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NABE Panel to Next President: Concentrate on Terror, not Stimulus
August 2004
“Terrorism produces the greatest short term risk to the economy, ” says Duncan Meldrum, President of NABE and Chief Economist, Air Products and Chemicals, Inc., “and that's where NABE's members believe the next president should spend the most of his effort. We also believe the time has come to tackle reducing the federal deficit, now that it's no longer needed to stimulate the economy. Longer term, the costs related to the aging of the population dominate the challenges to sustaining economic growth.”
Survey Highlights
Terrorism remains the biggest short-term problem facing the U.S. economy this year, according to 40% of respondents, up from 19% in March. The deficit was chosen by 23% of respondents.
We separated long-term from short-term concerns for this survey. In the longer run, the rising elderly population and related health care costs are the primary problems. The rising elderly population and the concomitant rise in the dependency ratio were the prime long-term worries for 23% of panelists (down from 27%), while 22% focused on health care costs (up from 19%). The federal deficit was chosen by 17% (down from24%) as a significant long-term problem.
Technology and flexibility remain our greatest strengths. Thirty-six percent of NABE respondents felt the flexibility of the economy and the labor force is our biggest strength, while 35% said it is the strong U.S. technological lead.
Monetary policy should get tighter. Although 59% of respondents said current monetary policy is about right, 62% said it should tighten over the next six months.
Fiscal policy is too loose. Two-thirds of respondents thought current fiscal policy is too loose, and 80% thought it should become more restrictive. Only 37% thought it would become more restrictive, however.
The new president should concentrate one-quarter of his time on terrorism. We asked what percentage of his time and energy should be spent on different issues. The panel recommended that 25% of his time be spent on the Middle East and terrorism. He should spend 17% on reducing the deficit, 16% on health-care reform, and 14% on social security reform. Energy policy should account for 11% of his attention, trade 8%, and education 6%. No other problem should account for more than 1% of his time.
The deficit cuts should concentrate on spending. Only 32% of respondents recommended raising taxes, while 51% thought spending cuts should be the primary method to cut the deficit. In recommending spending cuts, 50% voted to lower farm subsidies, 11% health care, 9% military, and 21% other non-entitlement spending. On tax reform, 27% recommended moving to a consumption-based tax system. Making the tax cuts permanent attracted 15% of the votes on this issue, with 13% voted to let the tax cuts sunset and 18% to raise taxes. Another 18% voted for a flat tax.
Health-care reform is one of the more divisive issues . Forty-one percent of our panelists voted to institute health-saving plans with a catastrophic insurance back-up. Administrative simplification and a national health service each attracted 17%. In a separate question, 44% favored allowing importation of drugs from Canada, and 31% favored use of more generics.
The social-security issue showed little consensus among economists. Thirty-five percent of respondents voted for privatization of social security, with a safety net. Raising taxes to increase social security funding and cutting entitlements to reduce costs each attracted 27% of the votes.
Raising energy taxes attracted 29% of panelist votes. Twenty-four percent recommended research on and subsidies for alternative energy sources, and 20% opening ANWR (Arctic National Wildlife Refuge) and offshore fields. Only 9% of respondents felt that global warming and oil shortages were overstated as problems, and should be left to the market.
National Association for Business Economics
1233 20th Street NW #505
Washington, DC 20036
Phone 202.463.6223 Fax 202.463.6239
nabe@nabe.com
© 2003-2004, NABE®
The NABE Economic Policy Survey presents the consensus of a panel of 172 members of the National Association for Business Economics. Conducted semiannually, this survey was taken July 23-August 5, 2004 . May be reprinted in whole or in part with credit given to NABE. View the survey results, including complete tabulations, online at www.nabe.com. This is one of three surveys conducted by NABE. The other two are the NABE Outlook and the NABE Industry Survey. David Wyss of Standard & Poor's and Laurie Matthias King of Capital Guardian Trust Company conducted the analysis for this report.
PDF Version (better for printing)
Answer tabulations (PDF)
