The Economic Summit convened by the Friends of Boca Grande Friday at the Community Center Auditorium was as noteworthy for its panel of financial experts drawn from island residents as for the insights offered into avoiding the "fiscal cliff" rushing at the U.S. economy.
An audience of nearly 200 island attendees listened to some grim reckoning from the four financial wizards but also heard some possible solutions to the seemingly intractable economic problems faced by America.
The U.S. economic crisis was compared with that of bankrupt Greece by more than one of the panelists. The panel included:
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Mike Giobbe of Boca Grande, Wall Street financier
Moderator John Kissinger, a 35-year commercial banker at Chase Manhattan and at Sumitomo Mitsui.
Mike Giobbe, whose Wall Street career began as a security analyst at Lehman Bros.
Walter Meanwell, who retired from Wells Fargo Securities after 50 years.
Jeff Swift, who has more than 30 years experience with Hewlett Packard, Teledyne, Analog Devices.
Smith said when U.S. debt tops 80 percent of gross domestic product the economy inevitably slows and default odds rise dramatically. Yet paying public debt off is not the whole answer either, he said.
"If all debt were paid off, there would be no money," Swift said.
The Federal Reserve creates dollars and buys Treasury bonds, he said. When bonds are repaid, dollars disappear back into the Federal Treasury, he said.
The three-legged U.S. economic stool consists of keeping public and private debt and the trade balance at manageable levels, Swift said. The U.S. trade balance, which has been negative since 1990, is a key, he said.
"We will default if trade remains negative," Swift said.
Giobbe and Meanwell helped illustrate the plight of the U.S. taxpayer by breaking public debt share down by household.
The average U.S. taxpayer makes $21,000 in wages, spends $38,000 annually, carries $16,500 in debt and has built up $142,700 in credit card debt after the U.S. budget deficit is divided by population.
"That tells you what the fiscal cliff is on an individual basis," Meanwell said.
One Giobbe graphic advocated a belief in G.O.D.: God, Oil and Dividends.
Kissinger said Medicare and Medicaid have surpassed Social Security as the worst of the unfunded federal government liabilities that must be addressed.
"There's been a lot of talk about the problems of Social Security," Kissinger said. "The $16 trillion associated with Social Security is relatively small when compared with the Medicare number of almost $84 trillion. There's no way we can go forward without redoing the Medicare piece."
The United States is spending $856 billion on medical expenses, including Medicare and Medicaid, which is unsustainable, he said. It's the largest single area of federal spending.
As federal debt has been rising dramatically, personal debt has been coming down, Kissinger said. Mortgage liabilities have dropped by almost 10 percent and credit card debt is off 6 percent
An escalating debt structure, enormous unfunded liabilities and an anemic recovery from the Great Recession averaging less than half the normal post-recession recovery rate adds up to real trouble for the U.S. economy, Kissinger said.
"I would hope - we all will - that sometime between now and the first few months of 2013, we will see the administration come together with the new Congress to forge a Grand Bargain that could not be achieved up until now," he said. "We need to come to an agreement in a major reduction in spending and deal with the issue of tax increases to forge some kind of bipartisan plan that will say to the world that, while we will not solve the problems we face over the next couple years, we will have a plan put in place that we will execute to make sure the crisis is met."
