Health Care and Government

ECONOMIC ANALYSIS: Those who put head in sand put next generation in peril

February 20, 2006

I have always been fascinated with one particular aspect of the life story of Al Smith. Here was a poor, unsophisticated, relatively uneducated kid from the Lower East Side of Manhattan who showed up at the New York Legislature in 1903 as a nobody, but in the space of 10 years became a major power broker, ultimately running for president.

The secret to his success? Unlike his socializing, partying colleagues, Al Smith spent his evenings actually reading legislation. When it came time to vote, he was one of the few who actually understood what was being voted on, and that knowledge was the key to his early power.

To say we need more Al Smiths in government today is an understatement. For the cruel irony is that, as the issues before us become more subtle and complex, our attention span for detail has become, if anything, even shorter.

If we could move beyond the distorted, cartoonish portrayals served up by the spin doctors on major issues such as entitlement growth and regulatory reform, we could head off plenty of problems before they become crises.

And the list of problems waiting to become crises is depressingly long. We're kicking plenty of cans down the road these days, waiting for painless solutions to present themselves, which, of course, they never do.

Does anyone remember the call for action on the power grid? We haven't had a major blackout lately, so apparently our aging electric power transmission system can limp into the future a while longer. How about the ticking time bomb in unfunded public pensions? Another issue for the next generation to solve, I suppose.

I'd like to pick out a couple of issues in particular that could benefit from less posturing and more careful reading. The first is the telecommunications reform bill now wending its way through the Indiana General Assembly.

Non-readers of the legislation-who I suspect are in the majority-easily come up with positions on it, nonetheless. The big telephone companies are for it, so it must be bad. The bill might deregulate local phone rates, so we should oppose it. Or, as the AARP says, it is bad for older people, so we should oppose it.

If you are comfortable charting a course into the future on the basis of these kinds of statements, then read no further. But if you instead pop the hood open on the entire issue of telecommunications regulation, you see something infinitely more complex.

You see a world where much-needed investment is held in check by antiquated regulatory rules that make returns to investors uncertain. It's a world where the kind of technological convergence that lets us watch hockey games or make phone calls over our Internet connection promises competition that can hold prices in check better than any regulatory structure we can design.

If we build the infrastructure to support it, of course. Right now, that task isn't done, as many rural residents will tell you. And if we don't remove the roadblocks to investment, it's not going to get done.

But telecommunications reform is a cakewalk compared with my second example, reform of federal entitlement programs. This whole business of making permanent, open-ended commitments to fund everything from health care to groceries is not only unsustainable, it also turns the whole idea of leaving a better world for the next generation to enjoy on its head. The course we are following rewards us today, and presents our children with back-breaking bills.

Yet even the feeblest attempts to defuse the powder keg have been met with a shallow rhetoric that fails to address the complexity of the issue. For the sad truth is that even if the recently enacted budget reductions-labeled by some as cruel and serving the rich-had been 10 times larger, they would not have had a meaningful impact on the liabilities being assumed by the federal government in our name. Perhaps we should start paying some attention to that.



Barkey is an economist and director of economic and policy study at the College of Business, Ball State University. His column appears weekly. He can be reached by e-mail at pbarkey@ibj.com.
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