By Frank Ahrens
Washington Post Staff Writer
Saturday, August 23, 2008
OMAHA, Aug. 22 -- Two long-term views of the U.S. economy were on vivid display at a town hall meeting here Thursday night, with the world's richest person on one side and pretty much everybody else on the other.
If there is general agreement that times are tough in the short term -- the markets are flighty, foreclosures are widespread and jobless claims remain high -- there is sharp disagreement on what the future holds.
Some, such as super-investor Warren E. Buffett, believe that the economy is merely experiencing a "correction" and that subsequent generations of Americans will have a much higher standard of living than those alive today.
Others, such as David M. Walker -- former U.S. comptroller general and a traveling Cassandra on the perils of the mounting national debt -- fear that the economy is at an inflection point and could be headed toward disaster if something isn't done, immediately.
So the two sides went at it Thursday night, while taking questions from an audience of about 2,000 Omahans who had been given tickets to the event; the whole affair was beamed live to more than 400 theaters around the country to viewers who had paid to watch five men in suits debate the severity of the national debt.
The town hall discussion was the second half of an evening's worth of entertainment, which began with the premiere of "I.O.U.S.A.," a documentary on the national debt starring Walker and featuring Buffett and other notable thinkers on the economy.
The film's premise: The current national debt stands at more than $9.6 trillion, which represents about 66 percent of gross domestic product. This in itself is not a ruinous figure, the film says, and most economists agree.
However, Walker says in the film, if you total all of the government's current unfunded liabilities, the United States is actually in a $53 trillion hole.
Worse, Walker says, the coming boomer retirees represent a shock to the system, given their demands on Social Security, Medicare and Medicaid. These -- especially the cost of government-subsidized health care -- will push the national debt to 244 percent of gross domestic product by 2040, possibly leading to economic catastrophe.
Buffett disagreed, and spent a lot of time Thursday night talking about pie.
"Since 1982, we have added 25 million-plus jobs in this country; we will have a larger pie," Buffett said. "People will be fighting over the pie, but that's a wonderful thing. Even if we grow at 1 percent per year, we double the GDP per capita in 75 years. The pie will grow enough that everyone will get more of the pie."
Toward the end of the panel, Walker -- the debt crusader -- had had enough. He was visually champing at the bit to rebuff Buffett.
"I have enormous respect for Warren, but I have to disagree," Walker said. "I have already taken into consideration that the pie is going to grow."
Walker quit the Government Accountability Office in March to become head of the Peter G. Peterson Foundation, set up by the billionaire founder of the Blackstone Group, a private-equity giant. Peterson donated $1 billion to his foundation to educate Americans on the debt and other fiscal problems.
Buffett was received warmly by his town folk, who are accustomed to seeing the cornfed Croesus tooling around Omaha in his car, which once bore the license plate "THRIFTY." Forbes magazine estimates Buffett's wealth at $62 billion.
He got his biggest laugh of the night with a story that he probably meant to be self-deprecating but that the audience clearly took as a President Bush joke.
Buffett, who is a director of The Washington Post Co., likened his faith in the U.S. economy to the way he invests in companies, including Coca-Cola and the Mars-Wrigley tie-up.
"I like to buy stock in businesses that are so wonderful, an idiot can run them -- because sooner or later one will," Buffett said, to laughter. "Maybe even like the present management we have," which brought down the house.
Joining Walker, Buffett and Peterson on the panel at Omaha's Holland Performing Arts Center were William A. Niskanen, chairman of Washington's Cato Institute, and Bill Novelli, chief executive of AARP. While the other panelists drank water, sitting next to Buffett was a pitcher of his beloved Coke. Buffett's Berkshire Hathaway investment fund is the cola giant's largest shareholder, with 8.65 percent of outstanding shares.
If Buffett has a concern about the future of the U.S. economy, it seems focused on the widening of the trade deficit.
Others on the panel, however, were most worried about the coming burden of senior citizens on Medicare and Medicaid, with secondary concerns about the long-term obligations of Social Security. Each offered potential solutions.
"We need to increase age for full retirement benefits slowly and with warning," Niskanen said. "We're living longer and we're living younger and we need to think about working until 70 rather than retiring at 65."
He also proposed an income test for the Medicare deductible so wealthier seniors would pay more than poorer ones, and said that Americans should have the option of putting half of their retirement savings into private accounts.
"It's a very bad idea to privatize Social Security," he said. "It introduces risk into a safety-net system, it is enormously expensive to do and it isn't necessary. We can sit down right now and fix it and make Social Security solvent."
Peterson advocated what he called "provocative" ideas, such as requiring Americans to save 2 to 3 percent of their income, and cited similar mandatory programs in countries such as Australia and New Zealand.
Walker proposes a bipartisan commission that would reform government entitlement programs, particularly Medicare and Medicaid.
After the town hall session, Meredith Efken, 33, a novelist and fiction editor who was in the audience, gave Buffett a skeptical eye.
"I thought Warren seemed a little too rosy," she said. "I appreciate his encouragement, but I think if I hadn't seen the movie and just listened to him, I would think I could ignore the problem a little longer."
"I.O.U.S.A." is now playing in limited release in 12 U.S. cities, including Washington. A book based on the film is due out in September and the DVD is scheduled for fall release.