Editor’s Note: William Gale, Douglas Holtz-Eakin, and Joseph Stiglitz discuss some of the elements of an expanded economic package and its overall impact on the U.S. economy on the Diane Rehm show.
Diane Rehm: Thanks for joining us, I am Diane Rehm, jobless numbers have dropped in, existing home prices and a very volatile stock market present formidable challenges for President- Elect Barrack Obama and his economic team. In a news conference yesterday and another planned for today he is offering broad outlines in the massive stimulus package he intends to push through Congress soon after taking office. Joining me to talk about the US Economy, what can be done by this administration and the next to reverse current trends William Gale of the Brookings Institution and Douglas Holtz-Eakin former economic adviser to the McCain campaign, former Director of the Congressional Budget Office. We will take your calls 800-433-8850, send a short email to drshow@WAMU.org.
Good Morning to both of you. Bill Gale if I could start with you, president-elect Obama had originally said he was going to stay in the background during this transition period he has come out now press conference yesterday another today not only to introduce members of his team but to talk about his plan. How do you see that change in outlook on his part?
William Gale: I think he is responding to the fact that things continue to get worse and that time period between now his inauguration another 60 days is a long time. 2 months and a week or two ago was right around when Lehman and AIG those things hit the roof, and so a lot can happen in 60 days, and I think he realizes that he needs to be saying something now rather than just waiting for another 60 days.
Diane Rehm: Douglas Holz-Eakin, how do you see it?
Douglas Holtz-Eakin: I think there is also the chance that we may see him also now step back again too. He wanted to present his choices for his economic team to the American people. He wanted to convince them and provide a compelling case that they were the right people to solve the problems we face. Thats a good moment to talk about the problems. It’s a good moment try to lay out your plans and how the personnel will fit into it. Having done that, he may very well now step back let those plans be developed and continue what has been a arguably a pretty good transition partnership with the Bush administration not a lot of evidence they are competing for the baton. They are trying to get things solved, and the Bush administration is trying to pass this along.
Diane Rehm: Give me a brief outline as what you see as President-elect Obama’s plans as presented thus far?
Douglas Holtz-Eakin: Well I think what you see on number one a real emphasis placed on what he called yesterday a quote jolt to the US Economy. I went back to my graduate school notes and couldn’t find what a jolt is, but obviously your going to have provide some near sight to the economy. What we seen in Washington surrounding that press conference is that competing numbers game everyones coming up with a number which is the right amount, and I would argue thats probably getting it wrong, you ought to first diagnose the problem. In my mind the problem started in the housing market they continue in the housing market, you ought to target solutions on residential mortgages and homeowners thats a more important diagnosis than 500 versus 700, and I think that’s the kind of advice he will get out of his team.
Diane Rehm: And what about this morning’s announcement that the Federal Reserve is committing 800 billion more to unfreeze lending Bill Gale.
William Gale: We are in a situation where there are no good options right now, so all of the policy actions taken or not taken have short comings, and some case obvious shortcomings so when addressing any of these issues the question is compared to what, and the Fed has been very active and made it very clear that they will not stand by and let financial markets go down, so this is the just the latest step in that. We can all look at the numbers involved and gasp at how large they are. If the alternative is doing nothing then this is what they have to do.