PARTICIPANTS
David Malpass, Michael Boskin, John Cogan, Stephen Haber, Simon Hilpert, Ken Scott, George Shultz, John Taylor, Ian Wright
ISSUES DISCUSSED
David Malpass, former Deputy Assistant Secretary of Treasury and founder of Encima Global, discussed the topic “Restraining Government Growth: Demographic and Procedural Hurdles,” including accounting for entitlements, appropriations, unfunded pension liabilities, and constitutional versus legislated restraints on the U.S. debt limit, as well as the fiscal situation in Europe.
Malpass began by discussing how the fiscal crises in Europe and the United States are creating the need for new fiscal plans and approaches, and are thereby setting up conflicts of interest between government services, taxpayers, pension funds, creditors and others. Depending on the relative power and influence of each group and the actions taken, the fiscal landscape is changing.
Specifically, Malpass pointed out that structural reforms in Europe have made little progress in changing the European growth situation and problems in Greece, and that talks appear to be moving in the direction of increasing the size of government and its involvement, as opposed to decreasing it. As a pro-growth path for Europe, Malpass proposed various actions and reforms, including new restraints on the spending and borrowing of national governments in the euro zone, the sale of government assets, and the continuation of the euro with the single ECB mandate of price stability.
Pertaining to the United States, Malpass discussed historical facts about the increasing debt ceiling, public debt as a percentage of GDP, and debt by economic sector, as well as changes in the effective maturity of public debt. He also noted the widening gap between government receipts and outlays. Addressing these issues, Malpass argued the debt-to-GDP limit should cause spending restraint, rather than debt crisis, and that a balanced budget should not mean more taxes, but less spending. Additionally, he proposed that a one-time law be passed that establishes a sliding scale glidepath for the debt-to-GDP ratio, rather than a periodic nominal limit being set.
