"Running on Empty"

Yep, Me2, pension guarantees are another problem barreling down the track -

www.detnews.com/2003/business/0310/23/b01-305315.htm

 

ECONOMIC EXPERTS OUTLINE PRECARIOUS FINANCIAL SITUATION

Fri Aug 20,11:22 PM ET

By Georgie Anne Geyer

WASHINGTON -- In this season of political disunity and destructive campaigning, one diverse group of Americans is coming together on a campaign subject that ought to be of greatest importance to us all -- the financial stability of the nation.

Paul Volcker, former chairman of the Federal Reserve Board and a Republican, says we face a 75 percent chance of a financial crisis within five years. Robert Rubin, former economic chief under President Clinton, says we are confronting "a day of serious reckoning" and that "the traditional immunity of advanced countries like America to a Third World-style crisis isn't a birthright."

But perhaps Peter Peterson, former chairman of the Federal Reserve Bank in New York, chairman of The Blackstone Group and a moderate Republican, put it most succinctly. "We are not paying our own way," he says. "As a nation, we are running on empty. If the ultimate test of a moral society is the heritage it leaves to its grandchildren, I would say we are failing that test."

- rest at SOURCE

 

I wish this group was active in the public's eye - www.concordcoalition.org .

 

THE DEVELOPING CRISIS — DEFICITS MATTER
JOINT STATEMENT

A Fiscal Crisis

A fiscal crisis is developing in the United States, and the risks of inaction are high.
Without a change in current policies, the federal government can expect to run a cumulative
deficit of $5 trillion over the next 10 years. Moreover, the fiscal situation will deteriorate
markedly in the decades that follow, as the cost of the baby boomers’ retirement and health care
needs consumes a rising share of the economy and the budget. Deficits over the next generation
will dwarf the already large deficits the nation faces in the decade immediately ahead.

Failing to address the growing imbalance between federal commitments and available revenues means squandering the best opportunity we will have to get our finances in order before the aging of America makes our fiscal situation far more difficult. It means our generation will bequeath to future generations spiraling debt that will shrink economic growth.

But instead of expressing alarm, many in Washington now argue that escalating deficits do
not really matter, that they are self-correcting, that they are unrelated to interest rates or future economic well-being, and that tax cuts will pay for themselves later by spurring economic growth. It would be wonderful if this were true. It is not.

There are no easy solutions to the fiscal challenge facing the nation. But policymakers —
and the public — must begin now to confront honestly the difficult trade-offs that are required to restore a sustainable fiscal policy.

- rest at www.concordcoalition.org/federal_budget/030929jointstatement.pdf

 

As I said in starting this thread it's time to forget about the political election season mudslinging and to look ahead to the future of these United States, if we are to have a future to speak of. Re-fighting the Vietnam conflict will not do one iota of good toward stopping this nation's quickening slide toward fiscal bankruptcy. The feel good politics of unaffordable promises will not do one iota of good toward stopping this nation's quickening slide toward fiscal bankruptcy.

We all want to see our side victorious in the war with terrorists. But continued fiscal profligacy will give us at best a Pyrrhic victory over the Islamo-fascists, or perhaps even cost us the financial ability to defeat them.

 

I plan to order Peterson's latest book this week from Amazon.com. I hope we can have a good discussion of it, chapter by chapter, in the coming months.

 

*BUMP*

Just want to keep this on page 1 for those who want to discuss the meaningful issues that will have to be tackled after all of this election season stupefying silliness is
over.

 

This article is almost four years old, yet it is still timely -

Peterson Hits Social Security Myths
September 27, 2000

Peter Peterson, former Commerce Secretary and founder of the Concord Coalition, lamented in the New York Times this week that in the coming election "what poses for debate on entitlements may be worse than no debate at all. The bidding and one-upmanship on the campaign trail could easily lock the new president into indefensible positions that block genuine and badly needed reforms."

"Why is there so little understanding of the long-term challenge? Two big myths are anesthetizing our judgment: Myth No. 1: Social Security is in good shape because it has a trust fund. We are often told that the trust fund will keep the system solvent until 2037 if we do nothing and, if we make some minor tweaks, it will last until 2075. Who could get excited over such a distant danger?

"What we are rarely told is that the trust fund is fiscally and economically meaningless, an accounting fiction; this money has already been spent. Its so-called assets are nothing but a stack of IOU's from the Treasury. By 2015, Social Security's annual costs will start to exceed its tax revenues by ever ballooning margins.

"Because this is a pay-as-you-go system, Congress would then have to raise taxes, cut other spending or borrow from the public to redeem the IOU's -- precisely as if there were no trust fund -- or else take a heavy hatchet to Social Security and Medicare at the very moment the huge boomer generation is moving into its elder years.

"Some argue that we can use the projected budget surpluses to pay off the IOU's. Alas, this isn't possible. The surpluses themselves may not materialize. For one thing, an economic downturn could easily turn the surpluses into deficits in just a few years. For another, the budget projections assume, implausibly, that discretionary spending will not grow faster than inflation -- in spite of major new commitments to defense and education.

"If the surpluses do materialize, much of the money is likely to be spent. Gluttons don't often turn down a free lunch. Presidential candidates and members of Congress rarely withstand the temptation to give away surpluses by increasing spending or cutting taxes. There's much talk of putting a "lock box" on the surpluses. But no one has yet designed a lock box that Congress couldn't pick. Even if the lock box works, the money in the trust fund is but a small down payment on future obligations.

"Myth No. 2: The New Economy will allow us to grow our way out of the problem. According to this myth, official projections, which point to a gradual slowdown in economic growth, are too pessimistic. The critics confuse pessimism with arithmetic. Economic growth depends not just on growth in productivity, that is, output per worker, but also on rising numbers of workers. By the 2020's, the labor force will be growing only about one-tenth as fast as in the last quarter century. Given the demographics, it would fly against all logic if economic growth did not slow.

"A better question is whether the official projections are too pessimistic about the growth in productivity. But keep in mind that even a huge boost in productivity won't do much to reduce Social Security's burden. According to Alan Greenspan, the Federal Reserve chairman, eliminating Social Security's long-term deficit would require a 200 percent increase in long-term productivity, a leap that few economists, even new economy enthusiasts, believe is possible.

"Our leaders face a choice. They can address the question of entitlements for the elderly while the economy is still booming and the budget is in the black, and before most baby boomers retire. Or they can delay until the window of opportunity closes. Either way, America will change course. If we act now, everyone, young and old, will have time to adjust and prepare."

- SOURCE

 

Washington put on pensions alert
Sunday August 29, 5:00 pm ET
By Caroline Daniel and Dan Roberts in Washington

The federal insurer behind 31,000 US pension plans has warned of "multi-faceted and profound challenges", amid clear signs that concern about retirement costs is moving rapidly up the agenda in Washington.

With the threat of bankruptcies looming in the airline industry, senior White House officials are keeping a close eye on developments. The National Economic Council, headed by Stephen Friedman, is working with the Treasury, where a pensions task force is said to have been created. President George W. Bush is also understood to have raised the issue with Andrew Card, his chief of staff.

According to one senior administration official, the potential crisis could affect 40,000 people in the airline industry alone and lumber the federal government with a $13bn-$15bn charge.

A prime concern is how to save the Pension Benefit Guaranty Corporation, the federal insurer, in the event that United Airlines, the bankrupt carrier, terminates its pensions plans.

Last Wednesday, the IAM machinists union met, at the White House, Charles Blahous, special assistant to the president for economic policy, and Bradford Campbell and John Worth, two Treasury officials. Robert Roach, vice-president of the IAM, told the Financial Times: "The White House is very concerned and are looking at legislative solutions. This is being discussed at the cabinet level in the administration."

The airline sector's plight is raising broader questions about the sustainability of defined-benefit pension plans, particularly in industries such as textiles, steel and manufacturing burdened with large "legacy" costs.

- rest at SOURCE

 

*BUMPO*