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Economy’s Stumbles, Obama’s Cabinet Top Week’s News

December 5, 2008 at 6:35 PM EDT
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Columnists David Brooks and Ruth Marcus weigh the news of the week, including rising job losses, the auto industry bailout and President-elect Barack Obama's latest Cabinet picks.

JIM LEHRER: And to the analysis of Brooks and Marcus, New York Times columnist David Brooks, Washington Post columnist Ruth Marcus. Mark Shields is away tonight.

“Dismal job report” was the way it was described in the news summary. Would you agree with that?

DAVID BROOKS, Columnist, New York Times: I don’t think I could disagree. I’m trying to be disagreeable. No, pretty dismal to very dismal.

The only thing I’d add — and this is a non-economic point — but one thing that’s always worth keeping in mind to depress us further is that, when the economy goes down, the economists talk about loss of jobs. But sociologists will talk about other effects which are always worth mentioning.

Robert Putnam at Harvard emphasized that, when the New Deal hit, people didn’t only lose jobs, social organizations lost members, people pulled back all sorts of social bonds and relationships, marriages begin to fail in higher rates.

So what you get is not only poverty, which is bad, but you also get a much higher level of social isolation. And as we talk about the economy over the past couple of years — next few years, it’s also worth talking about the social effects and having policies to think about those social effects rather than just the material effects.

JIM LEHRER: Do you have anything dismal you’d like to add to that?

RUTH MARCUS, Washington Post: I don’t know. Are there any more adjectives you can come up with for “dismal”?

I have been actually quite rattled by the inability of anybody that I’ve talked to in the administration, in the incoming administration, and the outside academic world of economists to spin this in any kind of positive way.

It is a bad situation. And I think of it as a situation where you have a patient who’s shown resistance to a lot of antibiotics and systems are failing. And it’s time to really start throwing every piece of medicine that you have in your arsenal or medicine chest at the economy and hope that some of it works finally.

Officials try many plans

Ruth Marcus
Washington Post
I think it's time for everybody to refocus, think a bit about whether we should do another increase in food stamps. That's money that gets spent right away. It's pretty small, but it can't hurt.

JIM LEHRER: So that means a stimulus package unlike anything we've ever even imagined, David?

DAVID BROOKS: Well, this is the issue that we're now confronted with. I hear Ruth's point, and I've heard it from various people, that we should just throw everything. We don't know what will work; just throw everything.

And in the past years or months, the size of the stimulus package that's talked about, it used to be $300 billion was a lot, then $500 billion, now $700 billion, and $1 trillion stimulus package. The question is, what actually will work?

And I've spent the last couple of days at the University of Chicago among the economists there. And there does seem to be a sense we should do something. There's absolutely no consensus about what to do.

And I would say, in general, little understanding of how to manipulate a Keynesian business cycle, and so you get these plans...

JIM LEHRER: Explain what you mean.

DAVID BROOKS: Well, the standard model is that you spend a lot of money and you pump up demand. But...

JIM LEHRER: From the bottom?

DAVID BROOKS: Yes, or, well, in any way you can.

RUTH MARCUS: Or drop it from helicopters.


DAVID BROOKS: But some people will send you an e-mail saying, "What we need to do is cut the payroll tax in half." Some people say, "We need to do $150 billion of infrastructure spending, another few hundred of this, another few hundred of this."

There are many ways to do it. But there is -- but one gets the sense everyone thinks we should do something. No one has a really persuasive thing that will tell you, "Well, this will actually work." And there's some sort of magical faith in a magical technocrat who will somehow know what to do, but that magical technocrat is Santa Claus. That person does not exist.

RUTH MARCUS: Nobody knows precisely what to do. There are clearly smarter ways to throw money at this problem, spending money on things that you would like to spend on anyways, so there are some smart investments. You've talked about that in the past.

One of the things that I have been thinking about in the last couple of days -- and my mind was certainly focused on it with this morning's job numbers -- is Congress kind of gave up on doing a big stimulus package or any significant stimulus package in its last lame-duck session. It's now limping again back to town.

The Bush administration has been hostile to the idea of doing any stimulus beyond the pretty small piece of extending unemployment benefits that it did.

I think it's time for everybody to refocus, think a bit about whether we should do another increase in food stamps. That's money that gets spent right away. It's pretty small, but it can't hurt.

More important than that, more significant, there is money that could go to state and local governments right away. The Bush administration has been very resistant to this.

But the fact of the matter is, these guys are coming back in January. They are going to start talking about how they have to cut their budgets to balance them.

We know that the Obama administration is going to get money to them. Maybe that money would help sooner rather than later. Everybody has to drop their ideology and start to get responsible.

DAVID BROOKS: Well, I dropped mine months ago, years ago. And I would agree on the food stamps. I think I would agree on the aid to the states.

RUTH MARCUS: But it's small.

DAVID BROOKS: It's small. The aid to the states, the governors this week said they had $136 billion in infrastructure. But the real money that gets sent out the door gets sent to families. And you're a scared family. You either have lost a job or you might lose a job. You get a check for $900 or $1,000, are you going to spend that money? No way. And so...

JIM LEHRER: We'll put it in the bank.

DAVID BROOKS: Right. And so some economists think, well, maybe people will spend it. Some economists think not. Some economists come at you and say, "Well, if we spend it on this, that creates this multiplier effect, which will actually juice up the economy." Some economists think not.

And just to emphasize, really low understanding. And when you get into the big things, you really run into problems.

Debate over automaker aid

David Brooks
New York Times
There are many smart people who think a bankruptcy or Chapter 11 would be catastrophic. There are many smart economists . . . who think the industry is bound to be restructured, in any case. We should do it in the least political fashion possible.

JIM LEHRER: All right. Let's be specific, the auto thing. We talked about it before, of course. But today the big push was made again in the House and the Senate yesterday. And now there's going to be a Senate bill next week.

What do you think? Should it go or do you think it will go? You can answer either one of those questions.

RUTH MARCUS: I'm going to answer both of them, if that's OK.

JIM LEHRER: Oh, OK. All right.

RUTH MARCUS: Yes, it should, in a reasonable way. The question is, how? And, yes, it will, in the end. I don't think this Congress wants to limp its way back home before Christmas...

JIM LEHRER: You're talking about this Congress, not the new Congress, this one?

RUTH MARCUS: This Congress. Not the new Congress. This Congress does not want to go home and then have General Motors file for bankruptcy on Christmas Eve, which is not melodrama. It is potential reality.

So the question is, what can be done, should be done that isn't simply throwing good money after bad? So I have the Marcus plan here. Let's spend...

JIM LEHRER: OK. You might want to write this down.

DAVID BROOKS: I've got my pen out right here.

RUTH MARCUS: We don't want to throw good money after bad. That's ridiculous. We don't -- we have a lot of money to throw, but we should throw it smartly.

Let's give these automakers -- and Ford doesn't really need money right now. Let's give them just enough to get through to the next Congress, to the next president, sort of -- I'm keeping on my medical analogies. We're going to put on a tourniquet. We're going to stabilize the patient.

Then, that will give us a little bit of time to figure out whether this patient can be saved, whether there are -- or whether we just have to let the patient go, and how to deal with the effects of that.

JIM LEHRER: What do you think of the -- is there a Brooks plan, a competing plan?

DAVID BROOKS: Well, there's a question for the Marcus plan. What are we going to learn in two months that we don't know now?

RUTH MARCUS: We're going to -- it's not what we're going to learn. It's what we're going to be able to structure, which is, how do you put the money in place in a way that has oversight, in a way that has kind of responsibility?

The automakers came and they said they wanted $34 billion in total now. You know, it goes up every day.

Mark Zandi, who's a serious, respected economist, said two very important things. The first was that it was going to be cataclysmic for this economy to let the automakers fail. The second was that these automakers were completely low-balling. And he thought they were going to need more in the neighborhood of $75 billion, over $100 billion.

We need to figure out what the right number is and whether -- what the consequences are of doing that or not doing that.

DAVID BROOKS: Yes, I guess the first thing I'd say is, there are many smart people who think a bankruptcy or Chapter 11 would be catastrophic. There are many smart economists who do not think that, who think the industry is bound to be restructured, in any case. We should do it in the least political fashion possible, which is what -- we'd get a political fashion if we did it here.

And it seems to me the problem is a mechanism for restructuring this thing. People want to do it, but nobody in Washington knows how to do it, and nobody in Washington is likely to know how to do it.

And the general principle -- and we seem to be following the Japanese example. They had these 15 years of stagnation. And they did their capital injections, which didn't really work, because they didn't do enough of them, and then they went through the process we're now entering of picking winners and losers, and creating essentially these zombie companies which -- which are subsidized, which create nonproductive workers, which then strangle productive workers, which get you in this long economic tunnel.

And so, it seems to me, I understand the principle of sort of backing up the auto industry as a jobs program until there's a chance these people can get jobs, but that will be extremely expensive.

And in the meantime, we will be subsidizing the unproductive use of capital and taking it away from more productive uses.

Obama's foreign policy team

Ruth Marcus
Washington Post
But who's the big intellectual thinker in this group? Sen. Clinton, I have an enormous amount of respect for her intelligence and her diligence and everything else, but she's not a big-picture foreign policy thinker.

JIM LEHRER: Well, on that note of agreement, new subject, the Obama national security team. Do you -- first, an overview judgment?

RUTH MARCUS: Well, you know, it seems like so long ago, but it was just Monday.

JIM LEHRER: I know, just Monday.

RUTH MARCUS: A couple quick things. My look at this team -- and it's a very solid team. It's a team that should make people pretty much across the political spectrum -- and has -- feel very confident about the situation going forward.

But who's the big intellectual thinker in this group? Sen. Clinton, I have an enormous amount of respect for her intelligence and her diligence and everything else, but she's not a big-picture foreign policy thinker.

The biggest-picture foreign policy thinker in the group is actually Secretary Gates. That's a little bit odd. I was also...

JIM LEHRER: Why is that odd? Because he's a -- comes from a Republican...

RUTH MARCUS: Well, because he is a retread...


RUTH MARCUS: ... from -- you know, your big-picture foreign policy thinker is a Republican.

JIM LEHRER: Somebody else might call him a "holdover"...

RUTH MARCUS: Well, whatever. Let's be more polite than I was.

JIM LEHRER: Right, right.

RUTH MARCUS: I apologize, Secretary Gates.

JIM LEHRER: But do you share that, that there may not be a lot of intellectual power in this group?

DAVID BROOKS: No, I think the intellectual power is clear, and Gates is the one. He's an encore secretary, you could say.

JIM LEHRER: That's right.


RUTH MARCUS: If you were French.

DAVID BROOKS: If you were French. And the point is what we've had over the past couple of years, a bipartisan shift in the way we think about foreign policy, and it came out of the Iraq war.

And the general sense is our structure where we separate Defense, and State, and foreign aid, and foreign -- public diplomacy, these barriers are obsolete. And we need to merge these things in places like Afghanistan, in places like Iraq, in places like Pakistan, and get the military, the diplomatic, the foreign aid, all the stuff working together to stabilize chaotic parts of the world.

And that is something Gates has been in the forefront of, with a series of speeches. It's also something Jim Jones, the national security adviser, has been in the forefront of, and Hillary Clinton.

So the ideology or the project is already set. And it's, frankly, a project from the second Bush term. The question is implementing it. So I guess it bothers me less that they don't have a big grand strategist.

New role for Clinton

David Brooks
New York Times
Individually, I think it's a very good choice. My problem is the whole team of rivals issue. It sounds great to get a bunch of all-stars together and get -- just stack up I.Q. points. That sounds great.

JIM LEHRER: On the Hillary Clinton, now that it is official, do you still think that's a good choice?

DAVID BROOKS: Individually, I think it's a very good choice. My problem is the whole team of rivals issue. It sounds great to get a bunch of all-stars together and get -- just stack up I.Q. points. That sounds great.

Historically, it's rarely worked. In the Reagan administration, Cap Weinberger and George Shultz could barely speak to each other. In the Clinton administration, Clinton could barely work with Les Aspin, the defense secretary, or Jim Woolsey, the CIA director.

In the second -- in this Bush administration, Colin Powell and Bush didn't get along. Powell and...

JIM LEHRER: Rumsfeld.

DAVID BROOKS: ... Rumsfeld didn't get along. So you get these blowups. And the only person who's going to manage these blowups is going to be Barack Obama, and that will be a 25-hour-a-day job.

RUTH MARCUS: I'm a -- if you had asked me last week, I would have been a little more negative. But this week, I'm positive on Sen. Clinton as secretary of state.

I think if it weren't for the I think inevitable distraction that the former president is going to present, it would be a no-brainer good choice.

President Obama is going to have to focus like a laser, to use a Clintonian term, on the economy. He is going to need -- and he talked about this in announcing her -- somebody who has the stature, the intelligence, and the focus to do a big piece of the foreign policy heavy-lifting that he would otherwise have the time to do, not that he's going to ignore foreign policy in any way, but there just are not going to be enough hours in the day for him to do everything he'd want to do.

I was also struck, listening to Senator -- looking at Sen. Clinton, she didn't look very happy.

JIM LEHRER: At the announcement, you mean?

RUTH MARCUS: At the announcement. And I happened to speak to somebody later that afternoon who knows her quite well. And I asked this person, I said to this person, "She didn't seem that happy."

And what I got back was, "She knows it's the end of her political career. This is the end of politics for her." That made me think better about the team of rivals.

JIM LEHRER: Do you agree that this could be -- this could be the end of her political career?

DAVID BROOKS: I never count the Clintons down. She could easily come back. She's going to be a very famous person for a long time.

But if she has -- if she says, "OK, I'm carrying out the president's mission," then certainly that will be a big plus. I think Henry Kissinger wrote a piece today saying, if the secretary of state does not carry out the president's mission, if there's daylight between them, that secretary of state is completely ineffective.

JIM LEHRER: OK. David, Ruth, thank you both very much.

RUTH MARCUS: Thank you.

DAVID BROOKS: Thank you.