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Obama Offers Job Plan, But Deficit Pressures Rise

December 8, 2009 at 5:55 PM EDT
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President Obama outlined a series of initiatives Tuesday aimed at spurring job growth through aid for small businesses, despite mounting pressures to reduce a record federal budget deficit. Judy Woodruff speaks with Nobel laureate Paul Krugman and former presidential economic adviser Bruce Bartlett for their takes on the plan.
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JUDY WOODRUFF: Now we turn our attention to the U.S. economy and to the question of creating jobs. Unemployment remains at 10 percent, the highest level in more than 25 years. And it was at the top of the agenda in Washington today.

MAN: The president of the United States.

JUDY WOODRUFF: President Obama outlined new multibillion-dollar plans today to crank up the economy, with 10 percent of the work force unemployed and public discontent rising.

U.S. PRESIDENT BARACK OBAMA: For even though we’ve reduced the deluge of job losses to a relative trickle, we are not yet creating jobs at a pace to help all those families who have been swept up in the flood.

JUDY WOODRUFF: The president said the nation must spend our way out of this recession by cutting taxes to help small businesses grow, funding public works projects, and offering incentives to make homes more energy-efficient. The money would come from $200 billion still unspent in the government’s financial rescue program, the TARP.

Senate Republican Leader Mitch McConnell criticized the plan.

SEN. MITCH MCCONNELL, R-Ky.: TARP was a loan, a loan to be paid back. And we know that a number of the banks are, in fact, paying it back. Under the law, as I understand it, any money paid back goes to the deficit.

JUDY WOODRUFF: The president, in his speech, suggested, Republicans helped create today’s big deficits, and he dismissed partisan criticism of his spending plans.

BARACK OBAMA: Now, there are those who claim we have to choose between paying down our deficits on the one hand and investing in job creation and economic growth on the other. This is a false choice.

JUDY WOODRUFF: Still, a top House Republican, Eric Cantor of Virginia, said his party simply believes the president’s ideas are wrong.

REP. ERIC CANTOR, R-Va.: That is not something that we think worked back in January, nor do we believe that it will work again today. You just can’t spend money that we don’t have and keep doing it.

JUDY WOODRUFF: In the meantime, a survey today by the Business Roundtable found the number of major companies planning layoffs in the next six months outnumber those planning to hire.

We get some analysis of our own now about the president’s proposals and whether more should be done to spur job creation. It comes from Paul Krugman, professor of economics at Princeton University and a columnist for The New York Times. He won the Nobel Prize for Economics last year. And, Bruce Bartlett, he served as an economic adviser in the Reagan administration and in the Treasury Department during the George H.W. Bush administration. He’s a columnist for “Forbes” and writes a blog on economic issues. His latest book is “The New American Economy.”

Thank you both for being with us.

Paul Krugman, to you first.

You have been calling on the president for some time to do more to create jobs. What do you think of his proposals today?

PAUL KRUGMAN, columnist, The New York Times: What I have been saying, basically, is, show me the money. Conceptually, it kind of makes sense. It’s a bunch of things that are ideas that I and other people have been advocating.

It is clearly a plan to sort of do job creation on the cheap. They’re trying to leverage a limited amount funds to do a disproportionate amount of job creation. It’s OK stuff, but how big? You know, if we’re talking about $60 billion, this is not going to do it. If it is $200 billion, then we’re talking at least something halfway serious.

JUDY WOODRUFF: So, you’re saying it’s — a little — a little bit is OK, but he should have done still more?

PAUL KRUGMAN: Well, now, we don’t know how much he’s doing, right? I read his speech. I listened to it.

It’s all general, conceptual stuff. We don’t have a number on what this is going to be. And that makes all the difference. It’s the scale of the thing. It’s not something where you can say — you know, the ideas are good. It’s a nice menu of stuff. But are they adequately funded to do what we need to do, to deal with this terrible unemployment problem?

JUDY WOODRUFF: Bruce Bartlett, what do you make of — I mean, I did see the Associated Press said it roughly maybe relates to what Congress is considering, $170 billion. But whatever the price tag is, what do you think of the approach?

BRUCE BARTLETT, former President George H.W. Bush Treasury official: Well, I’m an agnostic as far as the — the details of the proposals the president has put forward. I’m not necessarily opposed to them.

What I’m opposed to, however, is treating the TARP money as a kind of slush fund that we can use for whatever we feel like spending the money on. I think if these proposals the president has put forward are justified, it ought to be handled in the normal appropriations process, and not just rushed in to action simply because we have got some money lying around that we think we can spend.

JUDY WOODRUFF: So, the president’s argument — I mean, he said words to the effect, we ought to take some of this money that would have gone just for the banks that we have still to spend and put it on Main Street.

What’s wrong with that?

BRUCE BARTLETT: Well, I just think it ought to be done through Congress.

I think the problem is that people don’t quite understand where this TARP money came from. The original TARP program was like $700 billion. And Congress estimated that maybe half of that money would be lost permanently. And, so, that was the amount that was actually budgeted, about $350 billion. And now it looks as if the money that is going to be lost is only about $150 billion.

So, you have got money that you appropriated that now is available, and that the original assumption was always that that money would be used to pay down the deficit. And I do — I am concerned about the deficit.

JUDY WOODRUFF: All right, I want to come back to you on some of the specifics that the president was suggesting.

But let me ask Paul Krugman about using the TARP money, the financial rescue money, switching that money over to create jobs.

PAUL KRUGMAN: Well, you know, there is money that wasn’t expected to be there. It’s available. It’s — you know, I understand Bruce’s concern about the appropriations mechanism, but you have to bear in mind that we have an extremely dysfunctional Congress.

And we have what is really an ongoing economic emergency. I mean, this — it’s not just that we’re not creating jobs. The level of unemployment we have got is doing enormous damage. So, I think the president is justified in reaching for whatever mechanism he can.

If — if he can say — you know, it really doesn’t make a difference in terms of the economics, where it’s funded from. If he can say, look, what we’re doing is redirecting funds, and make it happen, then he needs to do it, because, ultimately, what we have is a jobs crisis. Action must be taken. I think the paperwork is relatively less important at this point.

JUDY WOODRUFF: He’s saying, Congress is dysfunctional. Why not go this route?

BRUCE BARTLETT: Well, I thought, if we were facing the kind of crisis situation that we were when TARP and the original stimulus were enacted, that would be one thing.

But I don’t think we’re facing that. I think we have — we did enact the stimulus. The money is — there’s a lot of money still to come from that in the pipeline. I think we have only spent about a fourth of it so far.

The unemployment rate is coming down. I think that there’s a case for, let’s wait a little while. Why not wait until after the president submits his budget in February? Why rush to act this minute? It just — you get the feeling it’s like you put on an old jacket and found a $20 in your pocket that you forgot about, and you feel like this is free money to just spend. And I’m worried about that.

JUDY WOODRUFF: Paul Krugman…

PAUL KRUGMAN: Can I just say…

JUDY WOODRUFF: Sure.

PAUL KRUGMAN: … I violently disagree with that? Because this is — you may say, oh, it’s not a crisis situation. But, you know, we have — long-term unemployment is continuing to rise. People’s savings are being exhausted.

Young people are facing the prospect of graduating from college into a dismal labor market. And we know, from a lot of evidence, that that will destroy their earnings prospects, not just for a year or two, but for decades.

So, to say, oh, let’s wait, we have — we’re pretty sure that we’re not going to get a really good bounce out of what’s left in the stimulus. The peak impact on the economy’s growth rate is probably already behind us. To say, well, let’s just wait and see, that’s easy to say if you have got a job, if you’re — you know, if you’re a person well-established in his life’s career.

But we’re suffering enormous harm to the nation’s future by not acting now.

JUDY WOODRUFF: What about that?

BRUCE BARTLETT: Well, I am concerned about unemployment. But keep in mind that the stimulus, original stimulus program, that Obama’s advisers always said would have its peak impact eight quarters after its enactment. So, they themselves always said that the money was going to have its most important impact next year.

And a lot of the stuff that has high impact is things like public works programs, which the president would fund some more of, but it’s not clear to me that there’s worthwhile things out there to be funded that aren’t already being funded, you know?

PAUL KRUGMAN: Oh, that’s — that — I mean, there’s tons. We know that the stimulus originally was lowballed. It was below what even the administration’s own economists thought was appropriate.

We now have — I don’t know what they were saying then, but what they are saying now is that the peak impact on jobs is about the middle of this coming year, that there is a widespread fear. A lot of people, you know, independent business economists, are worried that, as the stimulus fades out, we may be heading for a renewed recession, a double dip.

So, this is — time is — is wasting. If we — if we sit and don’t do anything, we could be facing a very, very nasty economy by the time we finally get around to doing something.

JUDY WOODRUFF: You don’t agree with that?

BRUCE BARTLETT: Well, I don’t think there’s — there’s a consensus by any means that we’re going into a double-dip or anything like that. The last time I checked the consensus forecast, we’re — economists were looking at 2.7 percent real growth next year, which is pretty good.

And I don’t — I’m just — one of the things that concerns me is the idea that the administration always said, the stimulus is going to take care of itself as far as the budget is concerned. And if we make these things kind of semi-permanent, I worry about the deficit.

JUDY WOODRUFF: Paul Krugman, let me come back to you on the — this price tag for this jobs plan. I mentioned earlier the Associated Press threw out a number of maybe $170 billion, roughly matching what Congress is considering.

If that’s how much money it is, and if it is what the president described today, infrastructure, spending, tax credits for small businesses, what do you think?

PAUL KRUGMAN: Well, it’s way short of what I would like to see. I mean, if I could do it, if I thought it could be passed through Congress, I would call for much more.

I mean, we are looking — Bruce mentioned consensus forecasts. Basically, almost everyone is expecting unemployment to remain at levels that we would have considered totally disastrous, unacceptable not just through next year, but for several years to come. We’re looking at a really depressed economy.

The kind of number that, if it really is $170 billion, you know, they’re doing some stuff that might give a fairly big bang for the buck in job creation, but it’s still going to leave unemployment almost surely above 8 percent at the end of next year, almost surely above 7 percent at the end of 2011.

Those are not things we should be accepting. We should be not saying, well, that’s all we can do; we have got some arbitrary limits set by congressional notions of what’s responsible. And we’re just not doing enough. I mean, I’m much more heartened at $170 billion than at some of the numbers I had heard earlier this afternoon, which may or may not have been right, but it’s not nearly, not nearly big enough.

JUDY WOODRUFF: And, Bruce Bartlett, finally, if you had to put a price tag on what you think the government should do, what would it be? And what…

BRUCE BARTLETT: Well, I — as I said before, I think we have done enough, and we ought to wait and see what happens. I just don’t think that the case for rushing forward in a crisis situation with a lot more money right now is quite justified. I think that — I think we can wait a little while, a couple of months.

JUDY WOODRUFF: Bruce Bartlett, Paul Krugman, gentlemen, thank you both.