More sense, less politics would ease deficit problem

Billings Gazette

by Editorial

There’s no shortage of commentary on the U.S. economy, or more specifically, on the effects of the federal government budget deficit. Yet a refreshing dose of Montana common sense surfaced this week at a U.S. Senate hearing.

“The financial system is short of neither capital nor liquidity to fund economic growth,” Bill Johnstone, president and CEO of Davidson Companies., a Montana-based securities firm, told members of the Senate banking committee. “The financial system, businesses and the consumer are short of confidence and much of this deficit in confidence is related to the federal deficit. “

Johnstone was invited to testify by U.S. Sen. Jon Tester, chairman of the subcommittee that held the hearing on “Economic Implications of the Federal Budget Deficit.” Johnstone wasn’t able to be in Washington for the hearing, but sent his written testimony, which gives a thoughtful perspective on the economic situation.

A Fort Benton native, Johnstone was named president of Davidson in 2001 and works from the company’s Great Falls headquarters. He made these points in his testimony:

There is considerable investor concern about the federal deficit and our ability or will to address it. The concern is negatively influencing the ability of investors and businesses to make business and investment decisions necessary to drive economic growth and job creation.

Policies to address the deficit should be bold, concrete and credible, but implementation should be staged to avoid exacerbating the current weakness in the economy. While the particulars of the solution are important, more important is that the development and implementation of a solution is credible and understood.

To the extent the solution involves changes in tax policy, as he believes it should, we should use this as an opportunity to commence reform of our federal tax laws.

In conversations with employees, clients and business people outside of Washington, Johnstone said, he has heard more pragmatic and balanced views than what he has heard coming out of the nation’ capitol. Outside of Washington, “the narrative reflects an acknowledgment that change is necessary and that it will require some sacrifice and loss of benefit or advantage that is conferred by existing policy.”

Reading his testimony reinforces the conviction that intelligent, creative Americans can solve our nation’s fiscal problems. However, the political challenge looms large. So many members of Congress have my-way or no-way negotiating stances. A fair and practical solution will not be all that any partisan group wants.

Speaking Thursday to another committee on Capitol Hill, Federal Reserve Chairman Ben Bernanke also emphasized the connection between lagging public confidence and uncertainty over federal fiscal policy.

“There is evident need to improve the process for making long-term budget decisions, to create greater predictability and clarity, while avoiding disruptions to the financial markets and the economy,” Bernanke testified.

Americans need to see that Congress can get important things done in a timely manner. Political gridlock doesn’t improve confidence.