Peter Peterson, co-founder of Blackstone Group, yesterday convened the second Fiscal Summit sponsored by his eponymous foundation in Washington. D.C. Petersons goal is to increase public awareness of the U.S. fiscal crisis and facilitate numerous potential solutions. We are becoming ever more dependent and dangerously so on foreign lending, Peterson stressed in his opening remarks. Fifty percent of our debt is in foreign hands. At the same time, Peterson worries that any solution might hurt the weakest citizens. Our social safety net simply must be protected for the vulnerable in our society, he urged.
To gather the best ideas on implementing fiscal sustainability, Peterson invited a passel of politicos: former U.S. president Bill Clinton; six members of the Senate Budget Committee; Representative Paul Ryan, chair of the House Budget Committee; Gene Sperling, director of the National Economic Council; and Indiana Governor Mitch Daniels. Members of six think tanks, to whom Petersons foundation had awarded grants in 2010, also attended. Their assignment, dubbed the Solutions Initiative, was to build viable fiscal recovery plans that would re-imagine health care, social security, taxes, defense, and other government programs. Independent scorekeepers were assigned to review the plans, using the same consistent analysis with each one to allow for meaningful comparison.
Not surprisingly, Clintons hour-long address was the most riveting part of the day, partly driven by his charismatic personality and the rest a function of his encyclopedic knowledge of facts and figures. Clinton immediately established his fiscal cred as a president who came into office in 1993 on the heels of what he termed a traditional business cycle recession and hit the ground running with tax cut proposals followed by welfare reform. He reminded us that the U.S. ran its first structural deficits in 1981 and continued to do so through 1993. Acknowledging that we are still emerging from a financial meltdown that will take longer to get out of than the 1990-92 recession, the former president believes that it will take essentially the same thing to get us out now: a bipartisan solution.
Clinton explained to the rapt audience of policy wonks and journalists that when he left office in 2001, there were surpluses as far as the eye could see. How he got there and the lessons that might be gleaned by Obama and todays Congress was clearly the topic du jour. The idea that the lower the tax rate the higher the growth rate, has been debunked for 30 years, said Clinton, quickly adding that we could also have taxes that are too high and too stupid. He recommended going back to the same tax rates as in his administration and raising the corporate tax rate. It is very important to be internationally competitive, he emphasized.
Before he was through, Clinton had addressed health care (an unregulated, defacto monopoly), Social Security (meant to be self-sustaining but with the retirement of the Baby Boomers it wont be), job creation (only 2.5 million added in the last decade), and Rep. Paul Ryans proposal (Hes wrong to say no matter what, we wont raise taxes and his Medicare proposal is wrong. The problem is rising costs that are part of a toxic system.) and our decreasing competitiveness (Since people hold shares for 15 seconds, corporations have been uprooted.).
I think we are in a race against time, Clinton said, echoing the words of his ardent admirer and our host. This debt crisis is already constraining our growth as a country. But he concluded with advice to U.S. legislators: The fundamental problem we have in America is we have to listen to people who disagree with us. It cannot be that all Republicans and all Democrats are wrong. If we can break out of theology and get back into evidence, I think we can have bipartisan cooperation.
Later on in the program, Indiana's Governor Daniels provided details of his own more recent and more conservative budget deficit-wrangling match. Upon taking office in 2005, Daniels inherited a deficit of $800 million that he proceeded to whittle down without benefit of printing money, he noted, or borrowing promiscuously. He did it by reducing costs everywhere he could find efficiencies, from ending collective bargaining to reducing the time it took to get permits. His take on the Federal deficit: Most Americans havent been leveled with. By 2009, Indiana had a $1 billion surplus.
The panel of four senators from both sides of the aisle reviewed the efforts theyve been making to find common ground on fiscal solutions. One senator, Saxby Chambliss, a Republican from Georgia and vice chairman of the Senate Select Committee on Intelligence, summed their work up: This issue is so complex any time we reach agreement something else would come up. Even if they do reach agreement, he continued, It wouldnt be easy to sell to our colleagues. Still, their fellow senators have been encouraging the group to keep up their efforts because there is no other choice. For his part, Peterson hopes that next years summit will focus on reviewing solutions that have been passed into law. Based on the differences among the summit participants, that is going to take one heck of a bipartisan effort.