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Wednesday, 04 April 2012 16:29

Former U.S. Comptroller: Federal budget crisis needs biz leaders’ attention

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GRAND RAPIDS — The day of reckoning will be upon us soon if we don’t address the federal budget deficit, and it’s up to business leaders to push Congress on the issue.

That was the dour and instructive message delivered to West Michigan business leaders on Tuesday by former U.S. Comptroller David M. Walker at an event sponsored by the Grand Rapids Area Chamber of Commerce. Walker, who served under Presidents Bill Clinton and George W. Bush, on Tuesday gave the keynote address, “Living on Borrowed Time: Solving America’s Debt Crisis,” at the event held at the Amway Grand Plaza.

Perrigo Co. director Mike Jandernoa and U.S. Rep. Justin Amash, R-Cascade Township, offered their support to Walker’s message during a media roundtable prior to the presentation.

With the deficit climbing above $15 trillion, Walker said the country faces serious problems with Medicare, Medicaid and Social Security and he called for government transparency and accountability.

The business community and the country’s young people need to start pushing their legislators to come to a bipartisan resolution, he said.

“We face a range of key sustainability challenges that literally threaten our future economy, our future position in the world, our future standard of living at home and the future domestic tranquility in our streets,” said Walker, president and CEO of the Bridgeport, Conn.-based Comeback America Initiative. “We have to face reality.”

Pointing to his years spent in government, private and nonprofit sectors, Walker maintains the idea that government is not the engine of growth, innovation and job creation. Government has gotten too big, promised too much and waited too long to restructure, he said.

Walker said everyone can see the deficit, but the mounting unfunded obligations in Medicare, Medicaid and Social Security as well as a range of other commitments and contingencies – when aggregated together – total $65.5 trillion.

“Here is the truth: We have historically low interest rates. We have the lowest average maturity of any major sovereign nation on debt, which means we have huge interest rate risk,” he said. “So when interest rates turn around, for every 100 basis point or 1 percent increase in interest rates, that will cost the federal government $150 billion.”

“We’re self-dealing in our debt,” he said, noting the Federal Reserve is the largest holder of U.S. debt, outside of China. “We are buying our own debt in order to keep interest rates down, stimulate economic growth and to keep housing affordable and mortgage rates down.”

Walker said escalating health care costs could bankrupt the country. When Social Security and Medicare liabilities are coupled with the country’s debt load, Walker said he estimates the U.S. is within two years of where Greece was when its financial crisis began.

Getting out from under the financial crisis won’t be easy, he said, explaining four myths for dealing with the budget crisis:

●    Growing our way out of the problem is not possible because it would take decades of double-digit GDP growth.
●    Increasing taxes is out of the question because all federal taxes on young people would have to double.
●    Serious budget cuts would shrink the social safety net and compromise other basic elements of federal responsibility, including national security.
●    Inflation is not an option because the off-balance-sheet obligations grow faster than inflation – and faster than the economy when the economy grows.

Walker advocates a three-pronged sustainable approach to the problem: develop a plan, establish a real budget and track progress in a transparent manner.

“We need to have the people come alive, get educated and engage the public,” he said. “The president has to make a priority and use the bully pulpit to go directly to the people with the truth and tough choices.”

Jandernoa, who serves on the Business Leaders For Michigan, said from a business standpoint, the first step in tackling this overwhelming problem is for company leaders to educate groups both inside and outside their organizations.

“These are issues that they hear about, but are tough to comprehend, especially when you’re talking about trillions and billions,” Jandernoa said. “We need to put this in a format that the average citizen can understand.”

He said the sooner business and government can address these entitlement issues, the less draconian and less drastic the changes will need to be.

“If we get after that soon and elect politicians who understand the problems and understand solutions, they’ll be less disruptive on the small business, which are so critically important,” Jandernoa said. “It’s a kind of fragile economy today. To stabilize that, we need to eliminate this uncertainty that’s overhanging the entire country.

When we take that away, it will enable companies to grow a lot of faster and with a lot less risk.”

Read 3473 times Last modified on Saturday, 11 August 2012 10:13

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