State of the Economy

Jeffrey R. Kling
Jeffrey R. Kling Former Brookings Expert, Associate Director for Economic Analysis - Congressional Budget Office

December 1, 2008

Editor’s Note: Jeffery Kling, Daniel Mitchell, Sharon Parrott, and host Ian Mylchreest discuss on KNPR Nevada Public Radio the Federal Reserve’s latest plan to infuse another eight billion dollars in to the economy to help people borrow money for car loans, tuition and new homes and what effect this will have on the nation and the region.

Ian Mylchreest: An independent panel of economic and business experts set to meet today to estimate Nevada’s economic future at least for the coming six months. Governor Jim Gibbons would use those numbers as the state heads in schedule special session of the state legislature on December 8 and 9th. The goal, close a budget gap of at least $300 million dollars that would come on top of previous cuts of 1.2 billion dollars in the state budget. We are waiting on state economist Bill Anderson and chief economist from the Nevada Department of Employment training and Rehabilitation, he’ll be joining us in a moment, but first we turn to Jeffrey Kling he’s a senior fellow deputy director of economic studies at the Brookings Institution in Washington. Jeffrey welcome to the program, and I want to read you a noted economist assured a large group last week in northern Nevada that the recession will eventually pass given the cyclical nature of America’s economy. This is Jeffrey Thredgold of Utah, but he said that this could hit hardest mid 09 be over after 09. When we start talking about crystal ball predictions right here with this economy does anyone know what they’re talking about in this environment.

Jeffrey Kling: There is a lot of uncertainty that’s for sure. Most previous recessions, what Thredgold was saying makes sense but you would expect it to last for year or so, and then you would be out of it, and there’s some reasonable basis for saying that, but things can also be different this time its hard to tell.

Ian Mylchreest: Lets go through this because I think that a number of people listening right now have heard from economists and financial experts who talk about what’s similar what’s different from past bubbles that we’ve seen what do you see in this environment that is particularly different is it the housing meltdown is it the failure of the financial markets. What’s new?

Jeffrey Kling: The failure of the financial market is different than say in 1991 or 1981, and that is something that could potentially drag things out.

Ian Mylchreest: It’s different in what way because again are we talking about a fundamental difference here that, if you talk with Nevadans, people from Arizona, Utah, Southern California, sun belt communities and they look at the collapse of the housing market they look at the collapse of the stock market they feel as if though that this is different people of a certain generation say it fees somewhat like a recession of 1981 where unemployment rates rose to as high as 12% are we looking at something like that or is it something even more different that what we saw twenty seven years ago.

Jeffrey Kling: It could certainly be that severe it does seem that it’s different in that one of the big issues then was that we had a lot of inflation then. We don’t have inflation now, many think we are on the verge of deflation so it’s not prices are rising so rapidly but the fact that it is quite possible that unemployment rates will continue to go up and house prices will continue to fall and that’s very salient people feel that.

Listen to the full interview »