Sunnier Jobs Report Rises On A New Congress
SCOTT SIMON, host:
With that better-than-expected jobs report and a new look for the next Congress, there are questions about what's ahead for the U.S. economy. We're going to turn now to our friend from the business world, Joe Nocera, who joins us from New York. Joe, thanks so much for being with us.
Mr. JOE NOCERA (Columnist, New York Times): Thanks for having me, Scott.
SIMON: Federal Reserve announced this week it's going to purchase $600 billion worth of Treasury bonds that it hopes will spur the economy. I gather their goal is to lower long-term interest rates. It was announced the day after the election. Just coincidence?
Mr. NOCERA: Well, not exactly. Certainly Ben Bernanke, the chairman of the Federal Reserve, and many of the other Federal Reserve governors, have come to the view that it's up to them. There's nobody else who's going to, you know, really push the economy from the government point of view. And even if the Democrats had held the House, which as unlikely as that prospect had been even last week, they just weren't going to do another big stimulus package, they weren't going to do anything in the way of fiscal policy that was going to help spur the economy.
Chairman Bernanke just felt like he had no choice. He had to take it into his own hands. It's a dangerous move but that's what he's trying to do.
SIMON: How's it dangerous?
Mr. NOCERA: Several ways. Number one, it's really annoyed the rest of the world, which feels that the U.S. is printing money willy-nilly. And second of all, there's always a fear when you do something like this, when you drive interest rates down, that you could spur inflation. I think that's a little unlikely in this terrible economy, but this is not a riskless move.
SIMON: When will we know if it's having some effect?
Mr. NOCERA: Oh, it'll take a while. I mean, six months from now, seven months from now, at some point if we get to really see an economic uptick, I think then you could say it did have an effect. If we don't, it will have been a failed and wasted effort.
SIMON: A number of Republicans who will be taking power in just a few weeks in the new U.S. Congress say that they won't vote to raise the United States's debt limit when it comes up for debate early next year. Now, what are the consequences of that if the debt limit isn't increased?
Mr. NOCERA: Only disastrous. If you don't raise the debt limit, Scott, you run the risk of defaulting on your debt because you can't pay it. And no country wants to be in that position, and certainly the United States doesn't want to be in that position. So what they're proposing is kind of a nuclear bomb as policy, and it also has a political danger.
Because as you recall, when Bill Clinton was president, the Republicans took over, they did in fact at one point try to shut down the government, which...
SIMON: Which did in fact shut down for a few days.
Mr. NOCERA: And it was a disaster. And one thing the Republicans are saying is that we don't want a repeat of that. There's nothing that could bring us closer to a repeat of that than a refusal to raise the debt ceiling.
SIMON: The Bush-era tax cuts, as they're called, expire at the end of the year. And on Friday the White House suggested for the first time that they might be open to extending the cuts for those making more than $250,000 a year for at least a year. How do you see this playing out...
Mr. NOCERA: Well...
SIMON: ...in the lame-duck session?
Mr. NOCERA: Not only are they saying that they want to extend the cuts for people who make more than $250,000, but they are saying they want it done right now in the lame-duck session while the Democrats are still in control of Congress. It's truly quite extraordinary. But if you're going to extend tax cuts, it makes sense to do it before the year ends so that people don't have to pay more money into the system and to the tax man and then get it back at the end of the year or the following year.
So it just seems to me that this is a good example of the president basically saying, you know, I fold. You win on this and then let's see where we are in a couple of years.
SIMON: Well, I mean, there was an election, right? I mean, any...
Mr. NOCERA: There was an election but the Democrats still control the Senate and the Democrats still have the White House. So it's not quite that cut and dry. And if they do nothing, I mean, the administration could do nothing, in which case the tax cuts would go away.
SIMON: Joe, do you see the people coming into power in a new Republican Congress wanting to throw sand in the wheels of the financial reform legislation that passed earlier this year?
Mr. NOCERA: Yes, yes and yes. There's no question they want to do that. They certainly would like to limit the regulatory power that is about to be written. They certainly would like to clip the wings of the Consumer Protection Bureau. In particular, they would like to make sure that Elizabeth Warren is not named its head. They would like to see the Wall Street banks get a little more freedom than it currently looks like they might under the Democrats.
And they also would like to see something done once and for all about Fannie Mae and Freddie Mac, which guarantees mortgages and which has become, you know, a ward of the state and a very important cog in the mortgage machinery right now in which the Democrats have been loath to do anything about, partly because they had so much else to do and partly because they've always been defenders of Fannie and Freddie and nobody can quite figure out what to do about them.
SIMON: Joe, thanks so much.
Mr. NOCERA: Thanks a lot, Scott.
SIMON: Joe Nocera writes the Talking Business column for the New York Times.