Not long ago, it was hard to see a conversation about the federal budget progressing much beyond the issues of reducing the deficit, cutting entitlements, and getting the national debt under control. However, at the fifth annual Fiscal Summit, held in Washington on Wednesday, top leaders were just as anxious to discuss income inequality, early childhood education and infrastructure spending as they were trimming the nation’s fiscal sails.
The event, sponsored by the Peter G. Peterson Foundation (Pete Peterson owns and separately supports The Fiscal Times), took place with projected U.S. budget deficits at their lowest point since the advent of the financial crisis, though the Congressional Budget Office warns that they are set to begin climbing again near the end of the decade.
Much of the discussion from the stage on Wednesday, though, was about legislation designed not to cut spending, but to help grow the economy in other ways. Despite suggestions from many political commentators that Congress, in an election year, is essentially done for the year with regard to major legislation, several top leaders expressed hope that some things could get done.
House Democratic Leader Nancy Pelosi (D-CA) called it “totally unacceptable” for Congress to quit trying to pass significant legislation in May just because it’s an election year. “We have a responsibility to find common ground, to keep working, and to try to get something done.”
Among other things, Pelosi called for tax reform and for increasing investment in early childhood education. “Nothing brings more money to the Treasury than investments in education. We need a skilled workforce,” she said.
Senate Budget Committee Chair Patty Murray (D-WA) said, “One of the most important things we can do in the short-term before the election is to pass immigration reform.” Citing a CBO projection that comprehensive immigration reform could reduce the debt and increase economic growth by $1.4 trillion, she added, “To me, it’s kind of stunning the deficit hawks don’t look at that and say this will get us to a better point fiscally.”
Former FDIC chair Sheila Bair, who many credit with helping to stabilize the economy for her sure handling of the failure of hundreds of banks during the financial crisis, echoed Pelosi’s call for investment in education, and said there is also a need for an injection of infrastructure spending.
While admitting that the current debt and future deficits are a serious concern, she said the U.S. will eventually have to repair and replace crumbling infrastructure, and that this is the time to do it. "We’re in a serious competitive challenge” in the global economy, Bair said.
“We’re never going to compete with Bangladesh on labor costs, but there are strengths a developed economy ought to bring to the table,” she said, among them a better-educated workforce and solid infrastructure.
On the infrastructure issue, she added, “With interest rates where they are, we should be issuing 40-year debt to pay for it.”
Former Michigan Gov. John Engler, now president of the Business Roundtable, echoed Bair’s call for investment in infrastructure, saying, “We’ve got deferred maintenance everywhere we look.”
To be sure, the federal debt and deficit were a major focus of the event, as noted by former President Bill Clinton, one of the featured speakers. "The thing I like about this Peterson forum is I know a lot of people think that we should have stopped talking about the deficit and the debt when the economy turned around,” he said.
However, the former president insisted, it ought to remain a focus of public policy, and the subject of cooperation and compromise between politicians. “You can't do it by tax increases, and you can't do it by spending cuts alone. You just can't. On the other hand, to pretend that there are no long-term demographic changes or health care drivers here is crazy.”
Sen. Rob Portman (R-OH) also warned that it is not a good idea for Congress to take its eye off the ball when it comes to the federal deficit. “The fact is that based on independent analysis…we’re looking at trillion dollar deficits again in the next ten years,” he said.
“There shouldn’t be any easing off of the political pressure. There should be a lot of focus on it,” he continued. Politicians running for office this year, he said, ought to be asked, “What are you going to do about it?” and added that leaving the current debt and deficit to grow into the future is “unfair and even immoral.”
Erskine Bowles, former chief of staff to President Bill Clinton and co-chairman of President Obama’s National Commission on Fiscal Responsibility and Reform, likewise warned against fiscal complacency.
“I’m concerned that people will take some of this lull in the action, take some of this drop in the deficit, as a harbinger of the future, when any economic analysis tells you, that is not the case,” he said.
He predicted that if the nation continues on its current course, the government’s ability to borrow cheaply would disappear.
“The markets will wake up and they will look at us and say you have a dysfunctional government, you’re addicted to debt, your fiscal plan is unsustainable, and you have no plan to deal with it. I see more risk and I want more money for my money,” Bowles said.
Asked by the moderator if, given the improvements in the economy in recent months, he was at least somewhat more optimistic about the future, Bowles said, “Am I more optimistic? No. I am concerned.”
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