Obama Takes Office Under Economic Cloud
JACKI LYDEN, host:
From NPR News, this is All Things Considered. I'm Jacki Lyden. President Barack Obama took office this week amid pomp and circumstance and an economic cloud of massive proportions. Last week, unemployment claims hit a 26-year high, while homebuilding in December dropped to its lowest pace since 1959. And in his weekly address, President Obama warned that the situation is likely to worsen.
President BARACK OBAMA: Our economy could fall a trillion dollars short of its full capacity, which translates into more than $12,000 in lost income for a family of four.
LYDEN: He went on to argue the merits of his stimulus plan, an $825 billion package of spending programs and tax cuts. For a wrap-up of the week's economic news, I spoke with Mark Zandi. He's the chief economist at Moody's Economy.com, and he says the situation remains dire.
Dr. MARK ZANDI (Chief Economist, MoodysEconomy.com): The job market continues to erode. We lost 2.6 million jobs last year in '08, and we're on track to lose just as many this year.
LYDEN: This week, of course, Microsoft announced its first mass layoffs ever - 5,000 people over the next 18 months. And Intel had a virtually identical message - another 5,000 people. Now, the high-tech sector had been thought to be at least somewhat more recession-proof.
Dr. ZANDI: Yeah, and that's one of the disconcerting aspects of what we're going through here. There's no refuge. This is a very broad-based downturn. It's touching every industry, including technology. There is really no area in the country that's doing well. In other recessions, there were jobs to go to if you wanted to move. This go around, that's not the case. And obviously, that's pretty hard on the collective psyche.
LYDEN: We just heard a clip from the president's talk this morning and his remarks. He is asking for an $825 billion stimulus plan. You've analyzed it. What do you think its strengths and weaknesses are?
Dr. ZANDI: Well, if I were king for the day, I would advocate making the plan bigger - go from 825 billion to almost a trillion, and the increase would be tax cuts. Now, the problem with tax cuts is that they don't pack the same economic punch. They don't create as many jobs because people can save it, they can pay debt with it, they can buy imported goods with it. And so it doesn't provide the same economic punch as a spending increase does. But you can get it into the economy quickly, and goodness knows the economy needs help right now. So I would expand the tax cuts so that we can get some aid to the economy this summer.
LYDEN: The columnist David Brooks, who appears on NPR, argued in the New York Times this week that this package lacks a unifying strategy. And he said, quote, "It's a sloppy profusion of 152 different appropriations, off-the-shelf ideas that mostly create costlier versions of the status quo." Do you agree?
Dr. ZANDI: No, I don't. I think there is a strategy to it. There's income support for people who are losing their jobs, unemployment insurance, food stamps, COBRA payments for people who are losing health insurance. There's aid to state governments, which is key because these governments are under extreme pressure and because of their constitutional requirements will be cutting employment and programs, and this will help them forest(ph) all that.
The infrastructure spending - I think that's a good combination of things that the Romans built, like roads and bridges and dams, but also spending on new things like electric grids and the Internet backbone.
LYDEN: Is there a problem that some of the prescription for getting us out of this mess also talks about spending? What happens when all these bills come due?
Dr. ZANDI: Well, that is, you know, clearly an issue. But I think the broader point is that if we don't respond aggressively, the economy will slide away. People won't have jobs. They won't be able to pay income tax. They won't be buying things, so they won't be paying sales tax. House prices will fall, so they won't be paying property tax. So our budgetary problems will be even worse. It's, you know, obviously, a bitter pill to swallow, but a pill we're going to have to swallow.
LYDEN: Mark Zandi is the chief economist of Moody's Economy.com. Thanks very much for joining us, Mr. Zandi.
Dr. ZANDI: Thanks so much for the opportunity. ..COST: $00.00
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