Austan Goolsbee, chairman of the White House Council of Economic Advisers, in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend, said he is confident that the administration and Congress will reach a deal to raise the federal debt limit and that markets are confident that the U.S. won’t default.
(This is not a legal transcript. Bloomberg LP cannot guarantee its accuracy.)
JULIANNA GOLDMAN, BLOOMBERG NEWS: Welcome to the show. I’m Julianna Goldman, in for Al Hunt this week. We begin the show with Austan Goolsbee, chairman of the White House Council of Economic Advisers.
Austan, thanks for joining us.
AUSTAN GOOLSBEE, PRESIDENT’S COUNCIL OF ECONOMIC ADVISERS: Thanks for having me, Julianna.
GOLDMAN: You see the reports. Unemployment is up, confidence is down, manufacturing has slowed and housing prices are at their lowest since 2003. This is a pretty lousy economy, isn’t it?
GOOLSBEE: Well, look, Julianna, the thing is, we know that there were some - as you say - some headwinds that, in the first of the year. I would point to the gas prices or the tragic events in Japan and the impact they had on manufacturing and some of the European stuff. But many of those private forecasters and the Fed, you’ve seen, do not - they anticipate that there would be some rebound in the second half of the year.
I think it’s important to take stock of where we came from. Clearly, we’re coming out of worst hole since 1929, where we’re losing hundreds of thousands - three-quarters of a million jobs per month. And now in the last six months, we’ve added a million jobs.
We’ve got to get the growth rate higher. The president’s the first to say that. But I don’t think we should - I don’t think we should dismiss the progress that we made from coming out of that hole, which is where it sounded like you were going.
GOLDMAN: But even so, are you concerned that the current debate now in Washington around debt and deficits, that that’s overshadowing the need for some sort of additional measures that could provide some short-term economic boost?
GOOLSBEE: I would say that I am concerned if, in the discussions about long-range deficit reduction, which we should have, that we, over the long run, we’ve got to start living within our means - these fiscal issues we’ve known about for 40 years, and now it does feel like there’s a moment when maybe we could confront them - I would be concerned if, in that discussion, we’re going to go skimp on the growth strategy, we’re going to cut spending on education and training -
GOLDMAN: What about short-term, short-term measures?
GOOLSBEE: - That’s - in the short term, if we cut education and training, if we cut R&D and innovation spending, if we’re cutting the kinds of investments that we need to make for us to grow, we’re making a mistake.
I think - if you’re asking the argument, should there be more stimulus of the form that we did in 2009? It strikes me that 2009 was a moment of rescue, where the, the private sector is in freefall. We’re not in that moment anymore, and so the right kind of policy response are those things that government can do to get the private sector to stand up and do it.
GOLDMAN: Well, so one of those things could be an employer payroll tax cut, temporary, that administration officials are talking about. Would that provide some short-term -
GOOLSBEE: Well, look, it strikes me that the president has said - says now - said six months ago, and has been saying for some time that, as we’re shifting to this transitioning to a growth phase, we want to be for any policies that are going to help incentivize and stand up the private sector to drive the recovery.
In the tax deal, that’s a payroll tax cut for 150 million workers. That’s a substantial tax incentive for businesses to invest the capital that they’ve started to accumulate on their balance sheet.
We’ve got regulatory changes. We’ve got patent reform changes. We’ve got Startup America, encouraging entrepreneurs. We’re open to looking at any of these ideas.
On Monday, the president’s going to be in North Carolina getting ideas from the Jobs Council. People in the private sector, what do they think would help stand them up?
The things like the payroll tax, if it’s included in that list, it’s something we ought to be open to looking at, but it’s not things that are of the traditional stimulus form.
GOLDMAN: Well, I want to come back to the North Carolina meeting on Monday, but, first, there’s very few days in the legislative calendar before that Aug. 2 deadline to raise the debt limit. Also, now the White House is saying they want by July 4 a deal on debt and deficit reduction.
Republicans this week, though, they said that some would be pushing for some short-term extensions of the debt limit. Is that something that the president would accept?
GOOLSBEE: I don’t - I’m not in the legislative negotiations. Obviously, that’s being led by the vice president.
GOLDMAN: Would the markets accept that?
GOOLSBEE: I don’t think the - I don’t think the markets think we’re going to default either on Treasuries or on any of the other government obligations. We’re a nation that pays our bills. I really think it’s a bad idea to push it right up to the Aug. 2 deadline. That really plays with fire.
I’m kind of encouraged, if you look on both sides - you’ve got leaders on both sides of the aisle saying they don’t want to push it all the way to August. They want to do it by July 4th. And so I think we’ll - the negotiations are going reasonably well. I think we’ll find a solution to that.
GOLDMAN: Well, that meeting on Monday, you said the president is going to be in North Carolina. He’s going to be meeting with top CEOs, including GE CEO Jeff Immelt. How important is the message that the president is going to send to the business community? And is this just going to be optics of him standing there together?
GOOLSBEE: Well, no, I mean, the Jobs Council is 26 or so private-sector people, a lot of big and small company CEOs. There are some labor leaders, some economists and things like that. They have been working for several months thinking about the private sector’s view of, what are the - what are the sectors of growth that this year -
GOLDMAN: So new policies could come out of this?
GOOLSBEE: New policies could come out of it. New ideas. I think it’s helpful for the private sector to identify “here are the broad bases of growth for the economy that would allow us to get away from, let’s say, an over-reliance just on residential construction and excessive consumer spending.” And I think the Jobs Council is going to have a lot of that.
And the president’s - I think - I mean, I don’t want to give away secrets of what he’s going to say -
GOLDMAN: Why not?
GOOLSBEE: - But I think he’s going to reiterate the commitment to the - we’ve got to have a growth plan. We have to live within our means long-term, but we’ve got to - any ideas that people have of how the government can facilitate the private sector driving the recovery, we should be for those things.
GOLDMAN: Austan, after advising the president on stimulus, on taxes, on US Weekly magazine, on Rihanna, you announced this week that you’re going to be leaving the White House at the end of the summer to return to the University of Chicago. Is it really true that tenure rules are so strict that the president’s top economist wouldn’t have been able to come back after that initial leave?
GOOLSBEE: Well, look, I don’t - the University of Chicago has been beyond understanding of my time in public service and my two-plus years working on the campaign. So I’m not - I would never say a bad word about the university. They’ve been quite wonderful.
The university, my family, and the president and I have been back and forth on this for several months, and I just decided this is probably - this is the way that it’s got to be.
GOLDMAN: So we also know that on - on jobs days, on good jobs days, there’s sometimes been hugs or there have been fist bumps in the Oval Office. Can we anticipate any of that before you leave?
GOOLSBEE: Well, you know, I certainly hope so, but as you know, I stay out of the prediction business, other than the official forecast of the U.S. government.
GOLDMAN: Well, Austan Goolsbee, thank you very much for joining us, and good luck with all your pursuits in the future.
And when we come back, Newt Gingrich’s troubles get magnified, and time is running out to make a debt and deficit deal. Bloomberg reporters are next.
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