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Fiscal Wake-Up Tour sounds alarm in Charleston
By Shelia Watson
Contributing Writer
Americans will hand their children a staggering bill for government services they consumed unless a major, bipartisan effort cuts federal spending and raises revenue, most likely through taxes.
That was the sobering message delivered recently to a group of citizens, politicians, business leaders and faculty at The Citadel’s Alumni Center by four economists, headed by U.S. Comptroller General David Walker.
Charleston is the group’s 19th city on the multi-city tour across the country. The purpose of the tour is to spread the word about America’s perilous economic state among citizens and the business community.
Walker and the other members of the tour, a mix of conservatives and liberals, spoke to the Charleston Regional Business Journal prior to the presentation, emphasizing the bipartisanship that will be required for the solution.
“We want to raise the profile of the issue and make people aware,” said Robert Bixby, executive director of the Concord Coalition, which is sponsoring the tour. “Even if we didn’t agree on solutions, there’s a broad bipartisan consensus on the nature and size of the problem and the need to take immediate action. Plus the fact that nothing too much is really being done. If you want to get anything done in this sense, you need to take the debate outside Washington.”
The timing of the tour is no accident, Bixby said.
“If we hung out around the Capitol issuing reports and testifying, as we do most of the time, that still wouldn’t bring to bear any real pressure to get anything done,” he said. “So we thought, particularly in a presidential election year, that it was important to raise the profile of the issue, especially in places where candidates were trolling for votes early on. Like here in South Carolina.”
They were in Iowa and New Hampshire last month.
Douglas Elmendorf, a visiting fellow with the Economic Studies Program of the Brookings Institution, said the tour differs significantly from typical campaign stumping.
“This is more solution-oriented,” he said. “People love hearing a rational discussion where there isn’t a lot of yelling at each other. It would be good if politicians could publicly engage with each other like this rather than accuse each other. The public is really hungry for information and leadership on this.”
Alison Fraser, director of the Thomas A. Roe Institute for Economic Policy Studies of the Heritage Foundation, said the group is talking about ideas and values.
“We need to come to grips with the fact that we need to change and why. There are a lot of common goals. We’re also working behind the scenes with a number of members of Congress with a number of these ideas, working on them in a bipartisan way,” she said.
“We want to make sure it’s an issue the candidates address,” said Walker. “We want to make (the candidates) aware of the problem and get them thinking about it realistically. And if they’re not thinking about it realistically, then voters should know that too and respond accordingly.
“Math is not Republican or Democrat. The facts don’t have colors or labels.”
Uncolored and unlabeled though they may be, the facts are nonetheless alarming, and Walker zeroed in on the bottom line.
“The current fiscal policy is unsustainable, and the status quo is not an option,” he said. “There are certain things we can agree on. The more detail you get into the more you fragment, but we can all agree we need to re-approach serious budget controls. They expired in 2002, and we’re in worse shape than we were when they were put into place.
“We’re closer to a demographic tidal wave hitting us in the tsunami of spending.”
Walker said the nation needs to wake up on three main themes: Medicare, Medicaid and Social Security, all of which must be drastically reformed. Walker pointed out a few specifics:
• The first baby boomers will become eligible for Social Security in 2008 and for Medicare in 2011, inflating the costs of those already-expensive programs.
• Over the next 25 years, the number of Americans age 65 and up is expected to double, and the ratio of workers paying into Social Security and Medicare relative to the number of beneficiaries will fall by roughly one-third.
• Medicare, a federal plan paying some hospital and medical expenses for people over 65, costs four times as much as it did in 1970 and accounts for 13% of federal spending.
• Medicaid, a similar plan for low-income residents, will cost 166% of its current price by 2030, compared with a growth of only 72% in gross domestic product.
• Social Security currently is paying for itself through a 12.4% payroll tax, but it is projected to cost 147% of its current price by 2030.
Those are the basics. Coming up with a solution is up to the politicians, who must be both pressed and guided by the public, the group said.
Fraser’s organization brought several recommendations on retirement entitlements before the Senate’s Committee on the Budget in January, including: amending the Medicare drug bill, raising the retirement age, transforming entitlements into 30-year budgeted programs, balanced against other needs and measuring the impact of policy changes on long-term obligations.
Walker offered a three-pronged approach in his “The Way Forward” solution:
• Improve financial reporting, public education and performance metrics.
• Strengthen budget and legislative processes and control.
• Fundamental reexamination and transformation for the 21st century, including entitlement programs, other spending and tax policies.
“The situation is worse than advertised,” he said. “The way things are now, it’s a broken model.”
Walker said the business community has a role to play in the solution, but first it must wake up.
“The business community is largely missing in action (on this issue), and they need to understand that if this problem doesn’t get solved, it’s going to have adverse economic implications not just domestically but globally,” he said. “So they have a stake in this. It may not be immediate but it is a stake. It’s an opportunity for leadership by the business community to be part of the solution.”
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