Fixing Economy Key to U.S. Future, Former Officials Say
By Andrzej Zwaniecki
Washington - The period after the November elections and into the first months of 2013 will be critical for the U.S. economic future as the president and new Congress face the challenge of laying a framework for major economic reforms, according to former U.S. policymakers and central bankers.
The administration and legislators will be under pressure to act quickly on immediate issues such as the scheduled expiration of tax cuts, the government's debt ceiling and automatic spending cuts agreed to as part of a 2011 bipartisan congressional deal. But at an economic conference March 14 in Washington sponsored by Atlantic magazine, several speakers said these challenges may force the White House and Democratic and Republican lawmakers to look seriously at longer-term fiscal and public debt problems facing the U.S. economy.
No clear-cut solutions to those problems emerged from the event, which brought together more than a dozen U.S. central bank officials and former economic policymakers in Republican and Democratic administrations.
Most speakers agreed that tax and fiscal reforms are essential to fast and sustainable economic growth and to making the U.S. economy more competitive.
Paul Volcker, former chairman of the Federal Reserve, the U.S. central bank, challenged policymakers and legislators to come up with bolder tax and fiscal reforms than any plans hashed out so far by bipartisan deficit-cutting commissions.
"The problem is the United States can no longer claim unchallenged leadership over the world economy," Volcker said. "We have to do better."
He said tax reform should be more ambitious than the one in the 1980s.
"Very large changes are necessary. They need to be structural, they need debating, and this is the year to start the process," Volcker said.
Some speakers emphasized that a radical transformation of the overly complicated and inconsistent U.S. tax system has broad political support. It is "the one thing that unites people right now," said Lawrence Summers, who was a top economic adviser to President Obama. Summers said such reform is essential to reducing the budget deficit and accelerating economic growth. He said a simpler and fairer taxation system is also needed to address economic inequalities in the United States.
U.S. ECONOMY ON PATH TO RECOVERY
Most speakers said they are encouraged by signs of a strengthening economy. But they also said the U.S, economy still faced challenges ranging from high oil prices to the weak housing market. As Volcker put it: "We have a long slog ahead of us before we can claim anything like success."
Robert Rubin, treasury secretary in the administration of President Bill Clinton, urged a careful approach to cuts in federal government spending and to public health care and pension programs. Rubin said the U.S. government should develop a tax and debt-reduction strategy, but delay its implementation until the economy sufficiently strengthens. He advocated a policy focus on ensuring robust economic growth that will make national debt sustainable in the short term. Striking a similarly cautious note, Summers said that drastically slashing spending on public health and pension programs can have an "adverse" effect on the economy.
Former officials in Republican administrations agreed with their Democratic colleagues on the need for economic reforms, but often viewed their goals and major features differently.
Larry Lindsey, a former Federal Reserve governor and top economic adviser to President George W. Bush, said the U.S. economy "needs a combination of tax increases and spending cuts."
"But we need quality rather than quantity," Lindsey said.
Recurring at the event were calls for significant investments in infrastructure and education. Speakers argued that inadequate and obsolete infrastructure creates bottlenecks in the economy and the lack of workers with advanced skills prevents tapping the full potential of advanced manufacturing and other skill-based industries.
Former director of the Congressional Budget Office Douglas Holtz-Eakin, a Republican, said creating opportunities for workers to acquire needed skills is also a good way of addressing economic inequalities.
(This is a product of the Bureau of International Information Programs, U.S. Department of State.)