Economists Discuss Obama's Jobs Speech

Sep 8, 2011

Transcript

ROBERT SIEGEL, host: We've been hearing reactions to President Obama's jobs speech, which he made before a joint session of Congress. He started about an hour ago. Of course, he was done extremely early so that he could be done in time for the opening kickoff of the National Football League season. We'll have more on this subject.

From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.

And we continue our coverage now of President Obama's jobs speech with two economists. Christina Romer was chair of Mr. Obama's Council of Economic Advisors. She left a year ago to return to her job as a professor of economics at the University of California, Berkeley. And we're also joined by Phillip Swagel. He worked in the administration of George W. Bush. He was ultimately assistant secretary for economic policy at the Treasury Department and is now professor of international economic policy at the University of Maryland's school of public policy. Welcome to both of you.

CHRISTINA ROMER: Thank you. Great to be with you.

SIEGEL: And let's begin by listening to this statement that President Obama made tonight about differing economic theories.

President BARACK OBAMA: Now, I realize that some of you have a different theory on how to grow the economy. Some of you sincerely believe that the only solution to our economic challenges is to simply cut most government spending and eliminate most government regulations.

(SOUNDBITE OF APPLAUSE)

SIEGEL: I'd like to ask both of you this. Is what the president is proposing, which is not simply cutting government spending, is it in your view a sensible approach to lowering unemployment in the country? We'll begin with Phillip Swagel. Is it?

PHILLIP SWAGEL: Yeah, well, I'm glad you played that piece because I thought that was the weakest part of the speech, in some sense the straw man. I mean, no one's proposing to get rid of all regulation. I mean, Mitt Romney said as much in the debate. So, yeah, there's regulations that get in the way of jobs. The president is trying to do something, the Republicans might do more. But the idea of, you know, this different theory, it was just, it was straw man. It was really a unfortunate part of the speech.

SIEGEL: What about the things that he did propose? Do they add up, in your view, to the kind of things that a president responding to persistent 9.1 percent unemployment should be doing? And will they work?

SWAGEL: Yeah, I mean, there's some good ideas in there. And there's some ideas and I think as the president said in the first part of the speech, which was the good part of the speech, you know, do have bipartisan support. The wage tax cut, the investment tax cut which is expensing the training and I think even infrastructure, if it's paid for over time, all of those will have bipartisan support and will be useful.

SIEGEL: Christina Romer, what do you think? Is this an appropriate, effective way to go after unemployment?

ROMER: I absolutely think it is. I think, you know, if there was a weakness to the president's speech, it was in some sense not making the case enough for or diagnosing the problem enough. Because I think what certainly most economists believe is that was are facing a profound shortfall in demand consumer demand, business investment, our exports. And what the president was really proposing is a very bold plan to get demand back up by cutting individual taxes, by incentivizing investment, by incentivizing hiring. You know, all of those things are aimed to that basic goal. And I think it's exactly the right kind of things to be taking. I liked a lot of the proposals.

I think one of the things you're seeing from the discussion with Phil Swagel, is there are a lot of things here that should have bipartisan support - things like tax incentives for hiring and, you know, good infrastructure. I think almost everyone would agree that is good for jobs now and good for our productivity over time.

SIEGEL: Phil Swagel, though, you said that no one really believes that the whole problem is regulations but this idea that the real problem is insufficient demand that is, people aren't, they don't have enough money to spend on things or there aren't enough people with enough money to do that, it does seem to be in conflict with a parade of CEOs who say the uncertain regulatory environment or the immanence of Obamacare kicking in in a couple of years or not knowing what happens to their taxes, that's what's stopping them from hiring. Is there really any serious dispute about this?

SWAGEL: Well, I would say it's both, right. Economists talk about supply and demand - it's and, it's both, it's not one, it's not the other. So, having more demand is vital. And with the unemployment rate at nine percent, it's both a symptom and also a cause of insufficient demand. And then there's all the policies that you mentioned, and the uncertainties of the affordable care act, and environmental regulations, energy policy those are weighing on the economy as well.

SIEGEL: Christina Romer, you were there at the beginning. And as you know, the one thing the White House doesn't want to do is say how much this will reduce unemployment by. Because if you're stuck with a forecast that turns out to be too rosy, you'll never hear the end of it.

ROMER: Welcome to my life.

SIEGEL: To your life, if it was your forecast. So, when you hear this, what do think it comes out to? I mean, if we're at 9.1 percent right now, how many jobs can it add to the economy over a couple of years?

ROMER: Well, I've certainly learned my lesson and I don't I haven't done the kind of calculations that would allow me to give a number. I think the important thing is this is a big, bold plan - that this is not the token effort. This is the president and the administration saying this is what it's going to take. And, you know, frankly, it probably would take somewhat more than the $450 billion that the president has proposed to really definitively heal the economy but it would make a tremendous start.

So I think the one thing I feel very confident saying is that it would absolutely move the needle, would absolutely have an impact on the unemployment rate. You know, I've heard numbers coming out of Mark Zandi, who's a very respected forecaster, saying that he expects it to, you know, to perhaps reduce the unemployment rate from nine percent to eight percent. So, that gives you a kind of number. I think, you know, this is - we're talking about something big here is the important thing.

SIEGEL: Phillip Swagel, too big for you or just right?

SWAGEL: No, you know, I look at his components, that, you know, the things would go in the right direction, things I mentioned at the beginning, those are good. I think the hard things is the second half the paying for it. And in a sense, the president is going to propose things that he knows are not going to be acceptable to the other side. And so, you know, I wonder the extent to which he's really setting up a campaign battle. Hopefully that's not the case. I mean, I think it would be important for Americans to look at Washington and see things getting done. And so hopefully there will be pieces of this that get done quickly.

SIEGEL: Well, let me ask you this, Christina Romer, can the president come up with a couple hundred dollars in budget cuts without undermining the very effect he's trying to accomplish by increasing demand? Does it all get backloaded several years from now so that it'll be after the recession presumably ends?

ROMER: And that is absolutely the key. I mean, we have two big problems. We have an immediate jobs problem and we absolutely have a long run deficit. And we have to deal with both of those problems. And the way that you can fight both of them is to take the kind of aggressive action that the president is proposing tonight on jobs but to absolutely not only pay for it, as he's proposing to do, but in fact we're going to need more long-term deficit reduction as the economy recovers.

And, you know, I think here I might agree with some of the Republican critics who said it might have been a stronger speech if the president had had more of those specifics about how he's going to deal with the long-run deficit. Tonight, I mean, they obviously made a choice. They said they were certainly going to make a proposal to the super-committee in the next few weeks. But I'd feel reassured to see what's in it. You know, Phil says that, you know, they're not going to want to propose, you know, the kind of spending cuts. Well, one of the things the president has talked about is entitlement reform.

SIEGEL: And on that note...

ROMER: ...spending cut.

SIEGEL: On that note, Christina Romer at U.C. Berkeley and Phil Swagel at University of Maryland, thanks to both of you for talking with us about...

SWAGEL: Thank you.

ROMER: Sure.

SIEGEL: ...the president's speech tonight. Transcript provided by NPR, Copyright National Public Radio.