Real Time Thoughts on Meet the Press (December 13th, 2009)

Today’s Meet the Press is the first anniversary of David Gregory’s tenure as moderator.  Today’s broadcast is all about the economy.  The most interesting set of opinions will surely be those of Christina Romer, the Chair of the Council of Economic Advisors.  She is an brilliant thinker, one who is capable of explaining difficult economic concepts to the lay reader.

The Obama administration is sounding off on a more populist tone by blaming Wall Street for its risky and overleveraged ventures.

DG: Is the goal to punish Wall Street (one the financial industry regulations bill passed by the house)

CR: The goal is that this kind of thing doesn’t happen again and that the American tax payer is made whole again.  We want them to return to lending.

DG: When do you suppose we’re going to go down below 10% unemployment

CR:  Private forecasters are saying we’ll have positive GDP growth, and then in the first quarter we should have positive job growth.  The discouraged workers may come back into the job search which will automatically raise the unemployment numbers, but this recession isn’t over yet.  There will be rises before the unemployment level goes down.  Until Main Street is beginning to recover, this president won’t think this job on the economy complete.

DG: On the stimulus package.  Why hasn’t more of the money been sent into the economy

CR: A lot of the stimulus was a tax cut and some of it was sent to Cobra and unemployment.  We always knew that direct government investments was going to take more time, than fiscal stimulus.  So we knew that those funds would be injected into the economy in 2010.

DG: On the budget deficit versus spending to stimulate the economy.

CR: We all know that the adminstration inherited a budget deficit and a jobs deficit.  But we also know that the budget deficit will not come under control while the economic cannot grow.  So we’ll have to invest in infrastructure to help the economy grow and the fiscal deficit will have to be addressed responsibly.

Jennifer Granholm, the governor of Michigan, the one state with 15% unemployment, the highest in the United States and Mitt Romney the former governor of Massachusetts are on Meet the Press.  As are Alan Greenspan and Jim Cramer.

JG: The Volt, the plug electric vehicle that is coming off the assembly in Detroit is saving jobs.  And that couldn’t have been possible without the Obama Administration.

AG: (On being shown that at this time in the recession in 1981, unemployment had returned to pre-recessions). The reason why this recession is so deep is that private business got spooked and thought the economy would collapse below the level it in fact collapsed.  So private business drew back.  Now we are in the position where there is just barely enough workers to maintain our current level  of output.  So employment will go up fairly quickly.  Now that’s not to say that unemployment will go down on a one to one ratio.  That’s because it takes 100,000 new jobs to keep unemployment level and secondly as Dr. Romer said as the economy recovers, the discouraged workers will return to the job market, raising immediately the unemployment rate.

Now the problem is that a large porition of those discouraged workers and unemployed workers are losing their skill-sets and human capital.  This means that unless those people are able to retool, they will not necessarily find the jobs they were qualified for; now workers will take their places, leaving those individuals behind.

JG: We need a policy like “No Child Left Behind”.  We need to re-train our workers, maybe something called “No Worker Left Behind.”

AG: There are two economies in this country.  The positive growth in the economy is coming from big banks and rich individuals.  The big banks are doing well, the small businesses are not doing that well.

DG: Is the Fed doing as much as it can.  (This is in turn a question on teh new financial regulatory bill, and talk about re-aligning the Federal Reserve toward more public orientation)

AG: The Fed is doing a bang-up job. You cannot ask the Fed to do more than it is equipped to do, without dire consequences.  It has stopped a tail-spin in the economy.

(On this ground, I agree with Alan Greenspan.  The government cannot restructure the financial industry or even the Fed in some proposed way and expect that the consequences of reform will be exactly the consequences forecasted.  For this reason it may not be a good idea to restructure the financial industry toward a more populist direction, even at the cost of protecting consumers.  This is not to say that providing consumer protections is a inherently insipid idea; it is rather a question of restructuring incentives such that consumer’s are protected from pirate banks.)


~ by Faheem Haider on December 13, 2009.

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