May 20, 2011

David Gergen, Political Analyst, Is Somber Yet Hopeful About State of Country

At NAPFA Salt Lake City, Washington insider explains how macro events will affect advisors and clients

Where are we going as a country? Where are we headed? Difficult questions to answer in a 50-minute presentation. But David Gergen attempted to do just that in the Thursday afternoon keynote address at the National Association for Personal Financial Planners annual convention in Salt Lake City.

Gergen is a senior political analyst for CNN and has served as an advisor to four U.S. presidents. He is a professor of public service at the Harvard Kennedy School and he published the best-selling book, Eyewitness to Power: The Essence of Leadership, Nixon to Clinton.

“We are a nation that should have more confidence than we do,” Gergen said. “But a recent event gave us a surge of confidence we haven’t had in awhile. The Navy Seals' action against Osama bin Laden was a proud moment. You cannot walk away from that without saying some things still work in America, and this worked extraordinarily well.”

Gergen said he has spoken with various “people in the know” in Washington about the bin Laden raid. He revealed that prior to the raid there was uncertainty as to whether or not the world’s most wanted terrorist was even there. Certain people at the CIA believed there was only a 40% chance he was in the compound.

“I’ve never seen a mission as big in scope as this one with absolutely no leaks beforehand,” he explained. “During the Cuban Missile Crisis that lasted 13 days, President Kennedy went 11 days without a leak. By contrast, this mission was months in the planning, and there were no leaks. It’s a testament to the Obama Administration, but the real heroes—of course—are the Navy Seals and the military.”

Gergen noted that on the night of the bin Laden raid, 14 other operations took place, and an average of three similar operations happen each night in Pakistan and Afghanistan.

“These are fantastic young people that will eventually lead this country,” he praised. “We should all be happy about that. But the problem we have is with our current political class.

“They, quite frankly, are underperforming. We do not have the Navy Seals of the political class,” he concluded to applause.

He then moved on to the economic crisis, and noted the economy is underperforming, especially at this stage of an economic rebound.

“There is no question we are slipping into a debt crisis, which is the reason for the current negotiations between the parties. We typically measure debt as an overall ratio to the entire economy. That has historically been 38%. This year that ratio went to 60% and we are heading for 100% within 10 years. In fact, some economists argue that if you include state and local government debt, we're already at 90%.”

He then rhetorically asked how we get the debt reduced and what the spending level should be. Democrats and Republicans are still very far apart. He noted the bipartisan “Gang of Six” Senators won’t work, and political observers say the decision makers—meaning the president, Speaker John Boehner and Sen. Harry Reid—should be in the same room in. He said Treasury Secretary Timothy Geithner wanted a deal as soon as possible, but politicians will wait until the last minute in order to maximize their leverage.

“This will require hand holding moments with your client,” Gergen said. “There is not alot of political will to get our debt problem under control before the election in 2012. Historically, that wouldn’t be much of a problem, and they could afford to wait.”

But not this time, he concluded. The “new guy in the room” is Standard and Poor’s.

“They said if we wait until 2012, there is a one-in-three chance the rating agency will downgrade the U.S. government’s debt. That would be the first time it would happen since World War I. This is the most serious fiscal issue we’ve had to deal with in my 30 years in Washington.”

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