Dissecting An Obama Economy

President-elect Barack Obama says the economy is getting worse. He arrived in the nation's capitol yesterday, ahead of his inauguration, hoping to rally support for a new stimulus package. Money coach Alvin Hall offers an update on the economy, and plans to curb the current crisis.

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MICHEL MARTIN, host:

I'm Michel Martin, and you're listening to Tell Me More from NPR News. Coming up a new documentary tells a story of one ma'sn struggle to rebuild his life in post-Katrina New Orleans. We'll have more on the film "The Old Man and the Storm" in just a few minutes.

But first, President-elect Barack Obama arrived in Washington, and as a first order of business, he met with congressional leaders to get their input on a new economic stimulus package. Now, that's on top of the federal government's bailout of the banks and automakers and other American industries, and state and local governments are pressing for help.

Now, we wanted to ask what's happened to the billions of dollars that have already been paid out. We want to ask if that money has made any difference. Joining us to talk about all this is our regular contributor on money matters, Alvin Hall. Welcome back, Alvin. Happy New Year.

ALVIN HALL: Happy New Year to you.

MARTIN: So what has happened to the money that's been distributed so far?

HALL: Well, so far, about half of the $700 billion stimulus package has been paid out. 152.5 billion has been allocated - about 72 billion is pending. And it's gone to a wide variety of American corporations, everything from banks, insurance, cities, Philadelphia, Phoenix are pending, automakers, specialty lenders.

And what's happened is quite interesting. Banks who got the money haven't really increase their lending as much as the government has hoped. They have also not been as active in helping people get mortgage relief. Those people who are about to lose their homes - they haven't really been as active helping people to repair their debt, to get from under the burden of these huge mortgage loans.

So, the money is out there, but I don't think the government has really tracked what the banks are doing with it. On the other hand, with the automobile companies, what they've done - they've decided, well, you know what? We want everything from you. We want concessions. We want to know what the money is doing. So it seems as if the government is trying to have it two ways.

MARTIN: So there are some very strict rules on how the automakers have to report on what they're doing...

HALL: Yes.

MARTIN: With their - their bailout money. They have to be very clear about how they're using that money. And the money that's been sent to the financial institutions, there's been a lot less oversight. Is that going to change with the new administration? Is the new administration going to make more demands on financial institutions in exchange for these resources?

HALL: I certainly hope so. I think that one of the problems with the current administration has been the fact that Hank Paulson really only knows the financial markets very well. And he's a pertinent person who has implicit trust despite all of the current problems with people like Madoff and all the companies imploding. He has implicit trust that the bankers, both commercial and investment bankers, can make good, responsible decisions.

But I don't think he really understands the automobile industry, and he sees them - especially with the unions - as this sort of burden on America. I think that Barack Obama will bring a much more working-class view to how the stimulus package as well as the bailout package is allocated.

MARTIN: Well, I don't know because the headlines today are all about the fact that the president-elect and congressional Democrats are now crafting a major tax cut as part of their economic stimulus plan. This is very different, I think, than what many people have been led to expect, where they thought that most of the stimulus would come from additional government spending. So is this a change? And why the change?

HALL: I think it's a change because he's trying to be a consensus builder, which may be a dangerous road to take. I think he wants to add in something to the package that the Republicans would like. They love tax cuts, so he's handing them that.

But at the same time, his original supporters - those people who really did vote for a significant change - may find this a bit of a betrayal in a funny way. So I think he's really at the edge of a dangerous precipice at this point. I think compromise is good, but when you look at the people who are losing their jobs, is it tax cut what they need, or is it jobs that they need?

MARTIN: Well, he says that it is not about the politics. It's about the substance. He says that if there's a good idea, that no party has a monopoly on good ideas, and if it's a good idea, then he will consider it. So are you saying it's not a good idea substantively, or you're just saying that politically, you think that a more traditionally Democratic approach is more palatable?

HALL: I think a more traditional Democratic approach is more palatable to his original supporters. But I think in his attempt to be the president of all people in the United States - especially those people who did not vote for him who are die-hard Republicans - this is an olive branch of peace that he may be offering to their elected officials.

MARTIN: Now, we want to turn in the couple of minutes that we have left to other news. As you know, of course, last week...

HALL: Yes.

MARTIN: Former Rhode Island Senator Claiborne Pell died at the age of 90.

HALL: Yes.

MARTIN: He was the creator of Pell Grant, and that's a program that gives aid to low-income college students. How significant a program was this? And do you think that there will be additional support for college students in the incoming administration? I know that when we talked to some of the governors last week that that was something that was part of their wish list for this administration - more aid for college students.

HALL: I would not be sitting here talking to you without the original version of this, which was called the Basic Educational Opportunity Grant. When I started university, my parents earned $1,800 a year. So I certainly could not afford to go to an ivy league New England college, which is where I went. So this brought educational opportunities to a wide range of people from poor backgrounds like mine.

I can't say I was socially disadvantaged. I was simply po'. You know, I was so poor, I can't even afford the O-R in the word. So these grants were very significant, and clearly, when they renamed them after Claiborne Pell, and then became known as the Pell Grant, they continue the original mission. So in today's world, however, the amount of the grant is not as significant as it once was because the amount has remained relatively static as the cost of education has gone up.

MARTIN: What's significant about the Pell Grant? As I understand, it's a grant as opposed to a loan...

HALL: And you don't have to repay it.

MARTIN: But it doesn't have to be repaid.

HALL: Exactly.

MARTIN: And why is that important?

HALL: I don't know when you graduated from school, but I graduated in the '70s during the last great recession. It was very hard to get a job. I had both scholarships, loans, and grants. And to repay some of those loans was very, very hard given the little amount of money I was earning. So it really did in my early years limit my employment opportunities. I had to focus on earning money to repay those loans.

The grants give you a better freedom. You don't have to repay them. So therefore, you can take a risk on a job that may be lower-paying than you would like, but it may be in your field of interest.

MARTIN: Alvin Hall is our regular contributor on matters of personal finance and the economy. He was kind enough to join us from our bureau in New York. Alvin, thank you so much for joining us and looking forward to another great year of insights from you.

HALL: I am, too. Thank you very much.

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