Bair: Economic Reform Requires Taking the Long View

National Journal
Jordain Carney
Nov. 22, 2013, 6:50 a.m.

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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