Q & A

Is x sustainable?

Will medical costs in the United States swamp our ability to pay? Can information technology continue to get faster, lighter, and more effective? Will global trade go on increasing and generating wealth? Asking if a system is sustainable forces one to project far into the future — and then to look back at the present from that vantage.


Healthcare

Jonathan Gruber
Professor of Economics, Massachusetts Institute of Technology

Is the healthcare system sustainable?

In terms of the nation as a whole, healthcare spending is sustainable for the next 75 years. Even if we don't do anything, we can continue to pay for healthcare cost increases without lowering our standard of living. But in terms of government budgets, healthcare spending is not sustainable. It is simply implausible that we will raise taxes enough to cover the projected increases in Medicare and Medicaid costs over the next 75 years. And you can't deal with the costs for the government programs without dealing more broadly with controlling costs. So in that sense healthcare is unsustainable — the pressure from government budgets means we need to fix the system.

What actions would most likely put us on a sustainable course?

Unfortunately we don't have great answers on this. That's why all the experimentation in the current federal reform is so important — we need to learn more about what works and what doesn’t. But broadly speaking the key is to both move towards more effective delivery of healthcare on the supply side (e.g., by changing reimbursement so that hospitals and doctors don’t provide excessive care) and make patients more price sensitive.

 

The Information Economy

Robert D. Atkinson
President, Information Technology and Innovation Foundation

Is the pace of innovation and change in the information sector sustainable?

There are those who believe that the pace of change will continue to accelerate exponentially, that Moore's Law will continue to hold true almost without end. In reality, there’s probably another 10–20 years left of the sort of IT innovation we’ve experienced the last few decades. We essentially have the core technology system of the future: wireless, GPS, storage, processing, broadband, and others. This will continue to get better, and in some areas such as the ability for IT to be sensed throughout the planet (refrigerators will have IP addresses, manhole covers will have IP addresses), we’ll still see dramatic advances that impact people all around the world.

What actions will keep IT innovation on a sustainable course?

There is the potential for major breakdowns in the system. There could be catastrophic cyber-security attacks. Some people talk of a cyber-security Pearl Harbor. But there were also predictions of a nuclear war for decades and it didn't happen. The key is to manage the risk. Here in the U.S., there’s the bigger issue of the country falling behind when it comes to IT advances. In Scandinavia, health IT is leaps and bounds ahead of us. Estonia has instituted digital signatures. In Japan and Korea, people can pay for things using their mobile devices. Part of the problem stems from an ideological view in this country that the market alone is the only way to produce advances. And part has been a general fear among some in Washington that we need to take steps to limit, not promote IT innovation. But there appears to be a growing recognition that the nation needs a digital transformation strategy and policy.

 

Globalization

Daniel Griswold
Director of Trade Policy Studies, Cato Institute

Is globalization sustainable?

Globalization properly understood is sustainable. We can go on liberalizing trade and investment and travel and immigration into the foreseeable future and it will be a powerful engine for lifting mankind to a more prosperous future. It also will help with sustainability in general. By creating wealth, globalization allows more and more countries to afford more sustainable environmental policies — to, say, afford scrubbers on their coal plants or to create sewage systems in more and more urban and rural areas. That's why you see the highest environmental standards in rich countries most open to the global economy. The most sustainable path for everyone is one in which people are free to do business with one another and have incentives to use resources in the most economical way.

What actions will keep globalization on a sustainable course?

The key for globalization is for countries to resist the nationalistic impulse to grab hold of economic policy and start raising trade barriers and isolating themselves. This would be bad for foreign relations, bad for economic growth, and ultimately bad for the environment. Nothing is written in stone. The world took a huge step backwards in this regard in the 1930s. For those who believe America is better off when people enjoy more freedom to pursue their economic activities, these last couple years have not been encouraging. There's pressure to raise tariffs on trade, taxes are going up, and regulation is going up. It's not clear if this is a long-term trend. Clearly other places in the world, emerging markets in particular, continue to move forward in terms of opening themselves up. Medium- to long-term prospects are still quite bright. The world is going to be a freer, wealthier, more sustainable place 20 or 30 years from now.

 

Water

Sandra Postel
Director, Global Water Policy Project; Freshwater Fellow, National Geographic Society; Author, Last Oasis: Facing Water Scarcity

Is the amount of fresh water we use sustainable?

Worldwide, global water use — the volume withdrawn from rivers, lakes, and aquifers — amounts to about 10% of the global renewable water supply. So based on that statistic, it would appear that global water use is sustainable. But it's not—for two important reasons. First, a large share of the human population and of irrigated land is in a situation where water is relatively scarce. As a result, many rivers are over-tapped and running dry for large portions of the year — the Colorado, Rio Grande, Yellow, Indus, Nile, Amu Darya, to name a few. Likewise, in many regions, groundwater is being pumped out of aquifers faster than it is being recharged, so water tables are falling and groundwater reserves are being depleted. This is a big problem in important food-growing regions of India, the North Plain of China, and the western United States, as well as in parts of Mexico, Iraq, Iran, the Arabian Peninsula, North Africa, and elsewhere. In effect, we’re using some of tomorrow's water to meet today’s demands. As much as 10% of the current global food supply depends on the unsustainable use of water. In India, this figure is closer to 15–20%. There's a bubble in the food economy, propped up by unsustainable water use, that will pop at some point.

What actions would most likely put us on a sustainable course?

The global water challenge is not one of water scarcity per se, but one of water mismanagement and misallocation. And that's good news, because there's a lot of room for improvement with good science, technology, and policy. Two things are needed most to move us onto a more sustainable path. One is a mechanism to value the goods and services provided by healthy, well-functioning freshwater ecosystems. Our traditional approach assumes water only has value when it's extracted from the natural environment and put to use on a farm, in a factory, or in a home. But water has value when left in place to do its ecological work—to sustain fisheries, biodiversity, floodplain productivity, sediment delivery to deltas, recreational enjoyment, and so on. Most of those ecosystem services are not priced in commercial markets, so there’s a clear role for governments to protect their value — whether through regulations or by establishing markets that elicit payments for those ecosystem services. The second thing needed is a big boost in water productivity — the value or benefit derived from each gallon of water extracted from the natural environment. This is needed in all the major sectors — agriculture, industry, and cities. My sense is that we need to aim at doubling global water productivity by 2025 if we're to have a shot at meeting the water and food needs of eight billion people while also safeguarding freshwater ecosystems.

 

The Federal Budget

James R. Horney
Director of Federal Fiscal Policy, Center on Budget and Policy Priorities

Is the federal budget sustainable?

There is a very strong consensus among budget experts that the federal budget is not sustainable. And the primary reason is the anticipated continued rapid growth of per-person health costs. There's a smaller effect of the aging of the population and there's a significant effect of inadequate revenues resulting from the tax cuts of 2001 and 2003. But we just can’t continue with healthcare costs that rise 1.5–2 percentage points higher per year than the economy. We've done projections that show if we don't make any changes in policy, by 2050 deficits will be about 20% of GDP and debt about 300% of GDP. Compare this to the end of World War II, when we had about 110% of GDP debt. Under this scenario, our standard of living would go down and the government would increasingly have a hard time getting loans to finance debt, increasing the share of national income going just to finance the debt. This might happen slowly, but there's also a significant chance that it could happen more suddenly, with a real financial catastrophe.

What actions would most likely put us on a sustainable course?

We will need to cut spending and find ways to increase revenues. At the moment, the Republican Party adamantly opposes any increases in taxes and neither party seems anxious to cut spending. Over the last 30 years, we've had budget surplus for only four. Deficits have really swollen the last couple years because of the severe downturn. If you take out tax cuts, effects of the economic downturn, cost of wars, you’re looking at small deficits over the next 10 years. But long run, deficits would grow because of healthcare. Were it not for these things we’d have more leeway but would still need to take action to keep the budget sustainable over the long run. Social Security is part of the problem, but a smaller part than most people assume. The fact is we need leaders willing to step up and take the political hit for doing the right thing. In 1990, Bush sat down with Democratic and Republican leaders and created a bill that cut the deficit by $500 billion over five years. It was an initial step that pointed us towards a balanced budget by the end of the decade. But it was a different political era. Some people take from it that Bush lost the next election. By the time of the Clinton budget three years later, not a single Republican was willing to vote for something with tax increases. It won’t be easy but I still believe that Washington will eventually get us back on the right track. We have no choice.

 

Corporate Governance

Stephen M. Davis
Executive Director of the Millstein Center for Corporate Governance and Performance, Yale School of Management

Is corporate governance sustainable?

To tackle the Enron-WorldCom scandals, Washington fell into a conventional "police"-style approach, adopting Sarbanes-Oxley rules aimed at preventing fraud. It was an instinctive top-down solution. Today, though, policymakers are moving toward a different — and potentially more effective — reform in the wake of the financial crisis. They seek to empower investors to act as a kind of "neighborhood watch." Congress and the SEC are mulling mandating majority-rule voting for corporate directors, enhancing investor rights to nominate directors, requiring annual "say on pay" votes on executive compensation policies. Owners would use market mechanisms to align managers with real investor interests. The problem is that awarding rights to investors doesn't guarantee that institutions will use them, use them wisely, or use them for long-term value. In fact, what could thwart efforts to make corporate governance sustainable is chronic dysfunction in fund governance.

What actions would most likely put us on a sustainable course?

Corporate boards will implement a credible, sustainable culture of accountability when their owners — and not just regulators — demand it. The challenge we face is how to empower real ownership on the part of institutional investors. Public policies can make headway by measures that strengthen the chain of accountability, aligning the behavior of big financial agents — such as pension funds and mutual funds — with the interests of underlying beneficiaries. In the UK, the Financial Reporting Council has advocated a "stewardship code" to propel such reform. In the U.S., the SEC and the federal Department of Labor can take steps such as reviewing transparency and governance practices of pension funds and mutual funds.

 

Communities

John Norquist
President, Congress of New Urbanists

Are the nation’s communities sustainable?

The federal government has been subsidizing the spreading out of settlements for the past 60 years. A major result of this is that Americans in the exurbs use far more energy per capita than in cities. People living in Manhattan use 25% as much energy as the average American. The reason is our transportation policies. By focusing on congestion almost exclusively, the country has expanded road capacity to the point that many cities are dying and people have sprawled out so far that there is enough sprawl-type single-family housing to fill 30 years of demand. Going forward, the result of this is that people will not live as well, they'll have lower net income, and the U.S. will continue to needlessly waste energy.

What actions would put us back on a sustainable course?

To halt the fracturing of American communities, the U.S. needs to do away with the "bigger road theory." The idea of building more freeways and giant roads and access roads had a certain utility in the '50s, '60s, and '70s when energy was really cheap and there were all the new communities and suburbs. But it wasn't sustainable even at cheap energy prices. Now, we need to change the standard and change the goal. Did you know it's almost impossible to build the kind of mixed-use buildings that make up what we think of as Main Street? Because of regulations with Fannie Mae and Freddie Mac, no more than 20% of a mixed-use building can be nonresidential. They did this so banks would be confident in them. It's counterproductive. Some people say we should do away with Fannie and Freddie, and I agree. We need to take a fresh look at a lot of things we do that are killing our cities and realize that we need people living in dense areas if we care to maintain our standard of living.


Interviews conducted and edited by John Zebrowski.