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Treasury Secretary Lew on Long-Term Unemployment, Party Divide on Spending Cuts

May 8, 2013 at 12:00 AM EST
In a conversation with economics correspondent Paul Solman, Treasury Secretary Jack Lew addresses jobs and economic growth -- issues paramount to most Americans -- as well the political fight over automatic spending cuts, the implementation of Dodd-Frank and reform on Wall Street.
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JEFFREY BROWN: And now the point man for the Obama administration on what for so many Americans remain the most pressing matters of the day: jobs and economic growth.

Treasury Secretary Jack Lew has been in the post since February.

NewsHour economics correspondent Paul Solman caught up with him on the road yesterday, part of Paul’s ongoing reporting on Making Sen$e of financial news.

PAUL SOLMAN: Just outside Cleveland, Ohio, the new factory of one of America’s fastest growing manufacturing firms, Vitamix, maker of hot products in haute and not-so-haute cuisine, high-end blenders.

We were here to interview Treasury Secretary Jack Lew, who ran the Office of Management and Budget for both Presidents Clinton and Obama, served for a year as the current president’s chief of staff, and took over from Tim Geithner at Treasury in February. You will be seeing the new secretary’s name on a bill near you soon, though, after the president joked about Lew’s loopy signature, he decided to straighten it out.

As Treasury secretary, Lew is tasked with tackling, among other issues, the sequester, dealing with deficit hawks, mainly in the GOP, who think the sequester doesn’t cut government enough, the slow pace of financial reform, the euro slump, and, of course, lackluster job and economic growth, which is what brought him to Vitamix, to trumpet a success story.

But, we asked him, what about nearly 11.5 million Americans officially unemployed, four million of them long-term unemployed? And that rate hasn’t budged since 2011.

TREASURY SECRETARY JACK LEW, United States: We see a long-term unemployment rate that’s too high, and it’s not OK. It’s something that we have to be just vigilant about addressing.

We have got to have economic growth creating enough jobs so that we cannot just deal with the new entries into the labor force and people who are in jobs, changing jobs, but creating enough jobs so that people who’ve been out of the labor force can get back in.

PAUL SOLMAN: But why don’t these people, long-term unemployed, older workers — I have been covering them lately — why don’t they seem to be your top priority?

JACK LEW: Our top priority is growing the economy and creating more jobs. We can’t target where those jobs are created. The decisions are made in businesses like this, where, you know, there’s economic activity and people are being put to work.

If you look around, all the packages here that are wrapped in red are for export. People are buying U.S. products because they’re quality products. And if we make the things the world wants, we will sell things overseas and we will create more jobs.

I think that older workers are facing different challenges than younger workers. For older workers, the skills that they have, they may need some retraining. And we have some proposals that would help deal with retraining.

There are also challenges when people are out of the work force that they expect to lose some of their relationships and connections. You know, we have to use both official and some of the bully pulpit approaches we have to encourage employers to take another look at older workers who’ve been out of the work force.

PAUL SOLMAN: Is there something you can do?

JACK LEW: For younger workers, for younger workers, you know, we have to make sure that they get the skills training in elementary, secondary school and in post-secondary school, so they can get into the work force.

We have too many young people who are — there’s a hiatus between their graduating and their entering the work force and getting their first job. And we have to create opportunities that cut across these groups.

PAUL SOLMAN: You were in Europe recently. You’re going back to the U.K. for the G7.

You have been telling them to ease up on austerity. Should we ease up on austerity here at home by ending the sequester, say?

JACK LEW: I have been going to our partners in Europe and making the case that they need to get the right balance between growth and austerity. They focus too quickly on deficit reduction and not enough on getting their economy moving.

They’re looking at our growth rate, and they’re, I think, aware of the fact that we have done something more effective than they did to get out of the recession. Here in the United States, we’re probably doing more deficit reduction now than anyone really thought we should be. The sequester took effect not because it was designed to take effect. It took effect because Congress failed to enact a balanced long-term deficit reduction package.

We think that’s wrong. We think that the sequester is irresponsible and it should be replaced with a more balanced longer-term approach, and we should remove that drag on the economy and also the specific effects, which are very damaging to the economy.

PAUL SOLMAN: But, from what I’m reading, you’re credited with having helped concoct the sequester.

JACK LEW: If you go back to the summer of 2011, we were in a very difficult situation, where congressional Republicans were saying, we will not extend the debt limit, we will force a default of the United States unless something is enacted.

We tried every other option. There was no meeting of the minds on short-term policy. So then the question was, what could be put in place that would be so awful that Congress would never let it happen, so that they would then go to work and enact a balanced plan? And sequester was the result.

The thing that I find truly amazing is that there are members of Congress who are calling the sequester a success, a victory, their policy. They can have the policy. Nobody at the time thought it should take effect. It was meant to be something that would spur action on a more balanced basis.

PAUL SOLMAN: But isn’t it an administration’s job to figure out how to deal with the Congress that it faces?

JACK LEW: I can tell you it takes two parties for it to work. No one party can make it work.

And I think that the notion — you know, if you look at what the president has done over the last several years, he has shown in — time and again that he is willing to go more than halfway to make a reasonable agreement. In his budget this year, he put forward proposals that many on our side say, why did the president put that in his budget? And he put it in to establish clearly that there is a reasonable middle ground where we can have a balanced approach, with some more revenues and some serious savings on entitlement programs.

The question now is, will Republicans come forward?

PAUL SOLMAN: We’re in Cleveland, where the foreclosure problem really began. Are you proud of the administration’s record on foreclosures, given how many Americans lost their homes?

JACK LEW: I think we have made a lot of progress. There’s still more progress to be made.

If you look overall, there’s like 6.5 million Americans who’ve been — managed to refinance their homes either directly because of what the government has done or because of programs where the private sector moved in and kind of followed in kind.

There’s millions more who should be able to refinance their homes. There’s no excuse for somebody who is in a home where they can pay their mortgage and they’re stuck in a mortgage that’s at well above current market rates not to be able to refinance.

Now, we think that’s something that we ought to be able to get bipartisan agreement on. I actually am still optimistic we can. I wouldn’t want to have to explain to a homeowner, whether it’s here in Ohio or in Florida or in Nevada, that when interest rates start going up, they were the only — they were the ones who couldn’t get the benefit of lower market rates.

We’re working on what whatever we can do administratively. And I think, in the end, it would require legislation to really help a lot of those families.

PAUL SOLMAN: It’s three years since the president signed the Dodd-Frank Wall Street Reform Act. Most of it hasn’t been implemented. And a lot of people say it’s Wall Street that’s been slowing it down, chipping away at it.

Have you stood up to Wall Street?

JACK LEW: First of all, Dodd-Frank was an extremely important piece of legislation. It created powerful new tools, the first time in two generations that we have new tools to deal with a financial system that clearly had gotten out of control, and in 2008 caused a huge economic crisis.

At the beginning, it was difficult to implement Dodd-Frank. We had this enormous effort as soon as it was signed into law to repeal it. That slowed the process down. We’re now in a place where I think there is a shared sense of urgency, certainly an urgency I feel as treasury secretary to get Dodd-Frank fully implemented.

PAUL SOLMAN: Last question, should we be ending the era of too big to fail banks?

JACK LEW: Dodd-Frank was enacted to end too big to fail.

It established as a policy that the federal government cannot go in and bail out banks again. So the question is now asked, do those tools work? And I think it’s a little premature to answer, because we’re still not across the finish line of implementing all of Dodd-Frank. I think you’re seeing the regulators are looking at many of the dials that could be turned to make it more costly to be a big bank by raising capital standards, to make it more difficult to get overextended through the leverage requirements.

So I can’t sit here today and see into the future and say with 100 percent certainty that we have succeeded, but I can say with 100 percent certainty we are determined to succeed.

PAUL SOLMAN: Mr. Secretary, thank you very much.

JACK LEW: Thank you.