"The economics of governing is no easy task. The current state of our economy is testing our government and overall democracy like we've never seen," said Alice Rivlin, founding director of the Congressional Budget Office and former director of the Office of Management and Budgeting.  
 
The guest speaker at the fifth annual Economics of Governance lecture, co-sponsored by UCI's Center of the Study of Democracy, the Department of Economics and City National Bank, she offered some clear-cut solutions to some of the complex problems facing our economy, beginning with tossing political ideologies to the side.  
 
"It doesn't matter if everyone doesn't agree; we need solutions in order to make our economy more productive. We're not a good example of a democracy if we don't."  
 
She explained that government must work simultaneously on three sets of decisions if the country is to successfully move forward including putting out fires that existed before the economic collapse, continuing to address recovery efforts, and worrying about what the long run picture of the U.S. economy will need to look like if it is to function successfully.  
 
On the first issue, she pointed to problems in the nation's social security and healthcare systems that have seemingly been placed on the backburner due to the economic crisis. According to Rivlin, however, they are interrelated.  
 
"The social security issue is a quick fix, and addressing it would be a good show of faith that we're getting back on track," she said. Her recommended solutions include increasing taxes and cutting benefits, raising the retirement age and raising the income cap - currently set at $106,800 - on which social security payroll taxes are based.  
She also offered as a general overall solution for generating more government revenue creation of a value-added tax and increases to income taxes for top level wage earners.  
 
As for fixing healthcare, an issue she deemed "much harder to solve", she recommended investing more heavily in health information technology. "We won't ever reduce health spending," she said, "but perhaps we can reduce the rate at which spending grows by investing in health information technology, which would be a major victory."  
 
On current recovery efforts, she said the government is on the right track, but improvements can still be made.  
 
"The aggressive action of the Fed and other leading authorities was phenomenal," she said, adding that it's hard to gauge the position the economy would be in if they had not acted so swiftly. "The financial sector was out of control. They were creative, a trait our culture applauds, but their creativity was certainly the wrong kind." She chided the seemingly "ad hoc" efforts taken by the Fed to save selected firms, but noted that the actions led to a more organized plan which appears to be working.  
 
As for long term solutions, she recommended a need for more focus on infrastructure and skill improvements in order to become a less wasteful, healthier, sustainable system. Fiscal responsibility at all levels, she added, will be a must.  
 
"Consumers and government alike need to save more and spend less," she said, noting the national deficit as a percentage of gross domestic product is projected to hit a new high point in 2010 at 13 percent. The last high was in 1983 at 6.3 percent. She explained that while stimulus spending and financial rescue money will account for most of that number and that she expects it will come down fast as banking stabilizes, "we're still borrowing too much."  
 
Ending on a positive note, she reminded the students, faculty, alumni and community members in attendance of the confidence the rest of the world has in the U.S. economy.  
 
"When we got into this trouble, there was a rush around the world to buy U.S. Treasury bonds. The resilience and flexibility of the American economy is phenomenal and there is confidence - and rightly placed - around the world that we'll pull through and fix the issues that got us into this mess."  
 
Rivlin is currently on the board of directors of the New York Stock Exchange and a senior research scholar at the Brookings Institution.  

-Heather Wuebker, Social Sciences Communications

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