President-Elect Barack Obama introduced his economic team yesterday, another stage in a fairly concerted effort over the last few days to push a new economic plan in a time of severe downturn. Driving home last night, I heard his economic advisor Austan Goolsbee on All Things Considered, and he put some of those big numbers into perspective for me.
His most striking statement was:
Make no doubt about it, this is the most pressing, serious, economic crisis we have faced in seventy-five years. It is like a Hurricane Katrina hitting the entire country.
UPDATE: Comments below on the jobs and infrastructure focus of this plan brought to mind this Obama ad from the primary campaign:
More below.
Melissa Block began by asking about the stimulus plan, and what the cost would be. Goolsbee did not give specifics, only saying it would be much larger than Obama's campaign proposal of $175 Billion, given the deterioration of the economy. He also said that Obama is focused on the "jobs target" (2.5 million jobs over two years), agressive direct investment, and "tax relief for 95 per cent of workers."
When asked for a timetable, Goolsbee explained that the two yer plan would focus on an immediate economic recovery program, and other investments would follow. Block asked about potential pitfalls when planning such a big stimulus package. Goolsbee responded:
There are two dangers and they’re on opposite sides. By far the bigger danger, in my view, is that you don’t get the money out the door quickly enough, and we are not able to turn the corner on this severe downturn that we are clearly in. The other pitfall is that in the effort to ramp up and do so much spending in such a rapid time frame, you do have to be mindful that you aren’t spending money on programs that are not actually effective, and each of those is important.
The short version of that, without the troubling double negatives, seems to be: be bold, but be vigilant; spend freely, but spend wisely.
Block then asked Goolsbee about a statement he made during the campaign in April: "make no mistake, deficits still matter." She wondered if he still thought so. His answer:
Yes they do matter. That’s different from saying "this year." In the article you are citing, the reason why I said we want to control deficits is because when a national emergency arises, we want to be able to expand the deficit dramatically, if we have to, to cope with a national emergency, and I cited examples like Hurricane Katrina.
Make no doubt about it, this is the most pressing, serious, economic crisis we have faced in seventy-five years. It is like a Hurricane Katrina hitting the entire country. And it is totally appropriate and indeed necessary that we have large deficit spending, as rapidly as possible, in this short term period, to prevent this thing from morphing into a depression. We should not be trying to balance the budget in the next twenty months, in the face of this recession. That was one of the terrible errors Herbert Hoover made at the beginning of the Depression. As the economy started going into the tank, he began trying to balance the budget and it really drove them down through the floor.
Finally, asked whether the Bush administration was taking the lead, or acting quickly enough, in his view, Goolsbee said "no."
The President-Elect called repeatedly on the President to pass a stimulus. As he said in his first press conference: the economy is in trouble, it needs a stimulus right now, and the president should pass one, but if he won’t I will be ready to do so the first day I’m in office. And that’s basically where he is.
As a non-economist, I find this whole situation very confusing, even paradoxical. We're deeply in debt; we may need to go far deeper into debt to recover. We've been engaging in profligate spending; we may need to spend at a far faster rate to bring the economy around. It's weird. At home, when I run out of money, I kind of stop spending it. So this seems counter-intuitive.
But I know enough history to know that the New Deal worked best when they took big risks and put a lot of money into the economy. Are we in the same place today? I just don't know. A lot of us were freaked out by the size of the proposed plan yesterday. But if pushed to take a stand, I would say I trust the president-elect's ramped up plan now just as I trusted the earlier version during the campaign.
[This is my own transcription, done rather quickly, so please alert me to corrections.]