Delivering Alpha 2011

Does the Deficit Matter? Three Quick Takes

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One of the conference's panels is “Solving the Deficit Problem.” Moderated by CNBC's Steve Liesman, the discussion between Jon Corzine—Chairman and CEO of MF Global; Emil Henry, Jr., CEO of Henry, Tiger LLC; and Thomas Steyer of Farallon Capital Management—aims to tackle a growth threat to America's long-term prosperity. The panelists gave CNBC's Maneet Ahuja a preview of their opinions.

Thomas Steyer, Senior Managing Member, Farallon Capital Management

“The purpose of a long-term deficit reduction plan is to build a strong American economy and provide the best opportunities for its citizens. To do that, federal budget deficits must be brought under control, but must allow time for our economy to recover before delivering the full dose of painful medicine. After all, the best deficit reduction method is real growth. Having said that, I feel that any successful budgeting exercise at this point must protect investment in our future (education, infrastructure, R&D), maintain essential public services, including defense, and protect the social safety net, while cutting spending and addressing the most substantial fiscal challenge facing the country, namely healthcare. So while I applaud spending cuts, we must make them in the context of our government’s true obligations and challenges, in a realistic time frame, and with the knowledge that some of the solutions must come from increased revenues. Markets don't need to know everything is fine, but to believe everything will be fine. A credible trajectory with a determination to see it through is what the doctor has ordered.”

Emil Henry, CEO, Henry, Tiger, LLC

“Deficits and our national debt are integrally linked and unsustainable, and they are both on a trajectory towards crisis if not addressed soon and dramatically. The deficit needs both short-term and long-term solutions. In the short-term, government spending needs to be reduced from its current level of 25 percent of (gross domestic product) to its historical average of 20 percent or less. In the long term, any serious effort to return to a path of fiscal discipline must include entitlement reform which will require leadership and politicians who place the health of the country ahead of political careers.

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“In addition, the most important policy prescriptions going forward must focus on growth, including reducing burdensome regulation, simplifying the tax code, and lowering the corporate tax rate, passing free trade agreements, and creating an environment in the United States that attracts jobs putting us back on a path the full employment. A critical element of a growth is productivity enhancements from education and technology.”

Jon Corzine, Chairman and CEO, MF Global

“We need a two-pronged approach that provides fiscal stimulus today, coupled with a combination of entitlement reform, spending controls, and tax reform in the long term. Unless we make immediate investments in education, infrastructure, and job creation, the economy is likely to experience a double-dip recession, which will translate to even larger deficits over the next decade. At the same time, we need to take steps to control entitlement spending and protect the safety net for future generations, while also reforming the tax code and select discretionary programs. The problem is fixable, if politics doesn’t get in the way.”