It will require a "coalition of the sensible" to mend the battered U.S. economy, economist Alice Rivlin told a Steamboat Springs audience Thursday.
Only a group of people willing to work reasonably across party lines can repair the market capitalism system, Rivlin said at the Strings Music Pavilion. Rivlin, an economist and senior fellow at the Brookings Institution, gave the final talk in this year's Seminars at Steamboat discussion series.
Her talk was titled "The Future of Capitalism." In it, Rivlin addressed the strengths and weaknesses of the country's market capitalism system. She also discussed how fixing the health care system is crucial to building a strong economy.
Belle Sawhill, chairwoman of the seminar speaker committee, introduced Rivlin as an optimist and a groundbreaking economist.
"Back in the dark ages, when there were exactly 2 1/2 women economists in the entire world, she was one of them," Sawhill said, "and I was trying to become the other one, and she was an inspiration to me."
Rivlin has had a front seat to the development of the economy for years. She served as vice chairwoman of the Federal Reserve Board from 1996 to 1999. She also was director of the White House Office of Management and Budget during President Bill Clinton's first administration.
Rivlin explained market capitalism as the system through which private financial systems and securities markets make decisions about the allocation of capital, or who gets money to finance and expand businesses.
"Market capitalism channels savings into their most productive uses and does it far more effectively than any central planning system can, and it even reduces many of the risks inherent in economic activity," Rivlin said.
But the system suffers from pitfalls, she noted, including "plenty of instances where unfettered greed leads to disastrous results."
That was part of what caused this recession, Rivlin said. People were taking risks with other people's money, and excessive borrowing made for a vulnerable economy.
There are two weaknesses of the market capitalism system, she said: The market is often unstable and is prone to irrational highs and lows, and it also generates extremes of wealth and poverty. Those issues aren't new.
"We've been kicking problems down the road for quite a while and have gotten used to doing it," Rivlin said. "It's easy."
But the recession has made the systemic weaknesses impossible to ignore, Rivlin said. It also provides a needed push for the country to try to fix the problems.
"We have a chance to strengthen market capitalism so it's less prone to create another devastating boom/bust cycle like the one we're living in," she said.
That's where Rivlin's coalition of the sensible comes in. People across political parties must sit down together and come up with a way to balance regulation with risk-taking, she said.
Rivlin also spoke about the need for health care reform. The recession has made vulnerable Americans even more vulnerable, she said. It also puts more pressure on a nation already in debt.
"The long-term deficits were created by our reluctance to face up to the fact that our population is aging, and we've made promises to our future retirees that our tax structure will not support," Rivlin said.
The country has known for years that its health care spending was growing faster than its other spending, she said. Universal care is necessary at this point, Rivlin said. She suggested an exchange that includes a variety of plans and government subsidies for low-income people.
"What's controversial or most controversial is whether one of the competing plans that would be offered on these exchanges would be a public plan or a government plan," Rivlin said. "Personally, I don't think it's essential that one of these plans be a government plan. I think it would be better to establish a framework for universal coverage, get the exchange up and running, and see how these providers do creating a package."