While members of Congress are focused on a short-term budget deal, true economic reform requires exercising political leadership and tackling long-term problems to boost the economy.
That was the point made Friday by Sheila Bair, the former chairwoman of the Federal Deposit Insurance Corporation, at an Allstate/National Journal Heartland Monitor Poll event on the financial system at the Newseum in Washington.
“The answer really is with the president and the Congress, and the fact that they can’t even find a budget “¦ is quite compelling,” said Bair, who headed the FDIC from 2006-2011. “In the near term, we shouldn’t look to Washington. Some state governments are doing better on their own.”
In the latest Allstate/National Journal Heartland Monitor Poll, congressional approval hit single digits, while 38 percent approved of President Obama.
“The only part of government that is listening to the people is the NSA,” said Sanjay Gupta, the executive vice president for marketing, innovation, and corporate relations at Allstate.
Gupta noted that more than 60 percent said they believed the current budget battle would have a negative impact on their individual financial situation.
The current political situation is “becoming a tremendous drag on economic recovery,” he said.
Bair said that to strengthen the economy, officials should focus on long-term problems rather than only dealing with short-term hurdles. She noted that by only dwelling on current problems, the “options are going to be much more limited and much more difficult to deal with.”
Possible public and private reforms include closing tax loopholes, focusing on jobs and global competitiveness, and scaling back the Federal Reserve’s bond-buying policy.
For corporations that are seeing profits increase, the chief executive officers have to ask, “Is it me or is it the Fed?” she said. She noted that scaling back the federal government’s involvement will cause “some pain “¦ but we need to find out where we really are.”
“We’re still trying to go back to the broken model we used prior to the crisis,” she said.
Edward Reilly, the chief executive officer at FTI Consulting, said Americans largely believe the current political stalemate “has had a direct impact and hurt their own personal finances.”
But Reilly said that Americans continue to believe that their individual financial situation is on track, and that they could make sound financial decisions. “People are more confident than maybe they should be. People do need advice,” said Eleanor Blayney, the CFP Board’s consumer advocate.
The belief in individual success comes even though many also believe the country is still in a recession.
Heidi Shierholz, an economist at the Economic Policy Institute, noted that while the economic recession ended in 2009, she said that in 2008 “we fell off a cliff, and we’ve sort of been bumping along [since then] at the bottom of that very deep hole.”
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