Hewing to Schwab’s new tradition of using advisors to introduce key speakers at its Impact conference, Rebecca Pomering took to the stage in San Diego Wednesday afternoon to welcome “two of my heroes,” former Sen. Alan Simpson and former Labor Secretary Robert Reich.
Pomering, chief practice officer at the wealth management arm of Moss Adams, positioned the appearance by the two veterans of Washington’s political wars as being “in the spirt of coming together for the greater good.”
In a session titled, “The Long and Short of It,” referring to Reich’s diminutiveness and Simpson’s lanky 6’ 7” frame, the two men from different political parties exhibited levity and erudition as they discussed the biggest problems facing the country.
First came the presidential campaign and a discussion of the candidates and the animus felt by many voters, a trope visited multiple times during their appearance.
Reich joked that since the current Presidential campaign has been “so polite and positive, it would be good to address all the issues” that haven’t been addressed by the major candidates, prompting Simpson to quip, “which is everything.” Turning serious, Simpson said the current political atmosphere constitutes “a heartbreaking time for anyone who learned the exquisite art of compromise. If you don’t know how to compromise on the issues without sacrificing yourself, you’re not worthy of running for councilman,” much less President of the United States, “or getting married.”
As for the biggest issue not addressed during campaign 2016, Simpson said it was the nation’s debt and deficit. You “can’t get anywhere … without addressing two-thirds” of the nation’s budget: the cost of health care, which he said is on “automatic pilot” and will result in a national debt of 20 trillion bucks” by the end of the decade.
Reich said that in his time in the Clinton administration, he learned that the nation’s fiscal problem isn’t so much the size of the debt itself, but the ratio of the debt (“the numerator”) to GDP (“the denominator), which is all “driven by the aging of baby boomers and health care costs.” Reich said that “the lesson I took away is that Medicare is the problem; Social Security can be relatively easily fixed.”
(Speaking at a meeting with reporters earlier in the day, Liz Ann Sonders of Schwab said “three of us sitting down at a table with a napkin” could “fix” Social Security, the real challenge is to address Medicare.)
Simpson agreed with Reich on the fixes, calling for the use of the more politically acceptable term “affluence testing” in measuring eligibility for Medicare rather “means testing.” After all, the former Republican senator from Wyoming said, “just because you reach a certain age, regardless of your assets or income,” you’re getting those Medicare benefits and “putting a great strain on the Treasury.”
As for improving the long-term viability of Social Security, Reich said there are three solutions, which “if we deal with it in the next four years would not be a big problem” for the longer term. One, raise the eligibility age for benefits. Two, raise the cap on annual income subject to Social Security taxes from the current $108,000 in annual to something like $124,000; referring to that proposal, pushed by Simpson during his nearly 30 years in the Senate, Reich said it makes no sense that “Bill Gates reaches his cap at two minutes past midnight on Jan. 1.” The third solution is means testing, which Reich admitted “politically I’m not so sure we can do it.”
Reich then argued that “you can’t take care of Medicare without taking care of health care costs,” specifically the “cost of drugs and hospital administration—nurses spend a third of their time doing paperwork.”
The two men then returned to the issue of why the level of political discourse has become so low in the country and what to do about raising it. Simpson said “there’s too much hate in this country: hate is a container that erodes the carrier.” He argued that the source of discord in the Congress occurred when his fellow Republicans finally achieved a majority in the House of Representatives and decided to get back at the Democrats in the House who had ignored GOP interests for decades. Reich said “the venom began in 1995 with Newt Gingrich,” after Republicans won the House in the 1994 election.
The real problem, Reich said, is that now “money is coming from outside Washington and distorting the legislative process, even before the Citizens United case,” referring to the Supreme Court decision on political donations. That money, he said, “makes it impossible to do anything about the debt.” Simpson replied by stating that “the only thing I agree on with Hillary on is to overturn Citizens United,” arguing that the case “has nothing to do with corporations.”
Reich and Simpson concluded by returning to the theme of the angry voter and the genesis of that anger. “I’m worried about the anti-establishment, angry populism surge of Trump and Sanders,” which Reich said “we haven’t seen since 1968; both parties were surprised by their popularity. So where did the anger come from that fuels Trump?” Simpson said it comes from “people who see their legislators say they can fix things without touching ‘sacred’ Medicare, Medicaid, defense and Social Security.”
Reich’s take? “Trump and Sanders weren’t talking about reducing the debt and deficit. I think the anger comes from people working harder than ever and getting nowhere,” citing the lack of any growth in long-term wages for the typical worker.
Simpson had the last word in responding to a question from the Impact audience as to “what is a reasonable deficit target?” While Simpson said he wasn’t qualified to answer that question specifically, referring to Reich’s earlier point about the centrality of the debt-to-GDP ratio, he laid the problem to ourselves and our leaders. “Most Americans don’t know the difference between the ‘debt’ and the ‘deficit,’” he charged, while “95% of congressmen don’t know how to read a profit-and-loss statement.”