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Lyceum: To Do Better Than We Have Done


10/17/2008

Charles “Chuck” Blahous spoke to College of Business students on October 15th.

 

By Laura Ude

Since December of 2007, Blahous has been serving as Deputy Director of the National Economic Council at the White House and helps to coordinate the economic policy for the president. He has been on the National Economic Council for the entire Bush administration, starting in February of 2001. As the special assistant to the president, he works on primarily social security and other retirement security issues. For about a year, he was the director for the Alliance for Worker Retirement Security, and before that worked on Capitol Hill for Senator Judd Gregg and previous to that Senator Alan Simpson. Blahous has a Ph.D. in Computational Quantum Chemistry from University of California at Berkeley. From 2001 to 2002, Blahous was on the Council of Economic Advisory and served as the executive director of the president’s commission to strengthen social security.

Blahous was excited to speak at ILLINOIS not only because it was a collegiate audience, but also because he was happy to be anywhere but Washington. Although he is not an alumna, both Blahous’ parents and sister attended ILLINOIS, and he went to music camp at the University 30 years ago.

His speech, “Supporting an Aging Society: the Flight from Responsibility,” was focused on the problem of fixing social security and the fiscal dome that faces the next generation.

“I believe there is a flight from responsibility as I see it with respect of facing up to the consequences of an aging society,” Blahous said.

Blahous’ main concern is that politicians are failing to step up to the plate to deal with tough fiscal issues. Although this is not surprising, the press and watchdog groups normally hold politicians accountable, and in this situation they are not.

“Many think tanks and individual scholars are trying, but my concern is that there is a trend among many scholars and reports, many of whom should or do know better, to offer aid and comfort to less responsible politicians who want to duck the consequences of population aging and shift fiscal burdens to our children and grandchildren,” Blahous said.

The main danger behind this issue is that the public is not informed about the social security problem; therefore there can be no intellectual debates on the topic. Social security and Medicare are fiscal issues that now dwarf many other issues that facilitate more public discussion, such as the war in Iraq, Blahous said.

For the remaining part of his lecture, Blahous outlined four manifestations of the flight from responsibility that have seduced many analysts and opinion leaders: the misrepresentation of the certainty of the social security shortfall, the misportrayal of the nature of the social security trust fund, the minimization of fiscal pressures arising from population aging, and the employment of long term revenue baselines to obscure fiscal realities and to skew policy discussion.

The first point explains that there is a current discussion of depletion projections for social security and how it will simply disappear. Analysts are basing their opinions on past trustee projections and saying they have been too pessimistic, when in reality the passage of time has confirmed the trustees’ warnings.

The social security trust fund has been said to be solid for the next several decades. Blahous points out that this argument is wrong for several reasons:

“It neglects the fact that the trust fund is not a net asset to the federal government, it neglects the fact that the trust fund does not directly or indirectly facilitate national savings, it is illogical since those being asked to redeem trust funds in the future are not the same people who spent it, and it neglects that the crafters of 1983 reforms never thought it had that meaning [to build up a large surplus and cash it later] in the first place,” Blahous said.

Another fashionable argument is that our nation does not face population aging at all, only the issue of excess healthcare cost inflation. Blahous said that this argument provides encouragement for politicians who do not want to be seen as taking anything away from seniors. Although health care may be more expensive in the long run, population aging is the pressing issue now.

Finally, Blahous said that there is a trend among analysts and score keepers to disguise the direction of our nation’s long term fiscal path. This shrinks the size of our actual challenge and skews the policy debate.

“The analytical community needs to have as its goal the illumination of our long term picture, not the adoption of metrics and measurements that are designed to skew the discussion to shrink the apparent role of current law spending patterns, to amplify the apparent role of current tax policy, and to render larger and larger government the baselines scenario to which all other outcomes are to be unfavorably compared,” Blahous said.  

Blahous ended his lecture by calling out to the current generation to step up and become part of solving the problems surrounding social security.

“My plea is that everyone who has a role in outlining these realities needs to challenge themselves, challenge ourselves, challenge one another to do better than we have done,” Blahous said. “By so doing, it will help bring about a more informed debate and a better fiscal future for our children and our grandchildren."

UIUC College of Business