WASHINGTON, Dec. 15 (UPI) -- From an ever-growing trade imbalance to a ballooning budget deficit, there is no doubt that there are a number of sizeable risks to the U.S. economy in the years ahead. Yet on the first of the two-day conference on economic prospects organized by the White House Wednesday, the atmosphere was distinctly upbeat, as discussions focused on tax reform and reducing red tape for businesses, rather than tackling budget issues head-on.
Indeed, even as Treasury Secretary John Snow emphasized repeatedly to a small group of reporters following the conference that "the (budget) deficit is the centerpiece issue, the linchpin of the second term's economic issues," neither the trade nor budget deficits were given full consideration by the panel of experts gathered to exchange views with senior government officials before a public audience.
Moreover, not one of the dozens of experts invited to take part objected to the broad outline of what President Bush was proposing, namely more tax cuts and privatizing social security as a means to keep the economy strong.
So while the event was billed as a forum to discuss the prospect of "securing our economic future," talks were more like speeches by participants who simply reaffirmed their commitment to push ahead with Bush's proposals. As such, Vice President Dick Cheney opened the forum firstly to a panel discussion on the current state of the U.S. economy, followed by discussions on tax reform and talks on healthcare as well as civil lawsuits.
"It's more interesting to look at what isn't being discussed," said Roger Altman, a former Treasury deputy secretary in assessing the meeting.
Indeed, by listening only to participants of the conference, it would seem that the U.S. economy was on a steady to growth.
"By all of the key measures (of gauging growth), we're in good shape," said Martin Feldstein, an economics professor at Harvard University and former head of the Council of Economic Advisors under Ronald Reagan. "The weakness of the economy that we worried about is now essentially all gone," he added.
Moreover, Feldstein said that "the preponderance of the evidence now is that we are going to continue to have above-trend growth for the coming year, with resulting gains in employment."
Meanwhile, the chief investment officer of UBS Wealth Management, Mary Farrell, said that the tax cuts pushed through by the Bush administration not only ensured growth when the economy was suffering from the blows of a stock market crash and the terrorist attacks, they also "increased the investor class."
Certainly, it can be argued that the tax cuts, coupled with steady monetary easing by the Federal Reserve, kept the U.S. economy from facing a long and deep recession. But the Bush administration made clear at the latest conference that it was adamant about making those cuts permanent, and it also emphasized the need to privatize social security in part in order to keep the pension plan system sustainable.
Such prescriptions, however, do not address the burning questions for the U.S. economy's longer-term health, namely the ever-growing budget and trade deficits. The federal budget deficit reached a record $412 billion in the latest fiscal year ended Sept. 30, and the Congressional Budget Office projects $3.2 trillion in accumulated deficits over the next decade.
And that's without taking into account the cost of changing the social security program as proposed by the administration. Earlier this month, the White House acknowledged that its plan to privatize social security partially will cost between $1 trillion to $2 trillion over the next decade. Granted, the administration has argued that without any changes in the current system, social security will cost taxpayers anywhere from $10 trillion upwards during the same time frame.
Yet given the amount of money the federal government will have to invest in the military as well as homeland security on the one hand, while continuing to cut taxes on the other, the administration will likely burn a bigger hole in the budget.
One way the country is keeping itself afloat despite its ever-growing debts is through increased foreign borrowing, and the Economic Policy Institute pointed out that the federal government is currently borrowing $665 billion annually from foreigners.
"If the current account deficit doesn't improve, then the external debt of the United States will rise from 24 percent of total U.S. GDP at the end of 2003 to 64 percent by 2014," the EPI warned.
That may well be, the administration made no real effort to address the issue, except to state that reforming social security will keep expenditure under control in the long run.
On Thursday, the conference will address issues concerning the labor market, in addition to having President Bush give the closing remarks.