Politicians Disagree Over Economic Fix
LINDA WERTHEIMER, host:
It's MORNING EDITION from NPR News. Renee Montagne is in Afghanistan. We'll hear the first of her reports next week. I'm Linda Wertheimer.
STEVE INSKEEP, host:
And I'm Steve Inskeep.
The most terrifying month of the financial crisis is now two years behind us.
WERTHEIMER: In September 2008, the Lehman Brothers investment bank failed and Americans contemplated the chances that the economy would collapse.
INSKEEP: Two years later, recovery has begun but it's slowing down; that's the opinion of Republicans criticizing the Bush administration.
WERTHEIMER: It's also the view of liberal economist Robert Reich. He compares the economy to a tortoise trying to get out of a deep ravine, who's just begun to scale the wall when he gets tired and goes to sleep.
INSKEEP: We're going to talk about that tortoise with David Wessel, economics editor of The Wall Street Journal and regular guest on MORNING EDITION.
David, good morning once again.
Mr. DAVID WESSEL (Economics Editor, Wall Street Journal): Good morning, Steve.
INSKEEP: Do policymakers agree on what, if anything, is wrong here?
Mr. WESSEL: No. They...
(Soundbite of laughter)
INSKEEP: Okay. Thanks very much, David. That's all we wanted to know.
(Soundbite of laughter)
INSKEEP: No. No. Please, go on.
Mr. WESSEL: They agree - almost everybody agrees that the economy is unfortunately slowing down, the recovery running out of steam prematurely, with still so many workers without jobs. Some people think the problem is that President Obama administered the wrong medicine and they want different medicine; that's pretty much the Republican view. And others, particularly among liberal Democrats, think he just didn't administer enough medicine. And if only had enough gumption, he could more stimulus into the economy, more medicine - another dose - and things would get better.
INSKEEP: So what are the options now?
Mr. WESSEL: Well, the problem is that there are lots of options out there, lots of things that economists on the left and right might prescribe, but very little political will to agree to do any of them.
President Obama, as we've seen in the last week - and I'm sure in his press conference today - is going to revive some old proposals, make a few new ones. The only thing we know for sure is he's not going to call for more stimulus -that's become a dirty word. But he's got a bunch of business-friendly tax cuts that he says will get the economy going again.
John Boehner, who's the closest thing to a Republican leader at the moment, as the minority leader of the House, has what he calls a two-part plan; which is cuts spending to fiscal 2008 levels, protecting security spending, and extend the Bush tax cuts. And he says that'll get things going again.
INSKEEP: So both sides are talking about some form of tax cuts, but what else besides that?
Mr. WESSEL: Well, the president says that we should spend more money, but he wants to spend it on infrastructure: rails, roads and runways, he says, figuring that that would put people to work - we have a lot unemployed construction workers - and would also leave the country with something that would pay off in the future, a better infrastructure.
The Republicans, who are very much, both ideologically and seeing what the polls are saying that voters want, emphasizing the need to cut spending in order to get the deficit down; even though they also want to cut taxes which would tend to get the deficit up.
And it's not clear that either side has enough of votes to get their things through. So the most likely scenario is, nothing happens until the election. Maybe if the economy continues to deteriorate, something happens in a lame duck session.
INSKEEP: David Wessel, I want to make sure I understand what you're telling me here. Because you said stimulus is now a dirty word. Stimulus, of course, is what was used to refer to the giant bill that was passed at the beginning of the Obama administration; a combination of tax cuts and increased spending -deficit spending by the government to spur on the economy. You're saying nobody wants to say stimulus anymore, but people are still talking about deficit spending, tax cuts and so forth?
Mr. WESSEL: That's right. The stimulus has become a word, I think because many Americans think we had this big dose of fiscal stimulus and we still have a lousy economy, so it didn't work. So the president's economists - many of whom would like to do more stimulus - are trying to find other ways to describe what amounts to much the same thing. They call it what's good for long-term growth with a short-term kick, or something like that.
INSKEEP: Ah, which is a little more awkward than just saying stimulus, I suppose.
Mr. WESSEL: Well, they're not in the business of making language less awkward, Steve.
(Soundbite of laughter)
INSKEEP: No, not at all. Well, if Congress is going to be struggling to do anything in this situation, can the Federal Reserve do anything?
Mr. WESSEL: Well, maybe. That's a good question. They're not likely to do much when they meet next week, September 21st. But within inflation running below their target and unemployment running well above their target, they're at least contemplating really the only thing they can do. They can't cut interest rates any further - they're already nearly to zero.
They could buy more bonds in the bond market that would help push down long-term interest rates and get more money sloshing around the economy. And they are contemplating that, although clearly they're not ready to do it yet.
David, always a pleasure to talk with you.
Mr. WESSEL: You're welcome.
INSKEEP: That's David Wessel, economics editor of The Wall Street Journal.