Many of you have heard about the documentary movie I.O.U.S.A. For this blog post, I would like to borrow just the first three letters of this catchy title as I thank the wonderful Concord Coalition volunteers of the Midwest: I.O.U.

Since I began working as the Midwest Regional Director for the Concord Coalition in July 2008, I have continuously been impressed with the vigor and enthusiasm demonstrated by citizens and professionals of the great Midwest who volunteer for The Concord Coalition and those who offer their support of our initiatives in their community, state, and across the nation. To each of you: I.O.U.!  I owe you many thanks and want to publicly recognize your contributions to Concord and to my work for Concord in the field.

Let me provide Tabulation blog readers a few examples of the outpouring of participation and interest I’ve received in my Midwest region to illustrate why I.O.U.:

• An Illinois professional has decided to give his time, expertise, and money to The Concord Coalition in 2009. In his own words:  “I am increasingly alarmed by the growing unrecognized governmental indebtedness at all levels, and believe it is now my time to try to devote some serious energy to fighting these trends personally. I can think of no better organization to assist than yours in this regard.” Together, we are working on the development of a plan for building capacity in the state of Illinois that will facilitate Concord’s educational initiatives and the adoption of responsible policies by local elected officials.

• A graduate student serving as the President of the Students of Public Administration program at a University in South Dakota took it upon herself to arrange for a viewing of the documentary I.O.U.S.A. on her campus. She also worked with the Political Science department and Public Administration graduate program to arrange for me to conduct multiple “Principles & Priorities” exercises for more than 100 college and graduate students.

• A senior citizen from Ohio contacted me to help him arrange a screening of I.O.U.S.A. in his community.  He wants to support The Concord Coalition because he is “extremely concerned about the future of our country due to the fiscal irresponsibility of our present and past Presidents and Congresses…[who have not shown] concern for the consequences of our perpetually climbing debt..... When our creditors call-in their loans this country will be bankrupt. The biggest regret of my life is that my generation’s Congress initiated this debt and that generations to the present have allowed it to continue.”

• Upon seeing I.O.U.S.A., a financial planner in Minnesota contacted me because she felt compelled to improve our fiscal situation. Two key initiatives came about by her creativity and enthusiasm. First, she put me in contact with the Executive Director of her financial planning firm and together we have launched a variety of educational activities encouraging fiscal responsibility that will reach hundreds of financial planners and their clients or prospective clients. Further, this volunteer has arranged for me to train her colleagues on the federal fiscal challenge and budgeting issues, and to conduct budget simulations with them, so these planners can better serve their current and prospective clients.

These are just a few of countless examples of the great volunteers I get to work with every day. I know my colleagues covering other regions could provide similar examples. By sharing these with everyone who reads the Tab blog, I hope to inspire and motivate additional volunteers and participants to join with me (Midwest) or my colleagues Jeff Thiebert (Southwest), Phil Smith (Southeast), Christine Hovde (Northeast), and Janet Ryan (West) across the nation. Given the economic “State of our Union” today, and the fiscal challenges we faced long before the economic downturn of recent months, we have so much important work to do for the fiscal solvency of our government and our individual and collective futures. The Concord Coalition firmly believes that changes in Washington and state capitols will only occur when you (and I), the citizens of this great nation, encourage--dare I say “demand”--that elected officials act fiscally responsible.

On behalf of all my colleagues at The Concord Coalition, we look forward to working with you in the future, and wish you a happy and (fiscally) healthy holiday!

--Sara Imhof, Midwest Regional Director and Health Policy Analyst

Today I spoke at an event on Capitol Hill where the OECD’s Economic Survey of the United States was released.  (The policy brief, a condensed summary, is here.)  I was a discussant on the survey’s chapter on health care reform, which explains that the U.S. health system doesn’t seem to be performing well from a net-benefit perspective; we spend a lot more money on health care than other countries do, yet by many measures are not as healthy as those in those other countries.

The report puts forth some ideas for expanding health care coverage and controlling health care costs, and acknowledges that often the policy solutions to the two goals can run counter to each other.

Although the report doesn’t speculate on the size of the potential cost savings that could be obtained from some of the reform proposals (most of which are not terribly comprehensive or economically “bold”–although elimination of the employer-provided health care tax exclusion would surely be politically “bold”), I found the discussion on pages 118-119 of the health care chapter most interesting:

Spending a rising share of income on health, as has occurred in the United States and other developed countries and is likely to continue occurring, makes economic sense as rising incomes increase the relative benefits of investing in health-care consumption to extend life…[H]ealth care consumption is a superior good…The large and growing size of health spending underscores the importance of ensuring that the sector functions efficiently and equitably.

To me it also seems to underscore the implication that federal government spending as a share of our economy is likely to continue to rise–not flat line–and the importance as well as feasibility of coming up with a way to pay for these rising health expenditures, while at the same time doing our best to make health spending more cost-effective.

--Diane Lim-Rogers (cross-posted at economistmom.com)

A few weeks back we had our annual Economic Patriot Award Dinner, and among the short list of speakers (which included award recipient New York City Mayor Michael Bloomberg) was Yoni Gruskin, Executive Director of the youth advocacy group, Concerned Youth of America (CYA). A sophomore from The University of Pennsylvania, he gave an inspired and inspiring address that spoke to the timelessness of partiotism and an honest sense of American stewardship shared across generations. 

Whether its a new face, or the true face, Yoni put a good face on the idea of "youth outreach." Where many once read the term to mean an empowered generation of elders shaking up the silent and disaffected youth, this dynamic leader, not long out of highschool, redefined it as the youth reaching out to their seniors as if to say, "We're here, we've been listening, and we mean serious business." The enthusiasm and profesionalism of Yoni, his colleagues at CYA, and his peers at other youth organizations rising up around the country, all give us at Concord great comfort as the generation with the most at stake takes matters into their own hands. 

Check out a clip of his speech below.

--Stefan Byrd-Kreuger  

Executive Director Bob Bixby has a timely (in light of today's Congressional hearings) Op-Ed in this morning's Washington Post that analogizes congressional pressure on the big three automakers to come up with a sustainable, long-term business model, to the pressure that should be put on Congress to come up with a similarly forward-looking plan for the federal budget.

Here are some excerpts:

After hearings last month to consider the plight of the Big Three automakers, Congress's warning was clear: no plan, no bailout. It was a tough-love message, but it rang a bit hollow coming from lawmakers who have no plan of their own to avoid a fiscal debacle that could be many times more serious than anything the automakers face...

In these circumstances, it is worth asking what might be demanded of Congress by a special guardian appointed to safeguard the interests of today's youth. A good place to start is the letter written to the automakers by House Speaker Nancy Pelosi and Senate Majority Leader Harry M. Reid...

Pelosi and Reid declared that the American people "deserve to see a plan that is accountable to taxpayers and that is viable for the long-term," with "significant sacrifices and major changes to [the automakers'] way of doing business."

These sound conditions should be applied to the federal budget as well. Unfortunately, though, there is no special guardian of future generations to make such demands. That job belongs to our elected leaders. They, too, must demonstrate significant sacrifices and major changes to their way of doing business. After all, they share responsibility for the nation's future just as the Big Three executives share responsibility for the future of the auto industry.

For the full column click here.

--Josh Gordon

Congress has been developing a stimulus plan in recent weeks which it hopes will provide a much needed boost to the ailing economy. There has been a tendency to pin those supporting a large stimulus plan against those individuals deemed to be “deficits hawks.”

There are two points to make about this discussion. First, such a characterization assumes there are currently “deficit hawks” who are standing in the way of economic stimulus because of their concern for the short-term deficit--an assumption I consider dubious and at the very least is not an accurate description that people could make of The Concord Coalition based on our recent media interviews or policy briefs.

The second point is that setting up positions in this “debate” implies that short-term stimulus and long-term fiscal responsibility are contradictory goals. They are not, and we have attempted to make that clear.

In our most recent issue brief, we highlighted the important roles of short-term stimulus aimed at increasing aggregate demand in the interim and budgeting rules (like PAYGO) aimed at improving our longer-term future. These two problems should not be treated the same:

“A key distinction must be drawn between short-term and long-term goals. Policy makers are facing three distinct problems: (1) an economic downturn; (2) a financial sector crisis; and (3) the long-term unsustainablity of current fiscal policy. While there are linkages among these issues -- most specifically the debt increase all three portend -- they represent different ailments and should be treated with different remedies. The Obama Administration will need to calibrate fiscal policy to accommodate these differences. Short-term stimulus need not and should not increase the long-term structural deficit, just as reducing the long-term structural deficit need not and should not impede economic recovery.”

Harvard economist Greg Mankiw wrote something similar in a column for the New York Times last week:

“Calls for increased infrastructure spending fit well with Keynesian theory. In principle, every dollar spent by the government could cause national income to increase by more than a dollar if it leads to a more vibrant economy and stimulates spending by consumers and companies. By all reports, that is precisely the plan that the incoming Obama administration has in mind.

The fly in the ointment — or perhaps it is more an elephant — is the long-term fiscal picture. Increased government spending may be a good short-run fix, but it would add to the budget deficit. The baby boomers are now starting to retire and claim Social Security and Medicare benefits. Any increase in the national debt will make fulfilling those unfunded promises harder in coming years.”

Mankiw is not disagreeing with increased government spending aimed at stimulating the economy. Rather, it appears to be an acknowledgement that we need to have a targeted stimulus utilizing those policies that provide the greatest economic feedback (not an "all of the above" approach) as well as an added emphasis on fiscal responsibility once this crisis is resolved.

The same can be said for Nobel-laureate economist Paul Krugman whose recent New York Times column notes that:

“the best course of action, both for today’s workers and for their children, is to do whatever it takes to get this economy on the road to recovery.”  

Obviously, Krugman is speaking to today’s economic crisis, but he is not encouraging policymakers to abandon fiscal restraint, as he clearly recognizes the economic consequences of running structural budget deficits:  

“The claim that budget deficits make the economy poorer in the long run is based on the belief that government borrowing “crowds out” private investment — that the government, by issuing lots of debt, drives up interest rates, which makes businesses unwilling to spend on new plant and equipment, and that this in turn reduces the economy’s long-run rate of growth. Under normal circumstances there’s a lot to this argument.”

Furthermore, Robert Samuelson in the Washington Post added to this discussion by indicating that setting economic and budget priorities should be President-elect Obama’s most important goal—jumpstarting the economy first followed by a reevaluation of our fiscal outlook and a plan to bring it back onto a sustainable path:

“The country does need to face its health and energy problems as well as deficit-ridden federal budgets. But trying to do too much too soon risks doing none of it well. We -- and he [Obama] -- are caught up in a web of contradictions. In the long run, we need to discipline our appetite for health care and energy; we need to reconcile our desire for government benefits and our willingness to be taxed. Obama's first job is to avert an economic freefall.”

Based on reviewing recent media coverage, one might get the sense that all three of these columnists are vehemently disagreeing with each other over the issue of stimulus spending and the deficit. In actuality, there seems to be a lot of common ground on the basic issues, and The Concord Coalition agrees with much of what should be seen as an emerging consensus.

President-elect Obama and Congress have indicated they will make stimulus the first item on their agenda. Discussion of stimulus, however, does not inherently mean disregarding the need to address our long-term budget outlook or abandoning the broader goal of “fiscal responsibility.”

--Jonathan DeWald, Communications Director

One of my tasks here at Concord as the Youth Outreach Director is to help design our website. Because of this, I am always looking for new ways to present our message and I pay close attention when Concord's message appears in the many different media publications our staff has the fortune of being featured and interviewed in. Readers can normally keep up-to-date on these appearances at our "Concord in the News" page for traditional print articles or by clicking on the "Video and Audio" section of that page for multimedia.

I got quite excited recently because something came along that didn't fit neatly into these categories. Concord Coalition Policy Director Josh Gordon was interviewed about the scale and the nature of our nation's fiscal challenge, as well as how we can go about addressing it, by an organization called FLYP Media. They have a new bi-weekly publication that is part magazine, part TV show, and part in-depth and content rich website for a well-designed and well-integrated, truly multi-media experience.

I think that experimenting with such innovation in getting information to the American public is a crucial element in having messages like ours--for generationally responsible fiscal policy, and all of the difficult and complex choices that it entails--reach and persuade the American public. I hope to help Concord do this, even if it is little-by-little, over the coming months and years.

--Stefan Byrd-Krueger 

Even though my job as Policy Director means I spend a fair amount of time sitting at my desk and staring at my computer, I also get to play "in the field" giving chart talks or running budget exercises. Earlier this month, I conducted a "Principles and Priorities" exercise at American University, and had a a wonderful "teaching moment" where I was able to link the hypothetical budget simulation to perhaps the primary fiscal policy debate that will surround President-Elect Obama as his administration sets their priorities.

In the exercise, students divide into groups and act like special congressional committees designated with making budget choices. They pick choices in four areas: domestic discretionary spending, defense and national security spending, taxes and revenues, and entitlements. Groups can either cut programs or increase taxes to reduce the deficit, or spend more on programs they consider important, or cut taxes to increase the deficit. At the beginning of the exercise they are supposed to develop a target goal for the deficit and by the end they add up their choices to see how they did. Because we are an organization that stresses fiscal responsibility, the students tend to think the more they can do to lower the projected $8 trillion deficit over the next ten years, the better.

During the deliberations in this class, there were two groups in particular that seemed really into the exercise--asking questions, taking heated votes, and working up until the last minute. When all of the groups gathered to report their findings, I turned to them first.

One of the groups decided that they were going to raise taxes across-the-board and reduce spending on some specific domestic programs. They wound up cutting the deficit by about $1.7 trillion over 10 years. The next group decided to increase the deficit by about $400 billion over 10-years. Their main reason: they enacted an Obama-like expansion of health insurance, increased education funding and some other domestic spending, and only raised taxes on upper-income individuals. When I pointed out they were the first group I had seen in a while that increased the deficit, they responded that it was important to invest in domestic programs, especially health care reform.

I told the class that this was the exact debate President-Elect Obama will face among his Democratic advisors and constituents. The current economic crisis has hidden much of this tension as Democrats and many Republicans agree that increasing the deficit is necessary in order to work our way out of the immediate economic slowdown. For the Obama administration's plans beyond the immediate crisis the tension is likely to come to the fore as there will be a debate between whether Obama should enact numerous and likely expensive priorities in his progressive agenda without regard for its effect on the budget deficit, or whether he needs to either temper his priorities while deficits are large, or pay for his initiatives with an eye towards getting the budget back on the path toward balance.

This fissure in the Democratic party stems in large part from early debates in the Clinton Administration about whether it should place deficit reduction ahead of priorities like tax cuts and increased domestic spending (the deficit cutters are said to have "won" the argument). I recommend this New York Times Magazine story for a good rundown of this history. The history lesson is part of a larger article about (at the time candidate) Obama's thinking on economic policy. The story has a great web-title that highlights the difficult line Obama will have to walk: "Barack Obama, A Free-Market-Loving, Big Spending, Fiscally Conservative Wealth Redistributionist."

There does seem to be an attempt by those representing the two "sides" to have a dialogue about what they agree on and don't agree on. The NYT Magazine article has some of this, as does a Times Op-Ed last week entitled "No More Economic False Choices," by former Clinton Treasury Secretary Robert Rubin and progressive economist Jared Bernstein which discusses their areas of agreement and disagreement, and their recommendations for an Obama administration.

As I explained the competing views to the students during the budget exercise, I wrapped up by making it clear that as far as The Concord Coalition is concerned, the answers to the numerous fiscal challenges faced by the next president will have to involve both an understanding that spending in ways that increases future economic growth is important, but also that there is no reason for us to not prioritize so that we can increase spending in those areas and reduce spending in areas less helpful to the economy. Increasing revenues also needs to be part of the equation and if done properly, would not unduly harm economic growth. The bottom line is that getting back to long-term fiscal responsibility is essential for a sound economy in the future and for ensuring the younger generations that these students represent have the same economic opportunity that prior generations of Americans have had.

--Josh Gordon

In the movie I.O.U.S.A., Warren Buffett affectionately labeled China “Thriftsville” in his parable about the dangers of the United States over-consuming and relying on foreign production and lending. The movie also introduced us to a young Chinese couple, who met each other while working in a light bulb factory. This couple boasts that "saving money is a Chinese tradition," and they save half of the $20-a-day they earn.

The problem is, in an economic downturn, increased saving can harm short-term economic activity. So, from the front page of the print edition of today’s Washington Post, we learn that China is apparently now pursuing more than half a trillion dollars in fiscal stimulus (emphasis added):

China on Sunday night announced an aggressive $586 billion economic stimulus package, the largest in the country’s history, at a time when it is struggling with increasing social unrest due to factory closings and rising unemployment.

In a wide-ranging plan that economists are comparing to the New Deal, the government said it would ease credit restrictions, expand social welfare services and launch an infrastructure spending program that would include the construction of new railways, roads and airports…

The stimulus funds, to be used through 2010, represent roughly 15 percent of China’s yearly GDP. China last year accounted for 27 percent of global growth, more than any other nation.

The head of China’s central bank, Zhou Xiaochuan, said at the Brazil meeting that by increasing domestic consumption, China could help international markets.

Over the past three months, China's leaders have taken steps large and small to keep the economy stable. Among the more traditional measures are interest rate cuts, a lowering of bank reserve ratio requirements, export tax rebates and an abolition of a stamp tax on stock purchases. It has also embraced some less traditional moves, such as giving subsidies to rural residents to buy things like refrigerators and TV sets in an effort to increase domestic consumption.

The question this brings to my mind is: if “Thriftsville” is going to stop saving so much and start consuming more, then who will keep investing in U.S. Treasuries–i.e., lending money to “Squanderville”?

--Diane Lim Rogers, Chief Economist (post adapted from economistmom.com)