The nation continues to struggle with too much debt — the core problem behind the 2008 financial crisis, former U.S. Treasury Secretary Henry Paulson Jr. warned a Denver audience Monday.
“We are overleveraged,” Paulson told a lunch meeting of the Global Business Travel Association at the Colorado Convention Center.
Paulson is best known for his role in crafting the Troubled Asset Relief Program and other unpopular “bailouts” during the financial crisis in late 2008.
“I think they were right,” Paulson said of his decisions. “I feel that more so as time goes on.”
Most don’t agree, he acknowledges. When he left his post in 2009, Paulson said, a poll showed 92 percent of respondents were opposed to TARP.
Only 60 percent of Americans, by contrast, were against the use of torture as an interrogation tool.
The debate over raising the ceiling on the federal debt, now at $14.5 trillion, is just the latest flashpoint as the nation deleverages.
Paulson called the nation’s fiscal deficit solvable but only with serious reforms of entitlement programs and the tax system.
Any solution will likely require a new set of political players with a strong mandate from voters, he said.
Those voters have already started on the deleveraging that awaits the U.S. government.
Consumer debt burdens are down to 110 percent of disposable income from an average of 150 percent before the crisis, Paulson said. The long- term average, however, is 70 percent.
Many people may not appreciate how close the country came to entering another Great Depression, he said.
Commercial-paper markets were freezing up, leaving even blue-chip corporations short of cash and ready to slash payrolls, he said.
“If the financial system had collapsed, we would have had a really vicious cycle,” he said.
Aldo Svaldi: 303-954-1410 or asvaldi@denverpost.com
