News / USA

Business Leaders Warn of Unsustainable US Economy

Frank Wallace who is unemployed displays a sign during a
Frank Wallace who is unemployed displays a sign during a "Vigil for the Unemployed" at the Arch Street Methodist Church in Philadelphia, 22 Nov 2010

A group of leading U.S. economists and business executives say the United States is on an unsustainable economic course, with ballooning interest costs to service the national debt depriving markets of needed investment capital.

Billionaire investment banker Pete Peterson told the forum that growing interest costs to service the national debt are depriving the United States of capital needed for research and development as well as infrastructure.  He said America is also spending more on health care, but getting less in return than other countries.

Peterson, who served as President Richard Nixon's Commerce Secretary, quoted a former colleague who said that if something is unsustainable it tends to stop. "Or, he said, 'if your horse dies, I suggest you dismount.'  Now, we keep behaving as though we can ride this horse more or less indefinitely," he stated.

Inaction not an option

The forum was held just hours after President Barack Obama's bipartisan deficit reduction commission released a recommendation for long-term tax increases and government spending cuts.   New Hampshire Republican Judd Gregg announced support for the plan, saying inaction on America's debt crisis is not an option at this point.

Fred Smith, the CEO of global shipping giant FedEx, said he concurs. "This issue is going to be joined, and these unsustainable trends both on Medicare, the interest on the debt and so forth are going to stop.  It's only a question of whether we do it, or whether the market stops buying our bonds and funding our deficits," Smith said.

Smith recommended changing the country's corporate tax structure to favor industrial rather than financial activity.  This, he said, would create not only products, but jobs.

Carl Camden, CEO of Kelly Services, a global temporary help company, warned there will be no political will for deficit reduction unless America reduces its current high rate of unemployment.  He said high unemployment creates political instability that precludes structural changes, including higher taxes, needed to lower the deficit.

He too addressed the issue of health care, saying America needs a viable insurance program to remain competitive with other countries.  Camden said the current high cost of health insurance amounts to an employment tax. "If we don't solve the health care issue, if we allow it in particular to continue to drive up the cost of employment, it will be a rational decision of policy makers and companies to create jobs elsewhere," he said.

Innovation and entrepreneurship

Michael Chesser, CEO of the Great Plains Energy Company, said the business community needs to not only address performance and tax issues, but to also inspire faith in the future based on what he called America's core competencies of innovation and entrepreneurship.

"We need to be thinking of the impact we're going to have on emerging countries, how the quality of life is going to improve as a result of what we're doing," Chesser says, "how we're going to close the gap between the haves and have-nots in our country; you know - to have a sense of a higher purpose."

Consequences of gerrymandering

President Obama's former director of the Office of Management and Budget, Peter Orzag pointed to structural issues that he said are causing polarization in American politics that make it difficult to reach consensus about a solution.

"Including the unintended consequences of gerrymandering, including technological change in the media, including even the unintended consequences of airline deregulation and the reduction in transportation costs, which have made it easier for members of Congress to go home on weekends," Orzag said.

Gerrymandering is the redrawing of electoral districts to serve the needs of parties rather than voters.  

Orzag, noted the cost of solving America's economic problems will be less if they are addressed before they reach crisis proportions.  He said he remains hopeful solutions will be forthcoming before it's too late.

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