NAPA, Calif. — Stuart Varney, an economist and contributor to Fox News, is bullish on the U.S. economy. He warns, however, that government will have trouble supporting long-term pension and health-care commitments to retirees in coming years.
Varney, speaking here at the Ziff Davis CIO Summit on Monday, said there is also a potential political “crunch” in China that could spill over to that country’s economy. That crunch may occur because China’s Communist party is being “bumped up against” by capitalists on issues such as property rights. “Twenty years from now, I cannot see the Communist party maintaining its grip,” he said.
Varney discussed the new realities of the global marketplace, addressing an audience of about 130 technology executives at Ziff Davis Media’s CIO Summit at the Silverado Resort in Napa, Calif.
Why is he optimistic about the U.S.? “Americans apply technology in the workplace, as do other successful economies,” he said, citing Singapore, South Korea, Ireland and Australia as other countries that embrace technology and change.
“Americans love what is new,” he said. Other countries, for example, look to preserve old buildings. “In America, you knock the damn thing down. You build something vibrant, viable.”
Varney cited one example of rapid change propelled by technology: booking airline tickets online, a feat that marked its 10th anniversary on Jan. 16. “Think of how the travel industry has been transformed,” he said, referring to Alaska Airlines’ first online ticket sale.
To illustrate his point about the power of globalization, Varney ticked off the gross national product of four countries: the U.S., estimated at $13 trillion this year; Japan, at $4.3 trillion; Germany, “which is mightily struggling along,” at $2.2 trillion; followed by China. “China is coming from nowhere in a period of a few short years,” he said. “Within five years, it will certainly overtake Germany. Maybe Japan. That is a rapid change.” This is in contrast to the mid-1990s, when conventional wisdom held that the economies of Japan and Western Europe would fare well.
Another factor contributing to change in the global economy, according to Varney: Countries with declining fertility rates and an aging population will not be able to support social programs, including retirement benefits.
He pointed to the strike of transit workers in New York. “The strike was not about wages. It was about pension and health-care benefits,” he said. “A bus driver in New York City makes $62,000 a year, and that bus driver can retire at 55 or after 20 years with half-pay and full medical benefits. You cannot support that. It’s impossible. That’s an equation that does not add up.”
A change in accounting regulations will require local and state governments in the next 18 months to disclose their health-care and pension obligations. “The numbers are going to be staggering,” Varney warned, adding that taxpayers will not be able to afford to support these retirement benefits, either. “Something has to give.”
A bright spot for the U.S., in contrast to other developed countries: “We accept, willingly or otherwise, the immigration of millions of people outside our borders. They will provide your long-term health care and benefits,” he said, pointing out that he is also an immigrant, having arrived in the U.S. 30 years ago this week. And Varney has also done his part to improve the nation’s fertility rate: He’s the father of six children. “I am going to demand a round of applause,” he joked.
