Paulson in plea for reform of benefits
Paulson in plea for reform of benefits
By Edward Luce in Washington
Copyright The Financial Times Limited 2006
Published: August 1 2006 22:02 | Last updated: August 1 2006 22:02
Hank Paulson, the new US treasury secretary, made an impassioned plea on Tuesday for lawmakers to rise above partisan differences and tackle the looming US entitlement deficits.
In his first speech since becoming George W. Bush’s third treasury secretary last month, the former Goldman Sachs chief executive said reforming benefits would be his first priority.
Mr Bush last month hailed the fall in the US budget deficit to 2.3 per cent of gross domestic product. But in a change of emphasis, Mr Paulson made it clear he wanted to focus on longer-term deficits. “Let’s be honest with each other,” he said in a speech at Columbia University in New York. “The big budget issue is the longer-term structural entitlements challenge staring us in the face.”
The treasury secretary, who is viewed as the most credible figure to hold the job since Mr Bush took office in 2001, hinted that he believed the Sarbanes-Oxley law should be changed. Although Mr Paulson did not mention the law by name, his comments will be taken as a clear support of the growing number of executives calling for a watering down of the statute. US stock exchanges complained that Sarbanes-Oxley’s section 404, which imposes tough reporting requirements on small businesses and foreign companies, has driven equity listings overseas.
Mr Paulson said Washington’s swift regulatory response to the Enron and WorldCom corporate scandals in 2001 had helped restore investor confidence in the US. However, “often the pendulum swings too far and we need to go through a period of readjustment”, he said. “The challenge before us now is how to achieve the right regulatory balance to allow us to be competitive in today’s world.”
Mr Paulson’s speech puts social security reform firmly back on the political agenda more than a year after Mr Bush abandoned his plan to create “personal accounts”. Many Democrats last year accused the president of trying to privatise the pension system without fixing its underling solvency problem. Mr Paulson said yesterday that he had Mr Bush’s full backing to put entitlement reform firmly back on the agenda.
“Demographics don’t lie and demographics aren’t partisan,” he said. “If left unchecked these programmes would significantly impair our economic flexibility and erode our competitiveness.”
If unaddressed, the combined deficits of Medicare and Medicaid would rise from 8 per cent of GDP to 17 per cent in 2060.
Mr Paulson also warned that the world faced a disturbing wave of protectionism: “I am very concerned about the anti-trade rhetoric that I have heard coming from some quarters here [in the US] and around the world,” he said. He pledged that the US would do what it could to revive the Doha round of world trade talks that collapsed in Geneva 10 days ago. “We will continue to try to find a way to move forward.”
By Edward Luce in Washington
Copyright The Financial Times Limited 2006
Published: August 1 2006 22:02 | Last updated: August 1 2006 22:02
Hank Paulson, the new US treasury secretary, made an impassioned plea on Tuesday for lawmakers to rise above partisan differences and tackle the looming US entitlement deficits.
In his first speech since becoming George W. Bush’s third treasury secretary last month, the former Goldman Sachs chief executive said reforming benefits would be his first priority.
Mr Bush last month hailed the fall in the US budget deficit to 2.3 per cent of gross domestic product. But in a change of emphasis, Mr Paulson made it clear he wanted to focus on longer-term deficits. “Let’s be honest with each other,” he said in a speech at Columbia University in New York. “The big budget issue is the longer-term structural entitlements challenge staring us in the face.”
The treasury secretary, who is viewed as the most credible figure to hold the job since Mr Bush took office in 2001, hinted that he believed the Sarbanes-Oxley law should be changed. Although Mr Paulson did not mention the law by name, his comments will be taken as a clear support of the growing number of executives calling for a watering down of the statute. US stock exchanges complained that Sarbanes-Oxley’s section 404, which imposes tough reporting requirements on small businesses and foreign companies, has driven equity listings overseas.
Mr Paulson said Washington’s swift regulatory response to the Enron and WorldCom corporate scandals in 2001 had helped restore investor confidence in the US. However, “often the pendulum swings too far and we need to go through a period of readjustment”, he said. “The challenge before us now is how to achieve the right regulatory balance to allow us to be competitive in today’s world.”
Mr Paulson’s speech puts social security reform firmly back on the political agenda more than a year after Mr Bush abandoned his plan to create “personal accounts”. Many Democrats last year accused the president of trying to privatise the pension system without fixing its underling solvency problem. Mr Paulson said yesterday that he had Mr Bush’s full backing to put entitlement reform firmly back on the agenda.
“Demographics don’t lie and demographics aren’t partisan,” he said. “If left unchecked these programmes would significantly impair our economic flexibility and erode our competitiveness.”
If unaddressed, the combined deficits of Medicare and Medicaid would rise from 8 per cent of GDP to 17 per cent in 2060.
Mr Paulson also warned that the world faced a disturbing wave of protectionism: “I am very concerned about the anti-trade rhetoric that I have heard coming from some quarters here [in the US] and around the world,” he said. He pledged that the US would do what it could to revive the Doha round of world trade talks that collapsed in Geneva 10 days ago. “We will continue to try to find a way to move forward.”
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