Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, September 15, 1995 TAG: 9509150072
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: JEFF STURGEON STAFF WRITER
DATELINE: ABINGDON LENGTH: Medium
If the U.S. economy had a checkup right about now, the doctor might say, "Keep it up. See you in two years."
The American wallet, however, needs treatment for a serious circulation problem.
An audience of 130 area business leaders heard those conclusions and others Thursday at this year's Southwest Business Forum, sponsored by Emory & Henry College in Emory and Catawba Capital Management of Roanoke.
The economist on the speakers's panel, Donald Ratajczak, director of the Economic Forecasting Center at Georgia State University, said almost all indicators are pointing in the right direction. He predicted the stock market's chief measure, the Dow Jones Industrial index, will rise to above 5500 points in a year. The Dow closed Thursday at 4801.80.
Even though labor shortages in Virginia and other parts of the country threaten to drive up wages, "that kind of stress is two years away at the least," he said.
There is bad news on the farm, however. Asian farmers are putting down their tools for better opportunities in the city in such numbers it's noticeably decreasing world crop production, Ratajczak said.
U.S. farmers, who are supposed to make up the difference, might have a hard time fulfilling that responsibility if next year's output is as depressed as this year's is so far, he said.
The economy's "Achilles' heel" has been Washington's inability to provide health care insurance for the aged through the Medicare system and similar programs, and balance the budget, he said.
"We told people we can handle their health needs after retirement and we can't," Ratajczak said.
Medicare and Medicaid will consume every penny of federal government operating revenue in about 35 years - and leave nothing for other programs such as defense - if left unchanged, said speaker Gillian Spooner, a partner in the Washington tax practice of KPMG Peat Marwick.
Tax system changes that will be debated hotly during this fall and winter will try to address that and a second problem involving American savings habits, she said. Savings rates in the United States have plummeted since the mid-1980s, from about 6 percent to 8 percent of disposable income down to 4 percent. Europeans save at twice our rate and the Japanese save nearly 19 percent of their pay.
One proposal, by Sens. Sam Nunn, D-Ga., and Pete Domenici, R-N.M., would remove income tax on any money saved. Currently, there are limits on what an individual can save tax-free.
The tax question is intertwined with the current budget debate, said Spooner, who outlined its three components as follows:
Congress has until Sept. 30 to keep the government funded by passing 13 appropriation bills.
To keep the government running and avoid shocks to the financial market, Congress needs to agree soon to exceed the national debt cap imposed earlier, $4.9 trillion.
There are "budget reconciliation" proposals to put the nation on course to balance its budget in seven years.
by CNB