enterprise Institute; and Isabel Sawhill, with the Urban Institute. The Coalition also sponsors the docudrama, “IOUSA.”

 

I’d long been aware of many of the elements of the Coalition’s alarming story, which they’ve been telling for the past three years.  What’s new is, as Dr. Sawhill observed, that the story has shifted in recent months from “there are termites in the woodwork,” to “the wolf is at the door.”  Walker noted that “the future is now.” 

 

Walker also noted that what is beginning to happen to our country is similar to the banking crisis scenario:  a disconnect between who pays and who benefits, a lack of transparency, and an over-reliance on credit.  He says that the public “gets it,” that 90 percent believe the country needs to make tough choices.

 

The one surprising statistic for me was that, as of December 31, 2008, the nation’s $56 Trillion in outstanding liabilities of what it has promised to pay (Social Security, healthcare, etc) now exceeds the total $51 Trillion value of Americans’ household net worth. Walker said, “Americans are now worth less than they owe, and it’s only getting worse.”  For fiscal year 2009, the annual deficit will be $1.7 Trillion (13 percent of GDP), or more than twice the size of any annual deficit since the end of WWII.

 

President Obama convened a Fiscal Responsibility Summit last month to begin to raise the profile on the underlying causes of the structural deficit.  The bipartisan summit meeting at the White House focused on issues such as healthcare, social security, and tax code reform.  It issued a status report last week. 

 

Walker expressed some hope that the President will act quickly on issues such as Social Security, which members of the Coalition think may be the “easiest” to fix now since many of the fixes, such as increasing the retirement age, would not take effect for a number of years.  He called for a “Fiscal Future Commission,” which is also being discussed by members of Congress, to take on what Obama has called the needed “grand bargain,” and it should put “everything on the table.”

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