Treasury Secretary: Boosting World Economy Requires 'Tough Decisions'
ROBERT SIEGEL, HOST:
The U.S. economy is growing at a pace not seen in years, but if countries in Asia and Europe don't pick up some economic steam, it could spell trouble for the U.S. That's a message Treasury Secretary Jack Lew will be taking to this weekend's G-20 summit in Brisbane, Australia. And he's with us from Seattle, where he delivered his speech on the state of the global economy to the World Affairs Council. Secretary Lew, welcome to the program.
JACK LEW: Good to be with you, Robert.
SIEGEL: And as you've said, the U.S. is affected by slow growth in Europe and in Japan. Both the European Central Bank and the Bank of Japan have undertaken monetary policies to stimulate growth. What more can Japan and the European Union do?
LEW: Well, you know, Robert, we have come through a very long recovery from the financial crisis of 2008-2009. And I think what we've seen from the U.S. experience is that a comprehensive approach, where we dealt with all of the different tools that policymakers have available, is the most effective way to get out of the kind of economic doldrums that much of the world is finding itself in now.
The message that we're bringing is actually that they need to do everything. They need to do structural reforms to make sure that their economies are competitive. They need to focus on sustainable fiscal policies in the long-term, and they also need to focus on getting demand moving in the short term because you can't just cut your way to prosperity in the short term.
SIEGEL: So you're saying fiscal policies as well that would encourage consumption and growth?
LEW: Fiscal as well as monetary policies, yeah. And obviously, monetary policy is a critically important component, I think. In both Europe and Japan, you've seen the monetary authorities taking the lead. In Japan, it's been an effective program to get Japan's economy out of 15-plus year economic decline. But it's not enough to keep it going and they need to do more. They need to do reforms and they need to make sure that if they have another round of consumption tax increases that they more than offset that to keep current demand growing.
In Europe, I think there needs to be support for the European Central Bank moves. But there also needs to be a focus on both getting structural reforms in the parts of Europe's economy that are just not structurally competitive, but also to get demand growing, particularly in surplus countries like Germany.
SIEGEL: But monetary policy is made by central bankers often quite insulated from political forces. You make fiscal policy and structural reforms sound pretty easy. That doesn't seem that easy for us.
LEW: Well, you know, obviously it's not easy. But it is clear that when you make tough decisions, they make a big difference. And in the United States, we made some very difficult decisions in 2008 and 2009 to get the economy moving again. As the economy was gaining some footing, we took the steps to get our deficit under control and we've seen the fastest decline in our deficit since the end of World War II.
And we have the most flexible, resilient economy in the world. And the kinds of structural reforms that other countries need to make are one of the reasons why our economy bounces back. And in monetary policy obviously, our Federal Reserve Board policies were very aggressive to get our economy moving and keep it moving.
SIEGEL: But one measure that doesn't look so good is wages, which have been stagnant for years. Is it possible that the kind of growth being stimulated just isn't reaching the mass of employed, ordinary people?
LEW: Well, first, I think, you know, when you look at the job creation in the United States over the last, you know, four and a half years, you know, we've seen 10 and a half million new jobs created. At the same time, you know, we have very much focused on the fact that wages have not been rising as fast as we would like for working families to be able to keep pace.
We also know that there are sectors of the economy that disproportionately contribute to middle-class incomes - things like housing and construction. Housing and construction has been one of the slower parts of the recovery that otherwise has been a quite strong recovery. So we do have things that we can do and we need to do. And, you know, we're going to stay focused on it because our work is not done just if the macro-economic numbers are looking good. We still have work to do as long as there are challenges facing working families who are having trouble making ends meet.
SIEGEL: Secretary Lew, in light of last week's midterm election results, do you see real areas of agreement with the Republicans in Congress for economic policy?
LEW: Well, I do think there are areas where we should be able to work on a bipartisan basis to make good policy decisions that will move the country forward. Take a couple of examples - tax reform and trade policy. I think they're areas where the objectives that we and the administration have - the president's objectives and the objectives of congressional leaders, including Republican leaders - overlap considerably.
We've already had conversations at multiple levels to make sure that we get started working towards those areas, to work through issues, so that early in the year we can make progress. And I think that if we can show the American people that we can work together to fix a broken tax system, and in the course of doing that, make funds available to fund infrastructure improvements, and if we can have real progress on trade agreements that will create new opportunities for American business, that will be an important piece of work.
SIEGEL: It sounds like you anticipate an era of good feelings between Democrats and Republicans, which wasn't the message we were hearing a week ago.
LEW: Well, I'll leave it to others to interpret the lessons of elections, but I can tell you that from all the conversations that I have with people outside of Washington, they want to see a government that can get the business of the American people done in an effective way.
And that's what we come to work every day determined to do. And I certainly hope we have partners to do it with on both the Republican and the Democratic side because I think that will actually contribute both to a stronger country and to a better feeling in the country.
SIEGEL: Secretary Jack Lew - treasury secretary - thank you very much for talking with us today.
LEW: Good to be with you, Robert.
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