IndustryWeek Summit (Social Security)

Nov. 20, 1998, Washington, D.C.

JASINOWSKI cont.: Secondly, I think we have not talked about social security which is just one of those strange things where in some ways the number one overall issue for the year, we haven't had a chance to fully discuss it. When I say number one, I think the President has said this is the number one issue. And the Republican leadership has said it is the number one issue. And we at the NAM and I know much of the business community believes we need to reform social security because it is going bankrupt. It is laying on very high payroll taxes and is not giving the right kind of return to workers. I don't know. I would be interested what the others thought is going to happen in social security. Just as Tom was wondering about education. My sense is that we don't really know whether or not the President is going to try to make this a legacy issue or is he going to try to use it as a political point of leverage. And what do the rest of you think? I know it is going to be up there, keyed up as a number one issue. But what is going to happen to social security in this country? DONOHUE: Well, let me first join everybody else on the economic sphere. Absent international crises to major devaluation in China, huge upset in the EU and Brazil in the can, which isn't going to happen now, you are not going to have a recession. I mean, you -- you would have to get a committee of the smartest people in the world to make a recession here in . I mean you have the lowest unemployment. You have the lowest interest rate. You have the highest productivity. You know, you -- we are in a position that we have got to get organized to get a recession. But it could happen. As things happen around the world, you could see it going into the elections. Which would be very interesting. Second, I think the social -- as I mentioned in this big bang budget thing, I think the Social Security thing is a very critical question. I mean, it isn't -- it has three interesting components. First of all, who the hell is going to pay the bills. That is, who is going to be working to support those retired. And where are we going to get the money that we already collected and spent. Second, who will sit still for paying those bills in terms if they come in increased payroll taxes. What is it? Twenty-two increases in twenty-eight years or something like that. I mean I know my son that runs a little business in Colorado is livid at having to pay both sides of that for himself and then for some of his employees. But the third thing which I think is really the most interesting is, is there a stomach for the constructive things that we can do to make Social Security reform real. You know, when did this, when we put it together, why we made the age sixty-five is that white males died at sixty-three. This was a good deal. Now they die at eighty or whatever the heck the number is. And I'm not sure we couldn't move the age up a few years in retirement. Although a huge number of people retire at sixty-two because they want to go live the good life. Second, I'm not -- I mean the arguments I hear, privatize or not privatize. That is not an argument. The argument is should we privatize some of it. And if we did some small amount, we would get a lot of benefits. We would be able to drive up the actual benefit at retirement. And we would begin to put money into the market when the baby boomers begin to pull it out. It would provide a balance. And the other issues are what about certain things being taxable or other people being excluded and how do we look at this whole system. I mean, you go around and ask people all over the country are they going to collect it, young people, they don't think so. I think many of them will. I don't think I will, unless I hurry up and retire. Because I think at some point you are going to look at some means testing. Will it make a huge difference? No. But it will give you the impetus to make some of the other changes that people are looking at. I think that the Social Security deal, whether it is going to be Bill Clinton's legacy or not, or whether it is going to be a long, protracted debate to fix it, is only going to get fixed when it has to get fixed. Well, how did I come to that brilliant conclusion? I have watched this thing as an old man for a long time. They get to where they can fix the marginal part. They fix it and go away. Nobody wants to face up to the reality of this. Or Medicare and Medicaid. My final sentence. Demographics are God. And that is going to drive what happens here. You know, we are going to get down by the year or something, you would have two people working for one person retired. So we have got to look at immigration. We have got to get more people in this country paying taxes and retirement taxes for people that are retired. And we have to break the mold and go look at the reality of this thing or it is going to get us. ROGSTAD: If you, excuse me, just a comment on the election and Social Security and you listen to the discussion on both sides about Social Security. I heard a former member of Congress, very respected make a statement the other day that has been sitting on my head about this. And it was that he thought the elections, one of the big outcomes of the election process was that it may very well have restored the third rail to the social security discussion. That he thought it really politicized the issue again. JASINOWSKI: Did he really think (inaudible)? ROGSTAD: I think it takes -- it is going to take extraordinary executive leadership whoever. And I don't see that happening. JASINOWSKI: May I come back on the economy. Because I think when there are so many folks so positive about the economic situation, well, half the world is in recession. I am just a little suspicious that we may be kidding ourselves. I'm not suggesting, Tom, that we will have a recession in. I'm saying that economic growth will be one-half of what it is in. And that changes the whole complexion of the debate on policy and everything else. DONOHUE: I absolutely agree. JASINOWSKI: Okay. Well, I don't see it -- a recession, but I do think we are talking about two percent growth rather than four percent growth. That defines a lot of economic imperatives, including the trade and tax issues. DONOHUE: But it is two percent on biggest economy in the world. And that is still a hell of a lot of business. And the demand demographically for new workers at that level is going to challenging. JASINOWSKI: But, you know, I think there is a few more down sides. You didn't comment on Y2K. Nobody knows the answer there, so your opinion -- DONOHUE: And I'm cool about that because I said we are not going to do this early on in '99. But it could get very challenging going into the elections. I agree. I think the Y2K thing is, you know, is something that we all need to know more about. And my friends who are in the computer and software business and all that say there is only three things you must do. A month or so before the end of the year you must get a couple of thousand bucks, ten thousand or something and stick it in the mattress. Number two, don't fly for the first fifteen or twenty days of the year. And number three, don't believe half of what you listen to. JASINOWSKI: Right. On -- just one thing on the economy which is that I think both the Euro adjustment and I think Brazil are going to be bigger problems. I just think that the Euro adjustment slows down in Europe some. And I think Brazil is already moving into recession. And that Latin America will be in '99 in a slow or flat growth environment. DONOHUE: Now we just gave Brazil a ton of money in turn for some actions. And it is my view that if not the International Monetary Fund and others, but the fundamental Western governments will do what it takes to keep Brazil going in the can because they are the spin center of what we are trying to do. We saw it happen in Japan. We can't control that the way we can control Brazil. And if we let Brazil serious falter, we deserve it. ROGSTAD: Can we -- let me ask a question of my colleagues. And it goes on the trade issue. A lot of discussions about Europe will be kind of more isolationist as it goes through this. There is some evidence on -- DONOHUE: Not in that. Their demographic problems are much worse -- ROGSTAD: Worse than ours. As is Japan's. The question of whether, in fact, the international interests of our businesses and how it comes into an increasingly isolationist tendency in Washington and this country is going to be a huge issue for us. Which is why we have got to keep the fast track and MFN kinds of things going. Finally going to do some real education on the (inaudible). JASINOWSKI: Well, I think that we ought to mention in that regard the WTO ministerial here with, in many respects, will be the number one trade focus for , regardless of what we do legislatively. And there we will be talking about services, financial, manufacturing, a whole set of new issues to define the next trade agenda. So I think that the way to deal with the Euro and some of these other issues is in the context of the WTO ministerial. BRANDT: Is there anything anybody wants to say in conclusion? ROGSTAD: Thank you. JASINOWSKI: Thank you. DONOHUE: Thank you. BRANDT: Thank you for being here. JASINOWSKI: I hope we gave you what you wanted. BRANDT: You did. MILLER: We didn't mention Monica once. (Whereupon, the meeting was adjourned.)

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