By Charity Yodis

WASHINGTON (MNI) – Former U.S. Treasury Secretaries James Baker and
Robert Rubin Wednesday stressed the need for bipartisan efforts to
address the U.S. fiscal crisis and suggested solutions, citing the
global ramifications of inaction.

They were speaking at a conference titled ‘Economic and Foreign
Policy Implications of America’s Debt’ — the first of four that will
happen this year — hosted by the group Strengthening of America – Our
Children’s Future.

The bipartisan group is made up of former senators and
representatives, whose stated goal is to raise public consciousness of
the country’s growing and unsustainable debt between now and the first
presidential debate.

Both Baker and Rubin stressed the necessity for bipartisan efforts
to take the discussion out of the political sphere and get the leaders
of both parties to work together to fix the situation.

“If we continue with divided government it’s going to be damn hard
to get to a grand bargain,” said Baker.

In order for the two political parties to come together, compromise
on how to solve the fiscal crisis, and reach what is now known as the
‘Grand Bargain’, Baker believes there needs to be a “substantial down
payment in terms of spending cuts.” He claimed that taxes will rise if
those spending cuts are not made.

With a 24% GDP spending ratio, Baker suggested that the government
needs a spending cap that is sustainable.

Rubin said he thinks the U.S. needs a 50/50 split between revenue
increases and spending cuts.

“There is an ongoing debate about whether the immediate emphasis
should be on jobs and growth or deficit reduction. I believe that is a
false choice,” said Rubin.

“Our fiscal outlook undermines business confidence and economic
confidence … . I don’t think we will have a healthy ongoing recovery
till our fiscal underpinnings are in order,” he added. “And I do believe
the stimulus, if we ever have it, would be far more effective then
combined with serious deficit reduction program and the confidence that
would bring.”

According to Baker, U.S. interest rates will begin to rise and
foreign lenders will begin exacting premiums for lending to a government
with total federal debt at over 100% of GDP.

This will increase instability in the international market, hurt
the global growth, and keep the U.S. from having an independent monetary
and fiscal policy, he warned.

“Our strength abroad depends upon our economic health at home. You
can’t be strong politically, diplomatically, and militarily, if you’re
not strong economically,” Baker said.

Baker said any plan to bring America out of the fiscal crisis needs
to be realistic. He added that any plan should encourage growth, citing
Rubin’s plan of a 50/50 split between revenue increases and spending

Third, he said any plan should include upfront expenditure cuts in
legislation. His final two points called for putting in place a spending
cap and an enforcement plan to go along with it.

While stressing the urgency of the issue, Baker acknowledged there
is unlikely to be much done to address the fiscal crisis until after the
November presidential election.

Despite the fact that little is being done to boost the economy
during the election season, former U.S. Representative Tim Roemer — who
is a member Strengthening of America’s steering committee — said he
remains optimistic that America will get over the problem.

“I am an optimist. I believe that we can achieve these outcomes,”
said Roemer.

He argued that getting through the gridlock on Capitol Hill will
require great bipartisan leadership, as well as the American people
weighing in their views through social media.

“If enough public pressure can be created it may change the
political calculus of those in office to feel that they better
compromise or they may not be in office that much longer,” Rubin said.

** MNI Washinington Bureau – 202-371-2121 **

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