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Human capital. The deficit and its relation to entitlement spending. The sequestration.
Those were just some of the subjects Dr. Jim Barth, Lowder Eminent Scholar in Finance at the Auburn University College of Business and Milken Institute Senior Fellow, shared Friday, June 7, with county commissioners across Alabama at the Auburn University Hotel and Dixon Conference Center.
Barth’s presentation, “Challenges and Opportunities for Local Communities in a Global Economy,” was part of the 43rd Annual Alabama Government Institute, where local leaders across the state convene. The event was sponsored by the Auburn University Center for Governmental Services, of which Barth is also a Senior Fellow.
“Dr. Barth brings a global, national and international perspective on finance and his presence really connects our commissioners to the bigger picture,” said Don-Terry Veal, Director of the Auburn University Center for Governmental Services. “The county commissioners are often interested in that. Years ago, there was much more of an interest in local government and maybe national, but now, because what the global economy has become, the local decision-makers are clear that they have a part of this global agenda.”
Barth, who has authored books and penned papers on banking and finance, discussed employment, unemployment, taxation and housing, but spoke passionately about what he considered “The most important asset in the United States ...”
“I’m a big proponent of education and health care,” Barth told commissioners representing all 67 counties. “Why? Because the most important asset in the United States is human capital. If you want to make an investment, you get a bigger return — not investing in a stock, or a bond, or a home — but in your children.”
In a private interview following Barth’s presentation, he continued, “Human capital is the most important asset to any country. It’s the people. It’s not the buildings. It’s not the roads. It’s not the land. If you have human capital -- that is people who are healthy and educated and have the skills in a modern economy -- that’s going to generate an economic output and help create jobs. What we have is a mismatch between skills and jobs today. It’s not so much merely an unemployment problem. We have a lot of jobs that are going to go unfilled because there aren’t the people with the right skills for those jobs. Buildings are useless without people who know how to use the buildings and know how to produce goods and services within those buildings.”
Barth warned commissioners about the impact that non-discretionary federal spending is having on the federal budget. According to a chart provided by the Congressional Budget Office, it showed that entitlement spending would more than likely surpass national revenue after 2026. Barth said the ratio of the deficit ($16.7 trillion as of June 7) to the Gross Domestic Product is rising, which he considered alarming.
“The reason is because of so-called entitlement spending,” Barth told commissioners. “What does this mean? Mainly Medicaid, Medicare and Social Security. The government has to spend by law. You can cut some things, but not everything, unless the law is changed.
“We do have to deal with Social Security and entitlements, you know it, I know it, the people in Washington know it, the president knows it and members of Congress know it. The problem we have with Social Security, to be blunt, is that people are living too long. I don’t think people want to voluntarily solve that problem. Life expectancy is 80, 85 for females. People are living longer, so there are insufficient funds to make the payments.”
To prepare for the future Barth encouraged people to “start saving.”
Barth briefly touched on the sequestration’s impact on Alabama, which affected a number of programs in the state — including education, defense, law enforcement, child care, public health and other public-assistance areas. The sequestration was mandated by Congress on March 1 to automatically trim $85 billion from non-discretionary programs. Entitlement programs are exempt.
“The impact of sequestration (in Alabama) hasn’t been as great as some people say,” Barth said. “But if you lose your job, you’re not going to be happy, so some people have been harmed by sequestration. It turns out that federal spending is roughly $2.8 trillion. So if you take $85 billion away, it’s not a big decrease, but it has adversely impacted some people’s lives.”
Barth has worked in the College of Business since 1989. He is the co-author of Guardians of Finance: Making Regulators Work for Us. Barth’s expertise in finance has been featured in U.S. News & World Report, Financial Markets, and the Global Economy Journal. Earlier this spring, Barth was part of an all-star panel, featuring world-renown economists and elected officials, at the 16th Annual Milken Global Conference, where he shared his perspective on the U.S. banking crisis. Barth can be reached at email@example.com
The Center for Governmental Services, established in 1976, provides technical assistance, training, and survey and policy research to meet the changing needs of Alabama governments and public officials. For more information, visit its Web site at www.auburn.edu/outreach/cgs/, or call 844-4781.