Among economists, the University of Chicago has the reputation for being the home of "conservative" economics. Famed Nobel-winning economist Milton Friedman, who was the father of the Monetarist philosophy, worked here for decades. Yesterday, I attended a lecture by a current professor there, Austan Goolsbee, who is a Yale graduate and earned a Ph.D. from M.I.T. He was also Chairman of the Council of Economic Advisors under President Obama.
He began with a spirited defense of the TARP program during the Bush administration and the Stimulus program during the Obama administration. TARP was particularly successful because it re-capitalized the banks, he said.
Looking at Europe, he is concerned about their refusal to directly re-capitalize their banks. In fairness, the ECB has instructed European banks to increase their capital base, but the banks cannot find investors. That's why the ECB should imitate TARP, according to Goolsbee, and I think he's right.
He agreed that the U.S. recovery has been very slow, indeed. I have long argued that is because a recovery from a financial crisis is very different than a recovery from a normal recession, as it takes time to de-leverage. However, he argues the slowness is due to a lack of construction, which traditionally accounts for one-third of the rate of recovery. His argument provides economic cover for another stimulus program aimed at "shovel-ready" construction.
Far more disturbing to me was his bleak assessment of the political environment -- everywhere. He doesn't expect a good outcome for the ongoing Greek negotiations. More importantly, he doesn't expect a good outcome for the U.S. negotiations on the year-end fiscal cliff, when the Bush tax cuts expire, the payroll tax cut expires, and sequestration kicks in -- no matter who wins the Presidency.
Goolsbee enjoys a reputation as being a genuinely nice guy. Having heard him three times, I am not surprised. He recalled a humorous lunch during his government service. It is customary for the Chairman of the Council of Economic Advisors and the Chairman of the Federal Reserve System to have lunch one day each month. One day, Bernanke was late, apologizing that he got stuck wrapping up the Watergate report. Confused, Goolsbee asked what was the Watergate report? Bernanke explained that the security guard who discovered the break-in of Democratic headquarters one night in 1968 was also a security guard for the Federal Reserve Bank during the day. Ron Paul initiated an investigation of whether the Fed was the conspirator behind the Watergate break-in. This political vendetta against the Fed is petty and silly, but it seems emblematic of our current political culture.
My take-away is to re-think the "Taxageddon" scenario at year-end . . .
He began with a spirited defense of the TARP program during the Bush administration and the Stimulus program during the Obama administration. TARP was particularly successful because it re-capitalized the banks, he said.
Looking at Europe, he is concerned about their refusal to directly re-capitalize their banks. In fairness, the ECB has instructed European banks to increase their capital base, but the banks cannot find investors. That's why the ECB should imitate TARP, according to Goolsbee, and I think he's right.
He agreed that the U.S. recovery has been very slow, indeed. I have long argued that is because a recovery from a financial crisis is very different than a recovery from a normal recession, as it takes time to de-leverage. However, he argues the slowness is due to a lack of construction, which traditionally accounts for one-third of the rate of recovery. His argument provides economic cover for another stimulus program aimed at "shovel-ready" construction.
Far more disturbing to me was his bleak assessment of the political environment -- everywhere. He doesn't expect a good outcome for the ongoing Greek negotiations. More importantly, he doesn't expect a good outcome for the U.S. negotiations on the year-end fiscal cliff, when the Bush tax cuts expire, the payroll tax cut expires, and sequestration kicks in -- no matter who wins the Presidency.
Goolsbee enjoys a reputation as being a genuinely nice guy. Having heard him three times, I am not surprised. He recalled a humorous lunch during his government service. It is customary for the Chairman of the Council of Economic Advisors and the Chairman of the Federal Reserve System to have lunch one day each month. One day, Bernanke was late, apologizing that he got stuck wrapping up the Watergate report. Confused, Goolsbee asked what was the Watergate report? Bernanke explained that the security guard who discovered the break-in of Democratic headquarters one night in 1968 was also a security guard for the Federal Reserve Bank during the day. Ron Paul initiated an investigation of whether the Fed was the conspirator behind the Watergate break-in. This political vendetta against the Fed is petty and silly, but it seems emblematic of our current political culture.
My take-away is to re-think the "Taxageddon" scenario at year-end . . .
