By Maria Bartiromo
With the U.S. economy growing at a 3.5% rate in the fourth quarter of 2006 and a stock market that keeps steaming ahead, the battered Bush Administration has at least one glowing success amid the gloom. On Jan. 31, as George W. Bush took his message of economic cheer to Wall Street, I caught up with Al Hubbard, director of the National Economic Council and one of the President's top advisers.
Do you think Americans feel better about the economy today than when President Bush first took office?
I'm not sure if Americans feel better, but most Americans at that time didn't know that the economy was headed into a recession and that we would face a series of economic blows. When the President took office, the economy had already begun to feel the impact of the bursting of the stock market bubble. Real GDP actually declined in the third quarter of 2000. The Dow had been on a steady decline for the 12 months before the President was inaugurated, and the NASDAQ was at a fraction of its record close. After the bubble burst, of course, we had the devastating economic impact of 9/11, and then the corporate scandals that rocked investors' confidence. We faced enormous challenges, but thanks to the hard work and risk-taking of the American people, and a wise mix of public policies, the recession was shorter and an investment-led recovery began that has evolved into a sustained expansion with solid growth in employment, wages, and earnings.
But the average middle-class American will tell you his job isn't secure, his paycheck doesn't cover the bills, and he's worried about his family's future. What do you say to him?
This is an interesting question because consumer sentiment is near five-year highs, consumer spending continues to grow, and business investment remains strong. These are not indices one would expect from a nation beset by pessimism.
In the latest NBC News/Wall Street Journal poll, a majority disapproved of President Bush's job performance and his handling of the economy. Where do you think this anger is coming from?
I think the lack of progress in Iraq has taken a big toll on the way people look at things. I think it is difficult for them to separate the insecurity created by international terrorism and the troubles we are experiencing in Iraq from the robust economic growth here at home.
How would you characterize the economy today?
Every consensus forecast I have seen predicts solid growth in 2007. And that was even before this week's pleasant surprise for fourth-quarter GDP. The economy added jobs for 40 consecutive months, the unemployment rate is below the average for the 1990s, and, most important, real hourly wages for production and nonsupervisory workers increased 1.7% over the past 12 months. That's an extra $1,030 of new purchasing power for the typical family of four with two wage earners.
Social Security privatization is back on the table. What will the new Social Security plan look like?
Last year the President proposed creating personal retirement accounts to allow people—particularly those not currently invested—to own part of their retirement. Now, we understand that some people on the other side of the aisle don't like that idea. But...people need to say what they're for, not just what they're against. If no one is willing to step forward with a better idea, then we've got to work with the ideas that are out there.
The stock market has had a nice rally of late. But some people feel it's more important for Americans to have extra money in their paychecks through a hike in the minimum wage.
The President supports a minimum wage increase that is coupled with tax relief for small businesses. As long as the package includes targeted tax relief to help small businesses affected most by a minimum wage increase, he will support it.
What are the top economic priorities for the President's final two years in office?
Making tax relief permanent and finding a solution to the entitlement problems we face as a nation.
Maria Bartiromo is the anchor of CNBC's Closing Bell.