Remarks as prepared for delivery.
Good evening. I am Bob Gallucci, president of the MacArthur Foundation. I am glad to welcome you here this evening as our distinguished panelists discuss an issue with profound implications for America’s future.
The Federal Reserve Bank of Chicago has joined with MacArthur to organize this event. We are honored to have Daniel Sullivan, the Fed’s Executive Vice President and Director of Research, with us, and look forward to his remarks.
I am particularly pleased to greet two of MacArthur’s trustees: Donald Hopkins and Lloyd Axworthy.
The MacArthur Foundation has a long history of addressing complex social problems. Though we are best known for our Fellows program — the so-called "genius awards" — that is a small part of our mission. We make grants of 230 million dollars a year in the United States and across the world.
But we have a close bond with Chicago, our home city. We have invested 800 million dollars here, funded a thousand organizations and individuals, and dedicated 200 million dollars to revitalizing low-income neighborhoods.
This evening we address an economic problem still greater than the current grave recession, one that has to concern us all. You have heard a lot of talk about “the deficit.” We face short-term deficits due to government spending to counteract the effects of the recession, help the economy recover, and get people back to work. These aren’t the deficits that worry us most.
What troubles us is the national debt. We are accumulating deficits, borrowing money and building up a debt that threatens to overwhelm us. There are factors that will make it still worse. The largest-ever generation of retirees (80 million Baby Boomers) start leaving the workforce next year and begin drawing health and retirement benefits; Americans are living longer; medical costs are rising much faster than the economy is growing, stressing the Medicare and Medicaid systems. In short, as a nation, we have been over-spending, over-promising, and over-borrowing.
Our panelists will go into the details of how this came to be, and what the implications are for the United States — and for individual states that, like Illinois, are facing their own economic woes.
The fiscal crisis we face is so severe that it threatens the ability of our government to act creatively, or even responsibly, to deal with problems we now face and those that will emerge in the future. A nation that does not control its finances is not in control of its destiny. It acts out of necessity, not choice.
That concerns us all – and it has particular resonance for MacArthur. As a Foundation, we want to see an effective government that can improve people’s lives with thoughtful programs. We develop and support policies for better juvenile justice, housing, education, and more. Government should be able to make choices that reflect our nation’s best values and highest ideals, not our biggest debts.
We are not deficit hawks, but we are fiscal realists. If the government has no resources, it cannot meet its obligations, let alone find new ways to help vulnerable people.
A Foundation is able to draw attention to looming problems that are not politically popular — but so serious that, if not addressed, will undermine all our other aspirations.
And that is what MacArthur set out to do. In December 2007, we funded the National Academies of Sciences and Public Administration to convene an expert committee and develop scenarios for long-term fiscal sustainability. The committee’s report, Choosing the Nation’s Fiscal Future, was released in January 2010 and received widespread attention.
Last month we joined the Peterson and Kellogg Foundations in supporting AmericaSpeaks, an exercise in which 500 people met at Navy Pier and, by nationwide satellite link, joined thousands of other ordinary Americans to discuss ways to deal with the crisis before it is too late. The results of this discussion were shared with the President’s National Commission on Fiscal Responsibility and Reform; we hope they contribute to a plan for long-term fiscal health.
What are our options? None of them easy, I fear. We must grow our economy, but that will not do the trick. Ending fraud and abuse, or eliminating earmarks will not do the trick. Cutting foreign aid or eliminating corporate tax write-offs will not do the trick. There are even harder choices ahead. Liberals will have to face spending cuts, and conservatives will have to swallow rising taxes.
Economist Herb Stein once said: “If something cannot go on forever, it will stop.” We cannot go on as we are. The only alternative to pain now is worse pain later. If we do nothing, we could see long-term stagnation in our economy, a crumbling infrastructure, little economic innovation, constant high unemployment. The world’s investors could lose confidence in America’s ability to pay its debts, sparking a world-wide financial collapse.
The dilemma is that though doing nothing makes the problem worse over the long term, it is politically expedient in the short term. We need courageous, bipartisan action. We are more likely to see studied avoidance.
My hope is that by clearly framing the extent of this problem, putting it at the top of our national discourse, and aggressively educating voters, we will be able to make dealing with it unavoidable. America’s promise and potential is too valuable to be squandered by lack of action. MacArthur is determined to do what we can.
Now some introductions: To present the committee’s important findings, we have our co-chairs, Rudy Penner of the Urban Institute and John Palmer from Syracuse University.
Their discussion, and then your questions, will be moderated by Pat Widder from the editorial board of the Chicago Tribune. Thank you for your contribution and participation.
I look forward to a stimulating conversation, and invite you all to the reception that follows in the back of the hall.