Getting America Back to Work (Part 2)

It's no surprise the economy is on the minds of most Americans. One in ten of us is out of work. It's a rate that hasn't changed in a year and a half. So why aren't jobs being created? Why aren't businesses hiring? Can the government do anything about it? Should it? Three different economists with three very different views discuss how they would get America back to work.

Transcript


              JIM GLASSMAN:

Welcome to Ideas In Action, a television series about ideas and their consequences.  I'm Jim Glassman.  This week, we continue part two of a discussion on boosting job growth at home.  You might be surprised that the recession has been declared officially over because for many Americans, it sure doesn't feel that way.

 

That's because the unemployment rate has been holding steady at nearly ten percent.  So where are the jobs.  Here are three economists with very different views.  Heather Boushey, a senior economist at the center for American progress where she focuses on job creation and employment.

              HEATHER BOUSHEY:

This is the best time for government to go out and spend its dollars effectively on infrastructure.

              JIM GLASSMAN:

Kevin Hassett, senior fellow and director of economic policy studies at the American Enterprise Institute and a former senior economist at the Federal Reserve.

              KEVIN HASSETT:

We need to consider policies that could, on average, deliver something like a percent a year of growth for a long, long time not something that would necessarily jack up growth just this year.  A leading candidate, I believe, is fundamental tax reform.

              JIM GLASSMAN:

And Alan Tonelson, research fellow with the U.S. Business and Industry Council, a national business organization that represents nearly 2,000 domestic American companies.

              ALAN TONELSON:

What is urgently needed in order to grow while cutting debts is substituting on a very significant scale what we make at home, goods and services for what we presently import.

              JIM GLASSMAN:

The topic this week getting America back to work.  This is Ideas In Action.

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              JIM GLASSMAN:

According to the National Bureau of Economic Research, the recession has been over since June 2009.  That's when the economy finally showed signs of expansion.  But for many Americans, this so called recovery is no recovery at all.  Unemployment hasn't gone down.  It's been holding steady at nearly ten percent for a year and a half.  That means 50 million Americans are out of work, that one third of those unemployed haven't had a job in more than a year, a phenomenon not seen since the Great Depression.  Alan, let's talk trade.  You're in favor of putting up barriers to encourage manufacturing, and as you put it, protect American jobs.  But-- but some people would say that the Smoot-Holly Tariff during the Great Depression actually exacerbated things at that time.  So why would you want to have barriers now?

              ALAN TONELSON:

Well, the problem really is that first of all, the Great Depression resulted fundamentally from the fact that the world economy heading out of the 1920s was so sick that it was headed for an enormous fall.  And there's a lot of scholarly evidence showing that if you look at-- at-- at what tariffs were actually put on, when they were imposed, what specific retaliation-- it's really much ado about very little.

              JIM GLASSMAN:

But-- but whatever happened in the '30s--

              ALAN TONELSON:

Jim, I'm sorry.  But that's the scholarship.

              JIM GLASSMAN:

--You can imagine-- you can imagine the United States said, "We don't want any more Chinese goods.  Or we're going to force the Chinese to revalue their currency."  The Chinese can come back and do the same thing to us.

              ALAN TONELSON:

In-- in the crudest possible sense, in that case, we win.  Why?  Because they ran a $235 billion trade surplus with us last year in goods.  And PS, 95 percent of that was manufacturing.  And PPS, a shrinking share of those manufactured goods were not shoes and toys and sporting goods and all the stuff that, for better or worse, is gone.  It was much higher value capital intensive and technology intensive products.

              JIM GLASSMAN:

Yeah, but a lot of that was-- was-- we took it--

              ALAN TONELSON:

If you're talking about net effects--

              JIM GLASSMAN:

--And we made things with right?

              ALAN TONELSON:

If you're talking about the net effects--

              JIM GLASSMAN:

There were parts.

              ALAN TONELSON:

If by some wild chance which is not going to happen because nobody can possibly shut borders.  That's just silly.  But if there is a quote trade war end quote, they're the enormous losers.  They're running the-- the biggest surpluses.  So any country that had shrewd poker players as its leaders, and I don't think we do, would recognize the enormous leverage we have to secure more equitable terms of trade.

              JIM GLASSMAN:

Kevin wants to get in here.

              KEVIN HASSETT:

Yeah, I-- I was just going to say that-- that I-- I really disagree.  And-- and I think that-- the analysis might be correct in terms of jobs, only jobs.  But it's certainly not correct in terms of welfare.  And so the fact is that, you know, if you go to Wal-Mart, you buy cheap stuff.  Jason Furman-- has a famous paper about-- how Wal-Mart's really great-- for low and middle-income people and it improves their standard of living.

 

If all of a sudden we say those cheaper goods from abroad are not allowed to come in, then we probably would create more jobs in the U.S.-- because the stuff would have to be purchased from the U.S.  But-- but I would just dispute that it's clear that that-- that we would make the U.S. a better place, the-- that-- I think the consumers would be a lot worse off.  The people who were hired would be better off.  And on net, probably I mean, it-- at least if you believe the trade models, we'd be a lot worse off.

              JIM GLASSMAN:

Yeah, that's-- those are all--

              ALAN TONELSON:

But the consumers are usually people--

              JIM GLASSMAN:

--All experiment--

              ALAN TONELSON:

--The people who are behind.

              JIM GLASSMAN:

Let's say-- let's say we had no trade with anybody, we did everything in the United States--

              ALAN TONELSON:

Well, why-- why would you start with that?

              JIM GLASSMAN:

Would that be the b-- would that--

              ALAN TONELSON:

Why would you start with that?  Why-- that's so far from where we are.  Why in the wor-- that's-- that's just not a thought experiment we're engaging in--

              JIM GLASSMAN:

Yeah, but that s--

              ALAN TONELSON:

It wouldn't engage with me, I'm sorry.

              JIM GLASSMAN:

But that seems to be your-- your-- your thesis is we--

              ALAN TONELSON:

Why-- why do you say that?

              JIM GLASSMAN:

--We need to make more things in the United States.

              ALAN TONELSON:

Absolutely.

              JIM GLASSMAN:

Why don't we make everything in the United States?

              ALAN TONELSON:

I don't see, first of all, why this country should not be fully competitive in capital intensive and technology intensive products.  We have the human capital.  We have this wonderful entrepreneurial system.  We have a world-class university system.

 

We have very skilled workers despite what you read about the-- the lousy schools et cetera.  In fact, lots of the folks losing their jobs to foreign competition nowadays are folks who have got Ph.D.'s.  They're engineers.  They're software programmers, et cetera, et cetera.  So again, tremendous amount of skills that we have in this country.  Yet what happened according to the latest trade figures that we just saw?  The trade deficit in high tech goods hit a new record, a new monthly record.  The trade deficit in high tech goods this year as opposed to last year so far is running 52 percent higher.  This makes no sense if there were genuinely free competition.

              HEATHER BOUSHEY:

Well, and-- I think something to add to that is that-- I think sometimes we discount the important role that manufacturing plays in a feedback loop through creating the high tech goods and services, that those workers on the shop floor are the ones that can tell you, you know, how this good is being produced.

              JIM GLASSMAN:

So-- so-- so heather, s--

              HEATHER BOUSHEY:

So there's-- so--

              JIM GLASSMAN:

So what is the policy?  What-- what policy would you like to see?  Do you think we should, you know-- make-- have tougher antidumping laws?  I mean-- should we raise tariffs?  I mean, w-- how-- how do you-- how do you increase-- the consumption in the United States but don't increase imports?

              HEATHER BOUSHEY:

Well, I think one path-- that folks have been talking about a lot here in Washington that we should pursue is to th-- is to-- to make the-- to sort of-- to take it to a little different place, to make that connection that folks have been making between energy and manufacturing, that we-- have this opportunity to create a viable industry here in the United States that-- to promote it, to promote the development of green energy technologies and all of this, that-- that-- and these are things that other countries right now are starting to outpace us in.

              JIM GLASSMAN:

That's a little tiny, tiny, tiny part of the economy.

              HEATHER BOUSHEY:

But it doesn't have to be.  And it could create a lot of innovation.

              JIM GLASSMAN:

Well-- well, what do you think of that Kevin?

              KEVIN HASSETT:

No, no, I-- I-- look-- look, what we need to do is cut the corporate rate so that people want to locate firms here.  The fact is the-- that a big reason why the-- the estimates in the literature are that the elasticity of responsiveness of the location decision to tax rates is-- is really, really high, way bigger than one so that if we lower the rate then the plants that currently are deciding to locate in offshore, low tax places will want to locate here.  And you'll create jobs here.

              JIM GLASSMAN:

Well-- hold on-- what do you think of that?  I mean, that-- that seems to me like the most obvious thing to do.  We have the second highest corporate tax rate in the world-- a little tiny bit less than Japan.

              ALAN TONELSON:

Here's the problem with that, Jim.

              JIM GLASSMAN:

European countries have lower tax rates, corporate tax rates than we do.

              ALAN TONELSON:

First of all, taxes-- I mean, whenever you face a problem this big, there's never w-- one magic bullet.  Okay, but the other bigger problem--

              JIM GLASSMAN:

You know, but what's wrong with that?

              ALAN TONELSON:

The bigger problem is the fact that if you look at where the factories and labs are relocating to, it's not to the other OECD countries-- with whom the--

              JIM GLASSMAN:

OECD means--

              ALAN TONELSON:

Meaning the--

              JIM GLASSMAN:

--Highly developed.

              ALAN TONELSON:

--The wealthier countries with whom these comparisons are always made.  They're going to very low wage, very low cost regulation free for all intents and purposes developing countries.  Now, do we really want to engage in a tax competition with the Chinese because that, I guarantee you, is a formula for racing to the bottom and achieving Chinese living standards.

              JIM GLASSMAN:

What-- what do you think?

              KEVIN HASSETT:

No, we-- we absolutely have to engage in the competition.  Everybody else is.  And we haven't.  And that's why this-- even-- as you say, even the research is going abroad to these-- developing countries, the tax rates are even lower than in the OECD.  And the point is that you have to locate-- this is, like, a weird thing about tax planning that our bureaus' might not know but you have to locate intellectual property in the tax haven in order to locate income there 'cause what happens is you create the really cool software in-- in some low tax country somewhere.

 

And then all of your subsidiaries in the U.S. have to pay royalties to the place where the cool software was developed.  And so you need your smartest people that are generating the things that plausibly could-- could charge royalties in the lowest tax place.  And so-- and so we're really shooting ourselves in the foot.  We're locating production offshore.  And we're locating the research and development that then leads to waves of new products--

              ALAN TONELSON:

But if you also locate--

              KEVIN HASSETT:

--And so on offshore.

              ALAN TONELSON:

--The new lab or factory or you-- you-- you transfer it where the subsidies are most lavish, where currency gets manipulated--

              JIM GLASSMAN:

I mean, that's just--

              ALAN TONELSON:

--Massively in--

              JIM GLASSMAN:

Alan, that's--

              ALAN TONELSON:

--Violation of every free--

              JIM GLASSMAN:

--That's just the-- that's just the facts of--

              ALAN TONELSON:

--Market norm you can think of.

              JIM GLASSMAN:

Well, I don't-- I don't know.

              ALAN TONELSON:

No, no, it's--

              JIM GLASSMAN:

I mean, they're-- they're all con--

              ALAN TONELSON:

And what's-- and the problem with that--

              JIM GLASSMAN:

Nobody likes subsidies.  Actually I want to sort of segue form here because Kevin's talking about-- basically talking about-- sort of the good jobs.  But what-- but what do you think, Alan?  I mean-- is-- doesn't it stand to reason that-- that America's comparative advantage, whatever happens with trade, is in high technology or is in kind of the brainy kinds of stuff?  And so that it's really become more and more of an imperative for people to get a better education.  Isn't that really what the problem is?

              ALAN TONELSON:

No, it's not.  And the reason is that we are not the only people--

              JIM GLASSMAN:

To-- to put it bluntly.

              ALAN TONELSON:

To put it bluntly, we are not the only country that recognizes the value of retraining and reeducation and scholarship and knowledge.  We are not the only country recognizing that knowledge is good.  And the rest of the world including the very low-income countries are also racing frantically to re-skill and reeducate.

              JIM GLASSMAN:

So what's our comparative advantage or do you believe in that?

              ALAN TONELSON:

That-- that is actually increasingly a darn good question.  And here's why--

              JIM GLASSMAN:

That's why I asked it.

              ALAN TONELSON:

Okay, and this is the first time this has ever been said on-- on national television, productivity is increasingly becoming a mobile factor of production.  All of the expertise, all of the special qualities that are involved in making advanced products can now be literally packaged by corporations and transferred overseas almost as turnkey operations to work forces that are low wage-- not because in a sense they always have been and so they're basically-- playing catch up but because they are so numerous, there is such a glut of labor that they're going to be low wage for decades to come--

              JIM GLASSMAN:

So what does that mean--

              ALAN TONELSON:

--At minimum.

              JIM GLASSMAN:

--Too, for Americans-- thinking about what kind of job they're going to have in the next ten years?

              ALAN TONELSON:

As long as this economy remains as open as it has been to this kind of ultra low wage, regulation free competition-- I see a very dim future for even very skilled American workers.

              JIM GLASSMAN:

Kevin?

              KEVIN HASSETT:

I-- I think that-- the future could be bright or it could be dim.  I don't think that-- competition-- subtracts from what the U.S. can accomplish.  Don't forget that what's going on is that-- we're seeing what-- growth there is called convergence, that it used to be that the United States was much bigger, much wealthier than the rest of the world-- in part because the rest of the world was, you know, organized by communists-- that didn't know-- you know, that thought they could centrally plan an economy and they couldn't.  And what we're seeing is-- you said, "Why is China growing so fast?"  Well, they're growing so fast so that-- because they're so poor.  And if they just copy developed nations, then they can start to grow quickly.  So we're at a period--

              ALAN TONELSON:

But they're not copying developed nations.

              KEVIN HASSETT:

So we're in a period-- but we're in a period-- yes, they are.

              ALAN TONELSON:

Not they're not.

              KEVIN HASSETT:

We're in a period, yes, they are.  They're using pr-- developed nations--

              ALAN TONELSON:

They are using--

              KEVIN HASSETT:

--Production.  And-- and as they converge--

              ALAN TONELSON:

--Capitalism.

              JIM GLASSMAN:

I thought that's what you just said.

              ALAN TONELSON:

--Characteristics.

              JIM GLASSMAN:

I thought you said that anybody can-- that-- that-- that--

              KEVIN HASSETT:

Run a factory like us.

              JIM GLASSMAN:

Brain-- brainwork is-- is-- is mobile.  And the productivity can go anywhere.

              ALAN TONELSON:

Oh no, on the microeconomic level but in terms of that macroeconomic policy, the state owned sector in China is expanding once again.

              JIM GLASSMAN:

Well, okay, okay, but--

              (OVERTALK)

              KEVIN HASSETT:

That wasn't my point.  That wasn't my point.  My point was just that-- that convergence-- if-- if-- if China grows wealthy, that's not bad for us.  That's good for us.  The whole world economy gets bigger and then we can sell them stuff, too.

              JIM GLASSMAN:

Actually that's a great-- point-- I was wondering what Alan would think about that.  Is this a zero sum game?  Gee, the Chinese are getting all rich and so that means that we're going to be poor?  Or if the Chinese get rich or-- forget about the Chinese 'cause that's kind of an emotional issue, the Brazilians, for example, I just came back from Peru.  It's amazing what's going on in Peru.  You think the Peru-- Peruvians are stealing all our ideas and thereby stealing our jobs?  Or do you think it's good because Peru's getting richer?

              ALAN TONELSON:

It's a very complicated game.  And one thing that strikes me is that for 15 years, this country has been told if we open up the so called emerging markets, if we unlock all the consumption power of these zillions of consumers in China or outside China-- everybody grows richer.  The pie expands.

 

The sky's the limit.  And yet, what are we looking at now?  What is Mr. Bernanke most worried about now?  Deflation, why is that?  Because in fact, the opening of these very low wage, low consumption economies which will remain low consumption economies relatively speaking for decades to come has unleashed much more production and much more productive capacity than it has consumption and consumption capacity.  There's too much production in the world--

              JIM GLASSMAN:

Okay, you raise some really interesting questions.

              ALAN TONELSON:

--That has been generated from these countries.

              JIM GLASSMAN:

And first of all, is defil-- is the deflation that the fed is worried about, is that the result of this new supply coming onboard in all these countries?  Or is it because of this recession that we've just had?

              HEATHER BOUSHEY:

Well, I tend to think of it as-- as because of the recession that we're living through.  But I mean-- Alan raises an interesting point.

              JIM GLASSMAN:

And-- and-- and by the way, second question, I'll ask you, but-- but I think-- Alan-- Alan raises it.  And it's a very important question, which is, yes, it is true that these countries are not doing a lot of consuming.  But-- don't you think that at some point the Peruvians and the Chinese and the Brazilians will, in fact, be doing a whole lot of consuming like Americans have?  Or is there something culturally different about them?

              HEATHER BOUSHEY:

Well, there was something culturally different about Americans over the past couple of decades, right.  As we saw the American labor force see a decline, a secular decline in their wages, declines in family incomes, you saw them put more families members into the household during the 1980s.  More women went to work to sort of make up for-- falling male wages.

 

And then when they tapped out on that, they started taking out all this debt, all the crazy new debt instruments that we now know can-- can-- collapse an economy faster than you can say lickety split in the late 2000s, right, late-- 20 t-- you know, the end of the last decade.  But what we-- you know, so your question about whether or not developing countries will start consuming is will they develop the kind of middle class that can-- that can support that consumption base?

 

What we've seen here in the United States is that it appears that we have allowed our middle class to atrophy over the past 20 years, 30 years, a lot of it because we haven't focused on creating good jobs for the millions of people who are not just high tech workers and creating-- wage growth for those folks.

 

And that in turn has-- has led to-- you know, both-- you know, it was part and parcel to this crisis but is also part in parcel how we can't get out of it because folks don't have the savings.  They don't have-- now with high unemployment and they don't have the-- equity in their homes to sort of be the consumers that we kind of need.

              JIM GLASSMAN:

Oh but-- but do they not have the savings because somehow, you know, I don't know, we've destroyed the middle class as you say?  Or is it because of this cultural reason that you were just bringing up, that Americans have-- have kind of gone a little bit overboard on their borrowing.  Now, they got to cut back?

              HEATHER BOUSHEY:

Well, but-- but my-- but my point was why did people do that?  Right, what you saw was declining living standards since the mid 1970s.

              JIM GLASSMAN:

Actually-- Kevin--

              HEATHER BOUSHEY:

So-- so what-- so what--

              JIM GLASSMAN:

Respond to that.  What about declining living standards?  I mean, a lot-- a lot of people--

              HEATHER BOUSHEY:

But-- but--

              JIM GLASSMAN:

--Have-- have said that.  And you-- you got-- you know, s-- you go two people working, a husband and wife working.  And that wasn't true back in the--

              HEATHER BOUSHEY:

And families--

              JIM GLASSMAN:

--Good old 1950s.  I mean, are people-- are-- are living standards declining?  Is there something wrong with the American--

              KEVIN HASSETT:

No, the-- the--

              JIM GLASSMAN:

--System?

              KEVIN HASSETT:

This is-- the-- the-- the data that suggest that come from-- wage-- data-- sets.  If-- if you look at consumption it's not true that consumption has been declining.  Although, after the recession--

              ALAN TONELSON:

But that's been the problem.

              KEVIN HASSETT:

--I would guess you would adjust it.  No, no, no, but--

              ALAN TONELSON:

That's been the problem.

              KEVIN HASSETT:

My point is the living standard--

              HEATHER BOUSHEY:

You can't do that forever.

              KEVIN HASSETT:

--Is what people consume.  No, and-- and-- and when the savings rate is ten percent and it goes to one percent, then it could be because people are optimistic.  It turns out, you know, they were incorrectly optimistic.  It could also be something that comes about because so many-- families have two earners.

 

And so-- so you don't necessarily have to save for the probability that there's no job in the family-- quite so much.  And so there have been a number of changes that-- that have led to increased consumption.  I-- I would guess if we ran the numbers through 2009 that we'd see that even con-- real consumption-- in-- in the bottom of the income distribution has declined now.  But I think that-- that we need to emphasize though that-- that this notion that-- it's a zero sum game I think is one that-- that we should-- we should sort of reject.

 

The-- the-- the fact is that-- that there are problems in the U.S.  And-- and one problem is that you don't want to locate stuff that makes money here in the U.S. because we tax it so much.  And the-- the idea that we could tax the heck out of firms if they're successful but give them a little bit of subsidy to do something if it's-- if they can put green-- in the title of it-- is-- is just ludicrous policy making.

 

And that's been the policy making that we've seen, you know, through both the-- the Bush and the Obama administrations.  So-- so-- so-- President Bush didn't propose-- taking part in the tax competition around the world.  President Obama hasn't proposed it yet.  And I think that it's time that we fix those things.  And then the jobs and the welfare and everything will start to come here.

              JIM GLASSMAN:

But President Bush did cut marginal tax rates-- on-- on income.  And you don't-- personal income, so you don't think that has-- that has-- a good effect?

              KEVIN HASSETT:

Not very big.  It's-- it's a very--

              JIM GLASSMAN:

You think-- you think--

              KEVIN HASSETT:

--Loose link--

              JIM GLASSMAN:

--Cutting corporate taxes is more important.  Would you accept a tradeoff where t-- personal tax rates go back to where they were prior to 2001 but the corporate tax is cut in half?  There's a deal.

              KEVIN HASSETT:

You know, I-- I-- it's-- it's a deal that you'd have to take seriously.  I mean, the corporate tax is so out of whack with the rest of the world right now.  You know, I-- I-- I'd almost be willing but not quite to trade my dog for a cut in the corporate tax rate or something.  (LAUGHTER)

              JIM GLASSMAN:

Okay-- Kevin-- Kevin brings up an issue that I'd like to explore here as we near the end.  And that is-- this business about-- optimism.  And, you know, one of the reasons that people borrow is because they feel good about the future.  I mean, you know, we can-- we can have sort of moral judgments about people over-borrowing.  They feel good about the future.  And-- so do you think that Americans feel today that the future for their children and their grandchildren is not going to be as good as the present is for them or the past has been for them?  I mean, are-- are we entering kind of a new era here?

              HEATHER BOUSHEY:

Well, I think a couple of things.  I mean, one I think a lot of people were borrowing over the 2000s because-- maybe some folks were borrowing because of optimism.  But a lot of them were doing it in order just to-- to sort of keep up, to make-- to keep up with the living standards that their parents had that they felt that they should have.

 

So there-- there are-- there are a couple of reasons that people borrow.  And it's not just-- because they have hope in the future.  That's usually why you invest.  You invest in your kid's college education because you're hopeful that they'll-- that they'll get that job and that they will rise up.  You know-- are people more or less optimistic about the future today?  I mean, I think that now people are very concerned.  They're very concerned about-- wages.

 

They're concerned about jobs.  They're concerned about sort of where we're headed in this economy moving forward.  But I also want to circle back to something that-- that Kevin just pointed out which is that, you know, we have these choices to make as a country about how we're going to spend the resources that we have and-- and how we're going to create a vision of America moving forward.

 

And one of the big choices that-- we are looking at is-- is, you know-- how we feel about taxes and the tax cuts for the wealthiest Americans and how we feel about investing in infrastructure and bringing our infrastructure system up to the 21st century, how we feel about creating an economy that works for all of us and creates a vibrant middle class.

 

And I think those are really important questions.  One of the things that-- although I agree with much of what you said today, Kevin, one of the things that concerns me is that if our sole goal is on-- cutting taxes and cutting spending, although you didn't talk so much about cutting spending but cutting taxes, how are we going to create the foundations for a strong economy?  How are we going to lay that groundwork-- when we've got this infrastructure that's crumbling.  I-- I don't-- I don't know that that-- that connection doesn't seem to be there.

              JIM GLASSMAN:

Well, not to speak for Kevin but I think that-- he would probably say-- I would say that cutting taxes is a way to spur growth.  I mean, you can argue--

              HEATHER BOUSHEY:

Well, but he just made the--

              JIM GLASSMAN:

--Against that.  But the-- the goal is n-- I don't think the goal is to cut taxes.  The goal is to get the American economy going so that more people have jobs.

              HEATHER BOUSHEY:

Well, and that's--

              JIM GLASSMAN:

And he thinks that that's the way to do it.

              HEATHER BOUSHEY:

I-- I think-- I think we all agree that we'd like to see more jobs.  And I think that-- that-- that-- that's-- I mean, certainly we're all on that-- that point.  But what-- what-- what I think we've seen is that cutting taxes for the wealthiest Americans did not lead to rapid job creation over the 2000s and-- you know, and as Kevin just said, we're not-- I mean, I'm not sure that that's the right policy moving forward.  Corporate taxes is a different story.  But what you do in terms of-- income taxes-- does not appear--

              JIM GLASSMAN:

So you would cut corporate taxes?

              HEATHER BOUSHEY:

I did not say I would cut corporate taxes.

              JIM GLASSMAN:

You said it's a different story.

              HEATHER BOUSHEY:

I said it's a different story.  I think--

              JIM GLASSMAN:

Meaning?

              HEATHER BOUSHEY:

Meaning that--

              JIM GLASSMAN:

Real quick.

              HEATHER BOUSHEY:

That-- you know, the biggest-- I think the-- the question on the table right now is what do we do about income taxes.  And--

              JIM GLASSMAN:

You-- you seem to be ducking.  Okay, but Alan, so what do you think about the future-- the-- the very eloquent-- remarks here by heather about the way people see the future.  Is the future dimmer for-- for-- for children and-- and grandchildren?

              ALAN TONELSON:

I have to say I'm pretty pessimistic.  And I'm pessimistic not only because we're in-- a deleveraging recession-- which is going to take a long time to dig out of.  I'm pessimistic because for much longer than that, for the entire previous decade, this country, it seems, forgot how to grow without piling on debt.  We make a big mistake when we look at the pre 2007 period, the pre 2007 expansion as a reasonably good expansion.

 

The economy was basically healthy.  What did we hear from every responsible Washington official when the subprime mortgage crisis first broke?  The fundamentals are healthy.  The fundamentals then were deeply sick.  How do we know this?  Because even during that previous mortgage mess decade, the government was also pouring record amounts of peacetime stimulus into the economy, record low interest great-- record low interest rates for stimulus.

              JIM GLASSMAN:

You're talking about early in the 2000s?

              ALAN TONELSON:

Absolutely.  And it continued well after the 2001, 2002 recession ended.  Plus a major swing--

              JIM GLASSMAN:

Well, that may have just been bad monetary policy.

              ALAN TONELSON:

--In federal-- but also then bad budget policy.  But-- but the-- the f-- the main point is stimulus of various kinds and the growth output, the growth record was totally mediocre.  So that gave us a big clue that the engines of wealth creation were malfunctioning even back then.

              JIM GLASSMAN:

Kevin, what about the future?

              KEVIN HASSETT:

I think that right now-- if we do nothing then the future's looking bad for a long time.  I-- I think we need to remember that the-- experience of countries that have been through financial crises in the past-- is really troubling and disturbing.  If you go back to late '70s Spain-- you know, they had really low unemployment before their financial crisis.

It's never gone back to where it was even through today.  And so there's a chance that we're going to dislodge people from the work force and that they're going to be out there-- for 30, 40 years creating-- a place that's a different country, a fundamentally different country.  But I think that as we talked about-- there are a lot of policies that we can either agree on or almost get Heather to agree on-- that-- that could change things.

 

And-- and I believe that they could change things a lot for the better.  And so I think that the risks are kind of actually as we look forward on the upside because put it this way, yeah, I think that you could go into any random corner of economic policy and change something randomly and it would be better.  It'd probably be better because our policies are so terrible.  And so, you know, it's kind-- if congress can act at all then they can make things better.

              JIM GLASSMAN:

Well, on that happy note, thank you, Kevin.  Thank you, Heather.  And thank you, Alan.  Before we go, I want to remind viewers that you can catch Ideas In Action whenever and wherever you choose.  To watch complete shows just go to our website, Ideasinactiontv.com or download a podcast from the ITunes store.  And that's it for this week's Ideas In Action.  I'm Jim Glassman, thanks for watching.

 

ANNOUNCER:

For more information visit us at ideasinactiontv.com. Funding for Ideas in Action is provided by Investor's Business Daily. Every stock market cycle is led by America's never-ending stream of innovative new companies and inventions. Investor's Business Daily helps investors find these new leaders as they emerge. More information is available at investors.com. This program is a production of Grace Creek Media and the George W. Bush Institute, which are solely responsible for its content.

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Featured Guests

Heather Boushey

Senior Economist, Center for American Progress

Heather Boushey’s focus at the Center for American Progress is on employment, social policy, and family economic well-being. Currently, she is also working on the recession’s impact on workers and their families, as well as policies to promote job creation. She co-edited the 2009 eBook, “The Shriver Report: A Woman’s Nation Changes Everything” and was a lead author of “Bridging the Gaps,” a 10-state study about how low- and moderate-income working families are left out of work support programs.

Prior to working at the Center, Heather held an economist position with the Joint Economic Committee of the U.S. Congress, the Center for Economic and Policy Research, and the Economic Policy Institute, where she was a co-author of their flagship publication “The State of Working America.”

Heather’s research has been published in academic journals and has been covered in major newspapers. The New York Times called her one of the “most vibrant voices in the field.” She also spearheaded a successful campaign to save the Census Bureau's Survey of Income and Program Participation from devastating budget cuts.  

Kevin A. Hassett

Senior Fellow, American Enterprise Institute

Kevin A. Hassett is a Senior Fellow and Director of Economic Policy Studies at the American Enterprise Institute (AEI) where he concentrates on the U.S. economy, tax policy, investments and the stock market.

Before joining AEI, Kevin was a senior economist at the Board of Governors of the Federal Reserve System and an associate professor of economics and finance at the Graduate School of Business of Columbia University, as well as a policy consultant to the Treasury Department during the George H. W. Bush and Clinton administrations. Kevin also served as an economic adviser to the George W. Bush 2004 presidential campaign and as Senator John McCain's chief economic adviser during the 2000 presidential primaries and as a senior economic adviser to the McCain 2008 presidential campaign.

He writes a weekly column for Bloomberg.

Alan Tonelson

Research Fellow, U.S. Business and Industry Council

Alan Tonelson is a Research Fellow at the U.S. Business and Industry Council, a national business organization representing nearly 2,000 domestic American companies, most of them small and medium-sized manufacturers. His work focuses on the impact of economic globalization on America’s economy and the domestic manufacturing base.

Alan is a contributor to the Council’s AmericanEconomicAlert.org website, and a columnist for the Washington Times and IndustryToday.com. The New Republic called him “the most influential economist spreading the nationalist gospel.”

In 2000, he authored a book on globalization and the U.S. economy, “The Race to the Bottom,” published by Westview Press.

Previously, Alan was a former Fellow at the Economic Strategy Institute and Associate Editor of Foreign Policy.

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