American presidential debates often appear to be decided on relatively trivial issues. For example, some commentators believe John Kennedy beat Richard Nixon in the first-ever televised presidential debate because of Nixon's five-o'clock shadow. And when Ronald Reagan uttered his famous line, "There you go again," it seemed like a game-changer in his contest against President Jimmy Carter.
So yeah, little things do matter in presidential debates. But we think big issues still matter too. With that in mind, we asked some of our top analysts to come up with some questions about the economy that they'd like to have answered tonight by President Obama and Republican challenger Mitt Romney.
Morgan Housel : The two of you have distinctly opposite views on how to make entitlement programs like Social Security and Medicare sustainable in the long run. And a majority of Americans don't seem to agree with either of you. A 2010 Gallup poll showed three-quarters of Americans agree that entitlements pose a serious threat to the economy over the coming decades, yet two-thirds opposed reducing benefits, and more than half opposed raising taxes. Since nearly every American pays into the entitlement system and eventually receives benefits, it's in everyone's personal best interest to want more benefits and lower taxes. How do you convince Americans to sacrifice something they're not willing to sacrifice?
Getting the debt under control
Alex DuMortier : Gentlemen, the ratio of U.S. government debt to Gross Domestic Product is now roughly 1:1. A comprehensive historical survey (link opens PDF) by Professors Carmen Reinhart and Kenneth Rogoff suggests that once this ratio exceeds 90%, the debt dynamics take a damaging toll on economic growth. Furthermore, the figure above does not include unfunded liabilities linked to health care and Social Security. While an immediate, significant change in government commitments would be a mistake, U.S. policymakers must demonstrate that they have the resolve to tackle this problem over a medium-to-longer-term horizon.
So my question is: How do you propose to address this problem, and will you agree to form a bipartisan commission that would produce binding recommendations to put this country's "debt path" on a sustainable footing?
Stimulus: Too much or too little?
John Reeves : In February 2009 Congress passed the American Recovery and Reinvestment Act of 2009, which is often referred to as "the Stimulus." In the months after the signing of this bill into law by President Obama, unemployment peaked at 10.1%, which was considerably higher than White House projections, with or without the stimulus.
Despite that discouraging data, a significant majority of leading economists, in a University of Chicago survey earlier this year, determined that the stimulus kept unemployment lower than it otherwise would have been.
Given what we now know about the trajectory of the unemployment rate, was the stimulus too small? Or were there better strategies at hand to jump-start the economy at that time?
Strengthening Social Security
Ilan Moscovitz : It's estimated that by 2033, Social Security won't be able to pay out full scheduled benefits. Proposals for fixing the problem range from raising revenue by lifting the payroll tax cap or raising rates to cutting benefits through payment reductions or higher retirement ages. What proposal or proposals do you favor?
Energy and taxes
Aimee Duffy : The Congressional Research Service recently published a report (link opens PDF file) that indicates a modest tax on carbon could reduce our projected deficit by as much as 50% over the next decade. The study uses a $20-per-ton tax on carbon dioxide, increasing by 5.6% annually, to determine that the first year of the tax could generate $90 billion and cut the deficit from $2.3 trillion to $1.1 trillion over 10 years.
Another carbon tax analysis, this time from MIT (link opens PDF file), uses the same $20-per-ton figure and confirms the economic benefits of a carbon tax. This study also adds another compelling dimension: the environment. MIT analysts suggest that a tax on carbon will also reduce carbon dioxide emissions 14% below 2006 levels by 2020.
This is effectively a win-win situation for the economy and the environment. If elected, would you pursue a carbon tax, and why or why not?
Rich Smith : Governor Romney, President Obama: In 2011, America used 6.87 billion barrels of oil. At an average cost of $90 a barrel, this works out to $618 billion spent on oil.
The defense budget for 2011 was $708 billion, of which $159 billion was specifically earmarked for military operations in Iraq, Afghanistan, and Pakistan (IAP). A glance at the map suggests that much of our annual defense spending is specifically aimed at preserving and defending U.S. access to oil. In fact, if even just the money spent on IAP was considered a "cost" of oil, you could argue that the true cost of a barrel of crude is not $90, but a figure closer to $113.
So my question: If you were to consider the tax revenue spent defending access to foreign oil as part of the "cost" of oil, would this raise the "cost" of a barrel of oil high enough that alternative energy sources such as wind and solar would actually look competitive with fossil fuels? Alternatively, could greater emphasis on alternative energy permit us to decrease spending on the defense budget?
Time to abandon the strong dollar?
John Maxfield : The strong-dollar policy has contributed significantly to our rising standard of living since World War II. It allows domestic consumers to purchase goods from places like China at a relative discount, and encourages capital flows into the United States, fueling equity prices and making borrowing less inexpensive.
While this has helped consumers in the short-run, it has also contributed to a decline in domestic manufacturing, as imported goods are effectively subsidized by a strong dollar. I'm referring most pointedly here to China, which keeps the value of the Yuan artificially weak.
Since the financial crisis, many have argued that the U.S. Federal Reserve is set on reversing this policy. Most recently, monetary policymakers in Brazil, South Korea, and China have spoken out against the Fed's third round of quantitative easing, referring to it as a currency war and threatening consequences.
Given the benefits and detriments to a strong-dollar policy, in turn, my question is: Should the United States formally abandon it in order to spur manufacturing and thus employment?
Health care reform
Brian Orelli : The Affordable Care Act has affected many companies, from health insurers to drug makers to medical-device makers, which have had to pay taxes or offer rebates to consumers to help pay for the bill. But for investors, not knowing what parts of the law would stay and what parts would get struck down has been more nerve-racking than the actual changes that affect companies' bottom lines.
The Supreme Court kept most of the law intact, but Congress and the President have the power to tweak, replace, or repeal the law, keeping an overhang of uncertainty on the health care industry through this election at the very least.
So my question is this: What changes, if any, would you make to the current health care reform law and what time frame do you see those changes occurring in?
We hope you enjoyed reading the questions. Do you have additional ones that you'd like answered by the candidates? Thoughts about the ones we've provided? Let us know in the comments below.
This roundtable was compiled by John Reeves, who does not own shares of any companies mentioned in the article.
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