Part 2: Introduction, "Bringing the Federal Deficit under Control" William Emmons

October 18, 2011
Presentation (.pdf)

Emmons begins exploring the deficit problem by demonstrating the seriousness of the nation's financial challenges.


Julie Stackhouse: So with that, I'm going to turn the mic over to Bill Emmons. As I mentioned, Bill is an economist on my staff in the Banking Supervision division. He is going to talk about the federal budget deficit, the issues that are out there, and what those mean to each of you. So, Bill, please join us.

William Emmons: Thank you, Julie. And thanks, everyone, for coming out this evening. This is I think a topic that's going to be with us for quite some time. As Julie said, really the purpose is to have a dialogue, for us to play our role as an honest broker of information, to provide you with facts and information to allow you to speak to us, but also, hopefully encourage you to speak to your representatives. Because this is all about the political process. Congress, the president are really in control of these parts of economic policy, not the Federal Reserve. So our role is simply to provide information, not advocacy. I don't have, we don't have any particular position on any of these issues that we'll be talking about tonight.

So we asked you a few questions by e-mail. We got 70 responses back. And the first question was: Do you think it's necessary that we cut the federal budget deficit? Well, this is about as close as you can come to unanimity. 97 percent of those said "yes, it was necessary to cut the budget deficit," 3 percent "not sure." We also gave you two ways to qualify no, for various reasons. Not a single person answered "no, it’s not necessary to cut the federal deficit." And I think it's safe to say this also was a bipartisan consensus, everybody agrees on this issue.

Okay, that's the easy part. Now for the rest of the time it's going to get a lot less easy, a lot more difficult. How are we going to make these difficult choices? So you're going to use your remote devices to poll, and I'm going to ask you a few questions throughout the evening. The first one is: Which do you think is the most important issue facing the country right now? So we've all establish—we've established that cutting the budget deficit is important, it's necessary. But there are lots of other challenges. For example, Chris is going to talk about unemployment next month. In your mind, how does the budget situation compare to unemployment, how does it compare to healthcare, et cetera? You can see the choices there. So I'll give you a few seconds. You punch the number on your remote. It will register here. Don't worry if you punch it more than once. It will only count your vote once. You can change so the last choice that you make will be the one that's registered. Okay, polling is closed. So 60 percent—and I just want to make a note of this for myself and for you so as we talk about these issues we can refer back to this. So 60 percent said the "economy and jobs"—so that means, Chris, you've got a big job next month—27 percent say that the "deficit or debt" is the most important, 8 percent say "healthcare," 0 percent "taxes," 3 percent "education" and 2 percent either something else that wasn't mentioned or can't decide among these.

Okay. So the deficit is an important issue, maybe not the top issue, given the weak economy at this point. All right, second question. This is harder. There was no right answer or wrong answer on the first one, and I won't say there's a completely right or wrong answer here, but this is a little bit more difficult to, I think, come to a conclusion. Do you think the federal budget deficit can be reduced without harming the economy? And so you can read. I won't read these out loud to you. Several different ways you might answer that. All right. So 13 percent of you said "yes, the sooner the better;" 43 percent said "yes, but it should be done gradually;" 40 percent said "no, you cannot reduce the deficit without harming the economy, but it might be a price worth paying;" 3 percent said "no, and so don't do it;" and 1 percent "no opinion." So again, if you added the yeses, you’d get 56 percent. And I guess you could interpret the third one also as kind of implicitly saying you probably should go ahead and do it, it's a price worth paying. So if you added, what do we get? 96 percent of you. So that's very consistent with the pre-event survey. 97 percent said that we should cut the budget deficit.

So I think we've established that it's an important issue. It's a complicated issue. We're not sure what the effects on the economy might be. So I'll come back and ask you later another question, and I'm also going to be reporting back to you some of the results that you gave us in the pre-event survey, as well as comparing those responses a little bit with some broader public opinion polls.