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Entitlement Cuts Needed, But Who Has Guts to Do It?

Jon Corzine left government reluctantly, but there's at least one reason why he doesn't mind being out of office.

Jon Corzine
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Jon Corzine

Dealing with the current federal debtand deficit problems, he said, is a job someone else can have.

That's because he and fellow panelists gathered at the Delivering Alpha conference Wednesday agreed that controlling costs of large-scale entitlement programs such as Medicare and Medicaid are at the core of getting spending under control.

For those uninitiated in the way of U.S. politics, those programs are considered the proverbial third rails—touch them and you die.

"Entitlements absolutely have to be addressed in a way that I would have been uncomfortable talking about as an elected official," said Corzine, the former New Jersey governor and U.S. senator. Republican Chris Christie defeated Corzine in the 2009 gubernatorial race.

The remark was telling during a lively debate over just what policymakers can do to address the U.S. spending issues. The federal budget deficit is approaching $1.5 trillion and the national debt is $14.5 trillion and growing.

Despite agreement that the issue must be addressed, reaching consensus on how to go about it is a difficult exercise. The problem is that cutting off spending could stymie growth, but allowing the debts and deficits to continue to balloon unabated pose what could be an even greater threat to national economic stability, as resources are diverted towards paying foreign creditors.

"There's no question that in order for us to do right, we're going to undergo less growth than we hoped for and less growth than a lot of people expect," said Thomas F. Steyer, senior managing member at Farallon Capital Management. "Do I think it's going to affect the way I am investing and the ways I think about the future? Yes, I do."

Delivering Alpha - presented by CNBC and Institutional Investor
Delivering Alpha - presented by CNBC and Institutional Investor

Yet the notion that Washington will take away benefits from its big-ticket entitlements is troubling to some at at time of economic malaise.

As such, the populist battle to preserve the social compact against the practical realities of fiscal management continues to rage.

"This is a conversation about the responsibility of America's elite. America's elite is on this panel and gathered in this room. Exactly what level of responsibility do you people take to the rest of the people in this country?" said Damon Silvers, director of policy and special counsel for the AFL-CIO. "By cutting off the health care to poor, elderly Americans, think about what the public response to you might look like over the next generation."

But Emil W. Henry Jr., former assistant Treasury secretary and CEO at Henry, Tiger, said the U.S. needs political change to take on difficult issues that are being ignored by the Obama administration.

He cited a speech earlier in the day from current Treasury Secretary Timothy Geithneras being evasive on what the White House will to do foster economic growth.

"Growth is the answer. I think (Geithner) gave lip service to growth," Henry said. "I haven't seen a single growth policy out of this administration."

Ultimately, according to Corzine, who currently runs MF Global, resolving the issues may fall to those who are willing to sacrifice their political future.

"Politics is not going to go away," he said. "People have to be willing to lose to have society win."