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OBAMA: We still face some tough times. We still face some challenges. We’re going to pass through some rough terrain. There are still some headwinds that are coming at us.
STEWART: No (bleep). All right. A little rough terrain, a little headwinds still coming at us. Fine, we’re Americans, we’re strong.
OBAMA: It’s just like, if you had a bad illness, if you got hit by a truck, you know, it’s going to take a while for you to mend. And that’s what’s happened to our economy.
STEWART: How — how do we go from “There’s a little bit of headwind” to “We got hit by a truck”?
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AMANPOUR: If Jon Stewart doesn’t seem convinced, none of my guests here do, either. They think that that was funny, and he is not alone, because a new ABC News-Washington Post poll shows that 90 percent of Americans describe the state of the economy as not so good or poor. What’s more, 57 percent believe the economy has not even started to recover.
No surprise. Look at this. You can see here how long it took the jobs picture to improve after previous recessions over the past 36 years. Now, fast-forward to the current crisis, job losses being deeper and longer lasting. If job growth continues at this pace, it could take until 2016 to return to pre-recession levels of employment.
So how do we jump-start this process? Joining me now, Republican Senator Richard Shelby of Alabama, the ranking member of the Senate Banking Committee, Robert Reich, the former Clinton administration labor secretary and current professor at the University of California at Berkeley. And once again, ABC’s Jon Karl.
So that comedic set-up had you all laughing. What is the reality? Has one been hit by a truck? Is it a headwind? Let me ask you first. You’ve dealt with labor and — and the job market. Is this cyclical? Or is this a real structural hole?
REICH: Christiane, the central problem is on the demand side. Seventy percent of the U.S. economy is consumers, and consumers are hit with the equivalent of a truck. I mean, their housing prices are dropping like mad. Their wages, adjusted for inflation, are dropping. Their jobs are disappearing, and almost everybody knows somebody or has somebody in their own family or themselves are worried about losing a job.
Under these circumstance, consumers are pulling in. They are not spending. And if they’re not spending, then jobs are not going to be created. There has got to be — in fact, the jobs program we need is a way of putting money back in people’s pockets and creating jobs even directly (inaudible)
AMANPOUR: So we sort of know, but is there a plan — is there a plan to get Americans back to work, not long term, but now?
SHELBY: Well, I believe that stimulus basically doesn’t work, for the most part. We’ve tried that. I think what we’ve got to do is create the conditions, tax reform, which we could do and we haven’t, incentives for manufacturing. We’ve lost millions of jobs in manufacturing. And say this a new day. We’ve got to do it. We’ve got to be buoyant about where we’re going. We’ve got to grow this economy. The market grows the economy. Government — we’ve grown the government, but we haven’t grown the economy, and we better be mindful of that.
AMANPOUR: You’re shaking your head. You know, obviously, the debate right now is about how much government intervention. Even people who don’t want to see government intervene say that sometimes that’s what a government has to do in an emergency.
REICH: Look, Christiane, I really — I deeply respect the senator and the senator’s position, but it’s just sheer logic. When consumers and private-sector investors are pulling in because there is not enough economic activity, because consumers are scared, because consumers are 70 percent of the economy, then government has got to fill the gap. I mean, we’ve done this for the last 75 years.
KARL: But look what we’ve tried. I mean, look what the administration’s tried. We’ve done $800-plus billion in economic stimulus. We’ve done tax cuts, the big, you know, tax cuts passed in December. And the Fed has kept interest rates at virtually nothing.
REICH: Yes, but there’s…
KARL: And there aren’t many tools left.
REICH: Look it, the scale of the crisis was much larger than anybody anticipated. This was the worst since the Great Depression. Exempt the first $20,000 of income from payroll taxes for the next year. Redo the bankruptcy code so people can declare bankruptcy on their primary residence and, therefore, have enormous bargaining leverage with their lenders if they are trouble. Have a WPA, a direct employment program.
KARL: But do you really think a new spending plan is going to pass muster in Congress? I mean…
AMANPOUR: It won’t politically, will it?
SHELBY: First of all, no — I don’t believe any new stimulus is going to pass in Congress. I don’t think it has any credibility. We have seen what the past stimulus did, for the most part. What we need to do is create some certainty, some conditions for people to invest, to grow, to have some confidence. There’s not a lot of confidence in the economy right now all over America.
AMANPOUR: Can I just talk about this idea of jobs, which is the all-important one? You just heard Donna Brazile and Peggy Noonan arguing about whether there had been economic growth and whether jobs were being created. And Donna was saying for the last 15 months there has been. And I asked Austan Goolsbee on this program last week about the jobless recovery that some economists are talking about, and he got very angry. This is what he said.
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GOOLSBEE: It is not a jobless recovery. That is an incorrect phrase. After the last recession, in this comparable period, post-recession, we had lost 100,000 jobs. We’ve added more than 2 million jobs. There’s a major difference between a jobless recovery and a very deep hole that we’re climbing our way out of. And that is what — the position we’re in.
AMANPOUR: Deep hole? Jobless recovery? Is he right? They have added jobs.
REICH: Look, 2 million jobs have been added, Christiane, but so many jobs have been lost that we still have 13.5 million Americans without work and another million who are too discouraged even to look for work. This is not business as usual. The president has got to come up with a jobs plan. Even if it doesn’t get through a Republican Congress, he’s going to be fighting for it and fighting for Americans. You can’t go into an election year with this kind of unemployment…
AMANPOUR: Are you surprised that he’s not…
REICH: … and not have something substantial.
AMANPOUR: … more sort of passionate on — out in public about this?
REICH: I tell you, I am surprised about the silence coming out of Washington, deafening silence. Republicans talk about, again, with due respect, Senator, I mean, the same, old, cut taxes on the corporations. Corporations have $1.9 trillion dollars they are sitting on right now that they are not spending.
AMANPOUR: Why is that? Why are they not spending? This is something that…
SHELBY: People — people are not spending because they’re concerned, they’re scared, whether they’re a small medium-sized business or whether it’s an individual. They see the real numbers out there, not numbers that people are hyping on either side of the aisle, but the real numbers.
They see anemic growth. And they see maybe problems in the future for their children. So that’s why they’re not spending and why — and, also, a lot of uncertainty in America. There’s a lot of money that’s been on the sidelines right now that could have been invested, but we need certainty for investment. We need regulations that we know that are going to be there, or fewer of them. And we need a tax policy that means something.
KARL: I mean, a lot of uncertainty is coming from Congress and from the White House. I mean, there’s uncertainty about, are we going to default on our debt? Where’s the debt ceiling coming (ph)? There’s all-consuming right now. There’s uncertainty about taxes. Are the tax cuts going to be renewed? Or are we going to have to see tax increases to pay for all this debt? There’s even uncertainty on the health care bill. I mean, is the Supreme Court going to overturn it?
REICH: Yes, there is that uncertainty. But, look it, the deficit fight, the deficit is important over the long term. But, right now, the issue is not the deficit. The issue is not the debt ceiling. The issue is jobs. And they’re not the same.
Senator, what’s wrong, if I may ask, what’s wrong with a new WPA program or a Civilian Conservation Corps for the 6 million unemployed who’ve been unemployed for more than six months? Why not put them to work?
SHELBY: Well, first of all, I think we should do that, but we should do — work it in the private sector. WPA did not bring us out of the depression. The war did. We look back at the stimulus, nearly a trillion dollars gone down the drain. We’ve got to create the conditions of certainty to get people to have confidence to create jobs.
AMANPOUR: Can I ask you…
REICH: But the war brought us out of the Great Depression because of that spending; 120 percent of the national economy was spending.
AMANPOUR: You’ve also got an issue, obviously, that those who are producing and manufacturing are doing so not necessarily having to hire more workers because of the increasing technologization of the workforce. A, is that going to be structural problem going forward? And, B, is this 8 percent or 9 percent the new normal of unemployment in this country?
REICH: Christiane, there is a deeper structural problem. Even if you did all of the necessary stimulus, and spending, and had an exemption program for the first $20,000 of income from the payroll tax, did the WPA, you still have a deep structural issue, and that is, when so much of the nation’s income and wealth now go to the top 1 percent, the vast middle class doesn’t have enough purchasing power to keep the economy going. And we can’t rely only on exports.
Now, that’s going to take time to do something about. I hope Republicans are as concerned about inequality of income as some of the rest of us. But we’re not going to get it by lowering tax — marginal taxes on the rich. We have to do the opposite.
SHELBY: We’re talking about real income tax reform to give people incentives to create jobs and give them confidence to create jobs. But if you look at history, it’s the free markets that’s going to create and turn this economy around. The government stimulus will never turn the economy around.
KARL: Well, there’s a political reality on the tax reform, which is — you know it’s not going to happen before the next election. I mean, the White House — you know, what I’m hearing is we will see a white paper come out with this plan for corporate tax reform, lowering rates, cutting loopholes, reducing loopholes. But, you know, even the people most enthusiastically pushing this say there’s just no way in this political environment it gets down.
AMANPOUR: All right. I’m afraid that’s the last word.
SHELBY: Thank you.
AMANPOUR: We’ll continue this conversation, because it is number one on America’s agenda.
Transcribed by the Barefoot Accountant of Accountants CPA Hartford, Connecticut, LLC
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