This week on Facing the Future we were honored to have Leon Panetta as our guest. Panetta has spent more than five decades at the center of American public life, serving in such consequential positions as Secretary of Defense, CIA Director, White House Chief of Staff, Director of the President’s Office of Management and Budget and Chair of the House Budget Committee.
Concord Coalition Executive Director Carolyn Bourdeaux joined the conversation. We discussed the fiscal challenges facing the country, what meaningful leadership on the budget requires, and whether the political system is still capable of forging the kinds of bipartisan agreements Panetta helped shape in the past.
Panetta did not mince words when describing the current outlook. “We’re living at a time when neither party seems willing to try to confront the hard choices that need to be made to restore some degree of fiscal discipline,” he said. “We have a record debt. We’re paying interest on that debt of almost a trillion dollars a year now, more than we spend on defense, and it’s threatening our economic future. I don’t think there’s any question that we are on the verge of an economic crisis when you combine the fact that we have this huge debt and that Social Security and Medicare are going broke in the next few years, and nobody seems to be very concerned about what we do in order to deal with those huge problems.”
Panetta stressed the generational consequences of failing to change course. “I teach a lot of young students at the Panetta Institute,” he said. “And because of our inability to deal with this debt, we are going to be passing on to them and their generation a huge debt that is going to be even more burdensome in the future. We all believe in the American Dream, we all believe in trying to give young people the opportunity to have a better life than we did. By virtue of the irresponsibility on the budget issue, we are impacting the ability of these young people to ultimately be able to achieve the American Dream in the future.”
“We govern either by leadership or by crisis,” Panetta said. “If leadership is there and they’re willing to make tough decisions then I think we can avoid, or certainly contain, a crisis. But in the absence of leadership, we’re going to govern by crisis. And when it comes to the budget, we are largely governing by crisis right now.
Panetta is not hopeful that the conventional budget process will lead to results. “I’m afraid,” he said, “that the only way to try to create some discipline is if there’s a fiscal commission that brings together the best from both parties, as well as the business sector, and that makes a proposal, probably similar to the proposal that was made by the Simpson-Bowles Commission. We need a willingness to look at every area of the budget and then put discipline into the budget so that we pay for any proposal rather than simply borrow. And there has to be an up or down vote on the recommendations. That’s where we’re at right now because the process is broken and I don’t see any effort to try to restore a viable and credible budget process.”
With or without a commission, Panetta thinks “it makes a lot of sense” for policymakers to start with an overall fiscal goal, such as cutting the annual deficit to 3 percent of the gross domestic product (GDP), which essentially means cutting it in half from where it has been in recent years. “The administration has talked about it and I know that Republicans and Democrats on the Hill have talked about it and supported it,” he noted. “But now, it needs to get done.”
One catalyst for change, in Panetta’s view, is the pending insolvency of the Social Security and Medicare Hospital Insurance Trust Funds. “There has to be political pressure to understand that if they don’t act the country could face a major crisis.” He explained, “we know that the Social Security Trust Fund is going broke, and that can happen within the next 6 to 7 years. If that happens, Social Security benefits are going to be drastically cut and the same thing is true for the Medicare Trust Fund. That, I think, provides a political crisis. Maybe if we can get them to address the issue of saving Social Security, saving Medicare, and bring together a bipartisan coalition to address some of the tough steps that have to be taken, that might be a good stepping stone towards trying to then get a 3 percent goal put in place.
Despite his frustration with today’s leadership in Washington, Panetta remains confident that solutions can be found. “The real strength of this country isn’t in Washington,” he concluded. “The real strength is in communities across the country, both in red states and blue states. There are communities that are not Democrat or Republican, they’re people that are working together to try to do what’s right for their community. It’s the spirit and resilience of the American people that is the most important quality we have.”
Hear more on Facing the Future. Concord Coalition Senior Advisor Bob Bixby hosts the program each week on WKXL in Concord N.H., and it is also available via podcast. Join us as The Concord Coalition team discusses issues relating to national fiscal policy with budget experts, industry leaders, and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, Pandora, iTunes, Google Podcasts, Stitcher, or with an RSS feed. Follow Facing the Future on Facebook, and watch videos from past episodes on The Concord Coalition YouTube channel.
