A Conversation with Hank Brown
Conversation with Hank Brown
The meeting was graciously sponsored by Colorado Business Bank.
Boulder Tomorrow welcomed former Senator and University of Colorado President Hank Brown for an informal conversation with incoming Board Chair Gary Horton. Hank discussed the economic crisis and the long-term trends in economic policy, the rewards of elected office and the demands facing the state's universities. His insight covered a range of important issues that will impact the Boulder business community for the next several years.
Hank's initial comments highlighted his confidence that the country will weather the current crisis, albeit with some "painful" steps. "We'll get through this in reasonable order. However we're looking at an enormous sea change that will dominate much of our public policy for years." He foresees a de-leveraging which ultimately will be healthy for our private sector.
Hank said there is a problem that we haven't faced up to: not a financial breakdown of the private sector but of the private sector. The big crisis," he said, "is the one still coming." He described how government spending as a percentage of Gross Domestic Production (GDP) as grown from less than 10% prior to 1930 to approximately 35% now. "Even if we don't overspend in any given year, and assume no new programs, it will be over 60% in the next 40 years. It's mind-boggling. We've put government spending on auto-pilot."
Hank stressed that challenge for government is to learn from the current crisis and prepare and not do what we did this time: not watching and not using common sense. "It is a major problem that likely won't come to a head for another five or ten years," he said. "I'm not going to cheer you up any more," he joked as he then joined Gary in the easy chairs on the stage.
Gary prompted Hank on the Treasury Department's techniques to save financial institutions. Hank said he doesn't see a heavy level of government involvement with the current bailout efforts, although the new administration could change that. He emphasized how crucial it is to not have dramatic government involvement in business enterprises.
"We think about government in the United States, in terms of its size, as an issue related to helping people. It is a function of taking money from those doing well and redistributing to those who need help," he said. "Obviously this is a controversial area and we can debate how much or how little should be redistributed. But that is different than running a business, which is driven by efficiency and productivity."
Because the government responds to their constituencies, they allocate spending for political reasons, not economic reasons, he said. "Government involvement in enterprises is a huge mistake." He pointed to government sponsored enterprises like Fannie Mae (Federal National Mortgage Association) as an example. Decisions on buying mortgages to help more people own homes were made for political reasons that were not economically defensible in terms of risk. "If you want to assist people, government can do it, but not through running enterprises. That's the critical guideline in my mind."
Gary outlined the complex challenges facing the U.S. auto companies and asked Hank if he would describe his opinion on what to do. "No," Hank said with a smile. More seriously, he said the costs to produce U.S. autos are not sustainable or competitive globally. Chapter 11 bankruptcy may be the only way to save jobs via renegotiated labor contracts. "They've simply been giving away more than they have. A loan only prolongs the agony."
Hank addressed the public's obligation to cover the pension and health care costs of any failed auto companies' employees. "With normal accounting standards-not government accounting standards-you would see the full range of liabilities," he said. The auto companies' Pension Benefit Guarantee Corporation insurance is just one example. "If you look at the broad range of liabilities, we have estimates of $30 - 50 trillion dollars in unrecognized liabilities," he said. "So we have lots of excitement ahead of us."
Hank was emphatic that as a country we must determine our competitive vision. "It's not a long-term plan to not manufacture anything in the United States," he said. "The areas where we do produce and sell competitively are not enough."
Regarding his years in the U.S. Senate, he described the fulfillment of serving and "getting things done". Working on a generic drug bill, conservation trust funds and corporate tax codes were highlights for him. "If you recall the late seventies, taxes were high on blue collar workers. A few hours of overtime would bump people into higher tax brackets for their entire paycheck. I found it beneficial and fun helping to address these issues." Like anything in life, "you get out what you put into it," he said.
Hank compared his years as the President of the University of Colorado and the University of Northern Colorado. "The challenges are the same - the need for communication. The need to build an attitude of working together is absolutely necessary." In Greeley the growth has been to the west, and downtown and the east side has vacant buildings. Students live many miles west of the campus. In Boulder, he referenced the "insanity" of lawsuits over the University's property on the south side of town. "In both cases the University and the city didn"t do a good job letting each other know their vision and plans for development."
Gary finished asking how the new administration would handle the range of difficult challenges the country faces. Hank's perception is that government has not been responsible, and we need to use more common sense. "I think Washington is living in la-la land," he said. "We went to war in Iraq, and never asked whether we could afford it. There were good reasons to go and good reasons not to go. But we just assumed funding was no problem. Think of all the things that have been promised during the presidential campaign. My view isn’t shared by most people in the Capitol, but what we're doing is just nuts.' The new administration must be realistic in considering what can be funded, he said.
Hank concluded with an emphasis on the long-term view of the country's finances. "If you ask most people, they'll tell you spending is out of hand, but it hasn't translated through to our elected officials. We've developed a society where we've separated what things cost for government from what we want to do."
Thank you to Colorado Business Bank for their sponsorship of this meeting.
