Event Recap: The 2014 Fiscal Summit
The Peter G. Peterson Foundation held its 2014 Fiscal Summit today, bringing together a number of current and former policymakers, experts, commentators and other prominent figures to discuss the nation's fiscal challenges.
The summit kicked off with a discussion featuring Glenn Hubbard and Alan Krueger, both of whom previously served as Chairman of the President's Council of Economic Advisors. Hubbard noted that while he and Krueger would probably agree on a number of changes to tax, education, and immigration policy that would improve the country's fiscal and economic outlook, it is much more difficult for politicians with very different views and constituent concerns to reach such compromise.
Senate Budget Committee Chair Patty Murray (D-WA) noted that the federal government still faces big fiscal challenges. She stated her work with House Budget Committee Chairman Paul Ryan (R-WI) in passing the Bipartisan Budget Act of 2013 showed that compromise on the budget is possible, and that the public will support lawmakers who make the tough choices necessary to reach bipartisan agreement. In a separate discussion, Senator Rob Portman (R-OH) stressed the importance of taking early action to reduce long-term debt.
In a wide-ranging talk touching on inequality, financial regulation and foreign policy, former President Bill Clinton spoke about the need for broad-based economic growth and how it would improve the country's long-term fiscal situation. Clinton noted that even with greater economic growth, tough decisions will have to be made in order to address the fiscal challenges brought on by the aging of the population and rising health care costs, a point we've written about in a previous analysis. President Clinton also spoke favorably about adopting a federal capital budget, which would distinguish certain types of investments from other expenditures in the budget, and allowing companies to repatriate foreign earnings at a lower tax rate, with a share of the tax receipts being used to capitalize a national infrastructure bank.
Next, Governor Chris Christie (R-NJ) discussed his experience working with legislators in New Jersey to reform entitlements at the state level. Christie noted that 94 percent of state spending in New Jersey goes to entitlements and interest payments, crowding-out funds for public investments. He also stressed the importance of executive leadership in building a bipartisan coalition willing to address his state's budget issues, and said that such leadership is needed at the federal level before the country's fiscal challenges can be meaningfully addressed.
Former Federal Reserve Chairman Alan Greenspan suggested that conversations about federal deficits and debt all too often ignore the unquantifiable costs of implicit guarantees to major financial institutions. He also expressed concern that growing federal deficits could crowd-out private investment and hurt the economy.
A panel featuring former FDIC Chair Sheila Bair, Fiscal Commission Co-Chair and CRFB board member Erskine Bowles, and John Engler of the Business Roundtable focused on encouraging economic growth and competitiveness. Each of the panelists mentioned that tax reform that lowers tax rates while broadening the base could both improve growth and help reduce the debt. They also favored improving the nation's aging infrastructure, but worried that growing mandatory spending would crowd-out such investments in the federal budget.
The final session featuring House Minority Leader Nancy Pelosi (D-CA) and House Chief Deputy Whip Peter Roskam (R-IL) highlighted how the two parties in Congress aim to address the long-term debt. Pelosi stated that Congress should pay for any of the "tax extenders" it decides to extend. She also noted that tax expenditures currently amount to over $1 trillion, and that eliminating some of these tax breaks would raise significant revenue without endangering economic performance. Roskam said that addressing Social Security's looming solvency issues would both improve the government's fiscal situation and show that lawmakers are capable of achieving meaningful fiscal reforms.
Overall, the 2014 Fiscal Summit served as a reminder that the nation's debt problems are far from solved. Multiple speakers stressed that the "low-hanging fruits" of deficit reduction -- such as cuts to discretionary spending -- have already been plucked, and that lawmakers will eventually have to make tough choices to address our long-term fiscal challenges. The event also highlighted that despite the polarized political climate in Washington, there are still many areas of potential agreement. We were encouraged to see that a number of prominent figures are still serious about the growing debt and understand the steps necessary to put it on a stable downward path.