Show Me The Recovery: What Will Debt Panel Say?
MICHEL MARTIN, host:
This is TELL ME MORE from NPR News. I'm Michel Martin. And I want to give my thanks to Allison Keyes for sitting in for me last week.
Later in the program we will go back to Haiti. We'll hear about how those presidential elections are going in the wake of the massive earthquake earlier this year. The short answer is not well. We'll also hear some powerful Haiti-inspired "Roots and Grooves." That's the title of world music artist Joey Omicil's new CD. We'll get to all that plus the reignited debate over the military's anti-gay Don't Ask Don't Tell policy. That's all coming up.
But first, we turn to money, our financial futures and the kickoff to a series we're calling Show Me the Recovery. This is the week that President Obama's anti-debt team is set to release its recommendations. Now, most Americans grimace as the economy fell in late 2007. But we grimaced with the expectation that the economy would soon rise significantly again, and then we waited. And we waited some more.
And now word comes from the Federal Reserve meeting last week that points to a wait that extends right through next year with unemployment holding at around 9 percent all the way through. Now, we wanted to have this series because we wanted to explain exactly what is at stake here and what steps could be taken to get the economy moving again. We will hear from a variety of perspectives.
But we want to start our series by explaining exactly what's at stake and what some of the terms are. And to do that, we've invited Wall Street Journal economics reporter Sudeep Reddy, as well as Julianne Malveaux. She is an economist. She's the author of "Surviving and Thriving: 365 Facts in Black Economic History," to talk about this. She also happens to be the president of Bennett College, another of her responsibilities. But I thank you both so much for joining us.
Mr. SUDEEP REDDY (Economics Reporter, The Wall Street Journal): Thank you, Michel.
Dr. JULIANNE MALVEAUX (Author, "Surviving and Thriving: 365 Facts in Black Economic History"): Good to be with you, Michel.
MARTIN: Sudeep, if we could just start, and I just want to make this as accessible for people if possible, just to define the terms. What is the deficit and what is the debt? When we talk about the deficit, what are we talking about? But when we talk about our federal debt, what are we talking about?
Mr. REDDY: Well, the deficit is the difference what you've taken in in a year, the amount that's come in through taxes, for instance, and the amount that the government pays out for all of its programs: Defense, Social Security and Medicare and everything else that the federal government does. And that deficit accumulates every year. And if you are borrowing money every year, then that adds up and becomes the total amount of money the government has borrowed.
And that total amount of money has now risen to nearly $14 trillion, which is obviously a colossal figure. And just one year alone in the deficit is about a trillion dollars.
MARTIN: Now, President Malveaux, in sitting down with the Christian Science Monitor, the co-chair of the president's bipartisan commission on the deficit. And it's headed by both Erskine Bowles, who's a Democrat and Alan Simpson, who's a former senator - Republican from Wyoming. This is what Erskine Bowles had to say about why this matters.
Mr. ERSKINE BOWLES (Co-Chair, National Commission on Fiscal Responsibility and Reform): Our national security, its biggest threat is the buildup in this debt because we won't have the capital, you know, to fund our military.
MARTIN: Now, that's a particular perspective about why this matters. I'd like to ask you, why do you think this issue matters? Do you agree that the primary reason is that we won't have enough funds to fund things like national security?
Dr. MALVEAUX: You know, I actually respect, admire and appreciate Erskine Bowles, but I disagree with him on this one. Because I really do think that when you talk about cost cutting at a time when you have 15 million unemployed people, you really want to talk about how you invest to minimize the debt in the next cycle.
And so, to have all the Strum and Drang about this debt right this minute, which we didn't have four years ago when Mr. Bush was spending money like he was a crazy man. So it just seems to me that the timing of the concern is problematic.
MARTIN: So you don't agree that the issue of the federal debt is as significant, as urgent an issue as this commission and as others. And I assume the president believes it is?
Dr. MALVEAUX: Michel, if you were to ask me what the most important issue economically was, it will be unemployment. You have seven million Americans who have not worked in more than half a year. You have people who basically, while we sit here, all of us bountifully enjoying our Thanksgiving, who are not eating. And I don't think that the deficit or the debt are the most important things right now. They're important things, but they're not the most important thing.
MARTIN: That's interesting because, well, you're not the only person who feels that way. It has to be said, and there are other critics, like, for example, Nobel laureate Paul Krugman, who's also a columnist for The New York Times, who also takes issue with the direction that this commission is taking.
There's another group that's also been looking at this question and it's headed by Alice Rivlin and Pete Domenici former Republican senator from New Mexico, also a bipartisan group.
So Sudeep, I wanted to ask you, could you just lay out kind of the broad outlines of what each of these groups is looking at.
Mr. REDDY: Absolutely. The president's commission that he's appointed, that's coming up this week with this plan, is trying to come up with an idea of after 2011, what do you do with some steps to cut spending and raise revenue. And some of these offshoots, some are centrist groups, some are conservative plans, some are very liberal plans, and they all have a twist on this that the more liberal plans will actually put more investment in the near term to deal with unemployment and the weak economy and push out some of the cuts until later.
And some of the centrist plans, one of them, for instance, the one you mentioned, the Bipartisan Policy Center, with Alice Rivlin and Pete Domenici, that actually has a plan to implement a payroll tax holiday in the near term and a national sales tax to offset that with revenue. And in the medium to long-term change is through fewer tax brackets. All of these plans have, at their core, some important amount of spending cuts.
MARTIN: If you're just joining us, you're listening to TELL ME MORE from NPR News. We're looking ahead to the upcoming recommendations from President Obama's National Commission on Fiscal Responsibility and Reform. We're talking about the various plans that are likely to be proposed this week and various perspectives about, should that really be the priority for the country right now?
To have that conversation we're joined by The Wall Street Journal's Sudeep Reddy and economist Julianne Malveaux. She's also the president of Bennett College and a much published author.
Sudeep, to that point, a recent CBS poll shows that a majority of Americans want Congress to put the economy and employment at the top of its agenda. Only 4 percent of Americans want Congress to put the deficit at the top of the agenda. The growing deficit during the Bush years did not seem to become the political issue that it is now. So, I did want to ask you, Sudeep, why is this issue at the top of the agenda? Why now?
Mr. REDDY: People obviously put unemployment higher because it is a more pressing problem. But they also look at the debt and the deficit and see this, like, America's credit card, and most people are actually making cutbacks in their own personal finances and they see the government going and, on this path of adding up more debt to its credit card. And when you get to that point where you're paying so much interest on your credit card, that you can't actually do anything else, like, buy food and shelter at home, then you are in a serious problem.
And that's what the path the government is on now, is as you go further and further out without dealing with the long run issue here, then the cost of borrowing rises so much, that the government can't really do anything else. And that's why if you were to have another recession, the government needed to borrow money to do something like the stimulus, or even tax cuts, it couldn't do something like that 5 or 10 years from now if we're on the path that we're on now.
Because you're going to at some point spook financial markets and then people will start caring about it a lot more when cost of the mortgage, instead of 4 or 5 percent is 8 or 10 percent, if you don't send some kind of signal in the next few years that you're going to deal with this problem.
MARTIN: President - go ahead.
Dr. MALVEAUX: You know, I think that where you're heading is interesting, except if you go back maybe 10 years. We did have mortgage cost of 8 percent. And people still borrowed and people still bought homes. The fact is that we artificially drew interest rates down. That's the issue that we won't deal with. We honestly truly drew those rates down through this mortgage crisis, which we all know about and we all know what the deleterious effects of it had been.
But, additionally, it's important to note that as we look at the whole question of spending, do you spend now or do you spend later? We have the flexibility to spend now so that we can save later. It is untenable as a college president for me to see a third of my students going out and not being able to find jobs, because the jobs are not there. And so, how do we begin to do that? And we can't say, let's cut back, let's cut back, let's cut back. I think the counterargument is invest, invest, invest in our young people who will pay taxes five years from now.
MARTIN: What are you advising your students, the families who look to you for leadership on these kinds of questions? How should they evaluate these discussions as they are going forward? People are going to be hearing an awful lot in the news over the next couple of days and weeks about this.
Dr. MALVEAUX: Does it make sense? Does it make sense for you? You're going to hear that we want to take Social Security and raise the age. Do we want waitresses to be on their feet at 67 because people are suggesting that the Social Security retirement age goes up? Let's just be real about that. That's one of the things that Erskine Bowles and the commission is suggesting. No, that doesn't make any sense at all.
Do we really want to have people who have worked their whole life to be told you have to work five more years? No, I don't think so. I want people to behave as if what if it is happening to me? And I also want people to understand that President Obama has said that he wants our nation to, again, lead in education. We can do that. We can do that, but only if we invest in it.
MARTIN: Sudeep, how do you think people should evaluate these arguments that they're going to be hearing?
Mr. REDDY: Well, President Malveaux has a very good guide post - does it make sense? And that's what you have to look at with a lot of these plans is, really, do they add up in the end? It actually is a very smart policy and you're going to be hearing this in the coming days of putting more money in now into the economy and investing now, and that's because we're borrowing so cheaply as a government, and there's a rationale for doing it now because the economy is weak and that there's a value in the government borrowing money to do whatever is important for the government today.
But you're also going to be hearing about coupling the near term-spending with long-term deficit reduction and a long-term plan for dealing with this problem. And that's where, does it add up, does it make sense comes in. You can't really only cut taxes and not deal with everything else in the government. You can't only increase spending and not deal with the long-term issues. And that's what people often forget.
You hear a lot about cutting waste fraud and abuse from government. That's a worthy goal. There are a lot of things that are wasted in our government, but that's not going to get you to the point of dealing with the long-term problem, because until you start dealing with defense and Medicare and Social Security and all the big problems and not just dealing with whether a contract is overrun, you're not going to deal with the core of the issue. And that's what's really important here.
MARTIN: Sudeep Reddy is an economics reporter for The Wall Street Journal. He was kind enough to join us in our studios in Washington. Julianne Malveaux is an economist, author and president of Bennett College. Most recently she's the author of "Surviving and Thriving: 365 Facts in Black Economic History." And she joined us from member station WFDD in Winston-Salem, North Carolina. I thank you both so much for joining us. I hope you'll be back with us again as this important conversation goes forward.
Mr. REDDY: Thank you, Michel.
Dr. MALVEAUX: Good to be here, thank you.
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