Fiscal Responsibility

Carl Tannenbaum - Page 2

At work Carl doesn't spend a lot of time negotiating. Besides helping to set CD rates, his job is mostly about analysis and advising. "The other thing that's the big part of my job is what we know as Fed watching. We pay a great deal of attention to what the Federal Reserve does. We read their speeches, watch their movements, we participate in dialogue with them. Our advisory takes two forms. We do a lot of speaking internally and externally. I make about one hundred presentations to client groups or associations every year. We write weekly, monthly and quarterly commentary that goes out to customers. Then the other thing we spend a lot of time with is interest rates. Banks, obviously, are very interested in interest rates, no pun intended."

In addition to his duties at the bank Carl is also the president of the National Association for Business Economics (NABE), which is a 2400 member group of people, mostly in the private sector, who use economics in their work. "The board of NABE has a chance to meet with the chairman of the Fed and other federal economic officials pretty regularly, so that's a kick."

Regarding America's economy, Carl's analysis goes beyond the recent past. "I think by almost all measures the economy has done fantastically well over the last generation. We've been expanding since the end of 2001. We are currently entering the sixth year of this economic expansion. We had a nine-year expansion in the 90s and an eight-year expansion in the 80s. So if you think about some of the measures of economic activity and market performance, it's difficult to get away from the conclusion that is has been a tremendous run for the American economy. I started at the bank in 1983 when the prime-lending rate was on its way down from 21.5%. When a home mortgage cost 17% and inflation was about 14 or 15% and it was just tearing away at the American economy. Through a lot of hard work and a tip of the cap to people like Paul Volker and Alan Greenspan, we now have inflation that's down around 2.5%. We have very low long-term rates that have allowed many Americans to afford and refinance their homes. Business, because we have a little bit more price stability, has been able to plan more for the long-term. Those sorts of long-term investments have created new technologies and innovations that have driven the economy forward."

Looking ahead, Carl is quick to add that we need to be careful. "That's not to say that there aren't situations we need to keep a close eye on. For me, in no particular order, there is healthcare and retirement. We have a community of baby boomers, which is the largest generation of Americans we have ever had. The good news is that it's also the wealthiest but the leading edge of the baby boom just hit 60. They are getting to an age where they will be drawing from their retirement plans instead of paying into them and they are going to be using more and more expensive medical care. So the projections of the costs of those things at the federal, state and county levels and even in private companies, is really a scary amount of money. Most of those levels have not put aside nearly enough money to pay for those things. That extends to the individual, where it's quite clear through surveys and analysis, that the average household has not put enough away for retirement and healthcare."

Carl says the key driver over the next 10 or 15 years in federal spending is going to be the entitlement programs, namely Social Security, Medicare and Medicaid. "We absolutely have to have a good dialogue on these so we do not leave over for our children a level of national debt that threatens their opportunity at well-being. There's concern among a lot of economists that there is a limit to that support and we ought to invest some time thinking about how not to borrow quite as much money."

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Article:
  Harry Zeeve: Page 1 - Page 2 - Page 3
  David Walker: Page 1 - Page 2
  Alison Acosta Fraser: Page 1 - Page 2 - Page 3
  Belle Sawhill: Page 1 - Page 2 - Page 3
  Chris Swann: Page 1 - Page 2 - Page 3
  Carl Tannenbaum: Page 1 - Page 2 - Page 3

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