Summary:Steve Forbes started off the session by asking the panelists to share their views of the future of the American economy. Overwhelmingly, the consensus was rather negative, with a few positive highlights. John Breaux, former U.S. senator, began by citing the main difficulties that Congress faces today, namely, the high cost of energy due to increasing oil prices as well as rising health care costs and our inability to fund them under existing policies.
Richard Iley described the American economy as the Titantic — a big ship admired by the rest of world, but potentially running on excessive amounts of fuel and warned of "grave dangers lurking ahead," in particular, the large amounts of debt incurred by consumers. He described the U.S. economy as one with excessive undersaving and overconsumption as well as one "living well beyond its means." He also showed concern for foreign willingness to service the U.S. debt.
Continuing in this vein, Suzanne Nora Johnson described the current U.S. situation as an "air pocket of turbulence" and pointed out the high inflation and low savings rates in the U.S. Terry Semel injected a glimmer of hope in describing the relative success of American companies in integrating the Internet into American life, still, he questioned the U.S.′s future dominance as a leader in creating infrastructure in the field. Lastly, Barry Sternlicht talked about the weak dollar, foreign investment, the threat of offshore jobs and projected a "slowdown and seismic shift in the U.S. economy."
Forbes continued by asking the panelists what they thought would be the next breakthrough for the U.S. economy. Terry Semel emphasized the importance of building an infrastructure based on the Internet and TV Internet in order to stay competitive with other countries, going on to recommend that the government take initiative. Sternlicht agreed, stating that "Congress never created a clear path of how it was going to be done." The panelists then followed with a short discussion of the telecom industries, emphasizing that the world is increasingly changing to wireless technology and that current federal regulations need to be revised to promote competition.
Next, the panel turned to real estate, with Forbes posing the question "Is there a housing bubble?" Barry Sternlicht started off by stating that the double-digit rise in housing prices are not sustainable and predicted that the housing market should slow down, but further qualifyed this statement by pointing out that in locations in high demand, prices would most likely stay current. However, he pointed out that the weak dollar was encouraging the rise in housing prices by driving up demand by foreign entities. Johnson agreed with Sternlicht stating that people are spending more on housing than ever before and that this was alarming for the U.S. economy. Iley contended that there is "compelling evidence of a national housing bubble" and then pointed out that housing prices have risen 40 percent since 1997. He also raised concern about the fact that consumers today use their mortgages as "readily as cash from an ATM."
Forbes challenged the notion of a housing bubble stating that households today seem to be better off then ever before. Iley opposed this point of view by pointing out that people′s liabilities are rising more quickly than their assets and that both the American public and public sector have record amounts of debt.
The panel expressed concern over oil prices, with Breaux citing it as the one factor that would have the greatest implications for our economy. Forbes suggested that the rise in oil inventories and prices might possibly be due to speculation. Nora Johnson agreed, but added that supply and demand played a nominal role as well, as there are fewer suppliers of oil then ever before.
The panel touched on the importance of "Chindia" and the implications for the American workforce, concluding that American policy will have to change to adapt to the reality of a cheap, willing, and available labor force from other countries.
Forbes closed by asking about what the panelists what they thought of the Sarbanes Oxley Act. The overall consensus was that it is not good for the American economy, with Sternlicht saying that it encourages companies to not take risk and defer to auditors. The other panelists concurred, although Terry Semel pointed that parts of the Sarbanes Oxley Act help companies examine their internal accounting standards. Breaux commented that Congress will look at the measure again soon but is not planning any immediate changes in the near future due to the recent corporate climate.
