Tuesday, August 02, 2011
Whipping the confidence fairy to death
I have seen some fatuous spin in my day, but this drivel from Tim Geithner is enough to make me gag:
GEORGE STEPHANOPOULOS: So it looks like this deal is going to pass-- and that turns the bigger question of the underlying economy and what it means for the underlying economy. And what do you say the argument of a lot of economists who say that cutting spending, deficit reduction like this, right now, is going to make a weak economy weaker?
TIM GEITHNER: Well, let's start with what this deal does. The most important thing is it creates more room for the private sector to grow because although it locks in some very substantial long term savings, the near term cuts are very modest. So that-- that was the really critical thing in making sure that this economy continue to grow and recover. Now, it locks in a very big down payment and it sets in motion what we think is going to be a very effective process for forcing congress to come together—
Ok, let's just stop right there. Is he really trying to sell the absurd idea that the private sector has had no room to grow because of government spending? Really? Companies are rolling in profits, sitting on piles of cash. The problem is they don't have customers.
GEORGE STEPHANOPOULOS: But don't you think that any deficit reduction now will -- will hurt the attempts of the economy to recover?
TIM GEITHNER: You know, I think the — basic reality we live with and, you know, part of governing is recognize we live with -- we don't have unlimited resources, and we inherited and are left with unsustainable deficits long term. And the president understands that for the sake of the economy long- term it's very important we demonstrate to the American people, to people around the world that we can get our arms around this and start go back to living' within our means.
Now, we want to do that very carefully so we create room for the economy to grow and we have the resources necessary to invest in things that are going to be very important to the future like education, like infrastructure, like incentives for private investment. And to do that, it is absolutely essential to lock in these long term savings. Now -- the president was very strong on this and made sure that we were not going to accept spending cuts that would damage the prospects for near term recovery. Now, with this behind us, and we get this —
GEORGE STEPHANOPOULOS: So this won't cost us jobs?
TIM GEITHNER: No, it will not. Now ... if we put this behind us then we can turn back to the important challenge of trying to find ways to make sure that we do everything we can to get more people back to work, strengthen our growth. And we'll have more ability to do that now with people more confident and we can start to get our arms around the long-term problems.
I know they have to put some lipstick on this pig, but smearing it with manure isn't exactly the same thing. "Creating room" for education, infrastructure and "incentives for private investment" is gibberish. The appeasement we just saw ensures that will not happen in the near term or the long term. And they know it.
But don't burst Geithner's bubble. He's very happy in there:
GEORGE STEPHANOPOULOS: Yeah, the president had to give up in ... this deal-- his call to extend the payroll tax cuts through next year.Say hello to my 'lil friend, Mitch:
TIM GEITHNER: Well I -- George, I'm very confident that's going to happen. You know, again, I've been part of all these discussions. I've listened—
GEORGE STEPHANOPOULOS: How can you be so sure?
TIM GEITHNER: Well, because I think it's going to be very hard for Republicans to -- to prevent that from happening. I think it's very hard for them to stand up and say that they're going to try to block the extension of that tax cut that's worth about $1,000 a year for the average American family. Untenable for them to block that. I think we're going to have to extend employment - unemployment benefits further, we need to get these trade agreements passed, there's other things we're going to have to try to do to start to lay the foundation for stronger growth. But a condition --precondition for doing that, 'cause again we're a country -- we don't have unlimited resources and part of governing is recognizing that, is to lock in these long term savings so we have room to do that.
“The single most important thing we want to achieve is for President Obama to be a one-term president.”
I do think they might have some success with bad trade deals --- if the Tea Party gets on board, and there's no guarantee. (They don't like trade deals either.) But it should be fun watching the centrist Dems stick it to the unions who help elect them again. That's always entertaining.
And of course
the Republicans will cooperate with the president going forward. It would be untenable for them not to. As the President said about the debt ceiling last December
THE PRESIDENT: Look, here’s my expectation — and I’ll take John Boehner at his word — that nobody, Democrat or Republican, is willing to see the full faith and credit of the United States government collapse, that that would not be a good thing to happen. And so I think that there will be significant discussions about the debt limit vote. That’s something that nobody ever likes to vote on. But once John Boehner is sworn in as Speaker, then he’s going to have responsibilities to govern. You can’t just stand on the sidelines and be a bomb thrower.
That worked out very well.
GEORGE STEPHANOPOULOS: Has the way this whole process unfolded made a downgrade more likely?
TIM GEITHNER: I don't know. It's hard to tell. I think this is a good result, but a terrible process. And again -- again, I think as the world watched Congress step up to the edge of the abyss, it made them really wonder whether this place can work. But this is a good deal. It's a good agreement. It'll be good for the economy long term and it'll be good for the prospects of getting Congress to make the tough steps we need to make ahead.
GEORGE STEPHANOPOULOS: Good for the economy long term, but will it create jobs now? 25 million Americans are looking for work.
TIM GEITHNER: No, this agreement itself, on its own, doesn't create jobs. What it does is it avoids doing more damage in the short term, because the president refused to accept the types of deep spending cuts that many in congress wanted, and it -- locking in some long term savings it raises-- it improves the odds over time. You're going to see this basic underlying growth we've see in the United States improve over time becuse people will be more confident we can live within our means.
GEORGE STEPHANOPOULOS: So when—
TIM GEITHNER: And again, it-- George, with more confidence we can get our arms around this long term. We will have more room to do the things we need to strengthen investment jobs now.
I'm not sure what he's talking about. What cuts did he block? The president offered up Social Security, Medicare and Medicaid and the Republicans walked away
because the 4 trillion
in deficit reduction would have required some nominal revenue.
And again with the confidence fairy. From what we saw in the market today, it decided that the prospect of austerity (and worldwide economic upheaval) might not make for a very prosperous future.
But if you think that's delusional, get a load of this:
GEORGE STEPHANOPOULOS: How -- how do you avoid though-- the lesson being drawn from this, that if you want to get your way in Washington hold the debt limit hostage?Say hello to my 'lil friend Mitch:
TIM GEITHNER: I think they failed at that attempt. I think those who wanted to do that divided their party, scared the business community of the United States, scared the world, and they had to pull back from that because it was not acceptable, tenable, responsible way to try to govern. And I think one of the most important things—
GEORGE STEPHANOPOULOS: Well except the president didn't get the deal he wanted. He wanted a deficit reduction deal that included he called balance, that included revenue increases.
TIM GEITHNER: No, but-- but that's what-- that's what's going to come because the mechanism they agreed to will force that kind of balance that's inevitable. What the president prevented was those people using default as a threat over the American economy to get their agenda passed for the future. That is now off the table, definitively moved, and that's an enormously important accomplishment. We should never have been in that position, but that's a very important thing.
What we have done, Larry, also is set a new template. In the future,any president, this one or another one, when they request us to raise the debt ceiling, it will not be clean anymore. This is just the first step. This, we anticipate, will take us into 2013. Whoever the new president is, is probably going to be asking us to raise the debt ceiling again. Then we will go through the process again and see what we can continue to achieve in connection with these debt ceiling requests of presidents to get our financial house in order.
Jobs, jobs, jobs:
GEORGE STEPHANOPOULOS: How do you explain an economy where corporate profits are rising but jobs aren't being created?
TIM GEITHNER: I think it's an excellent, excellent question. You know, the economy as a whole, if you measure it by how much we're producing, we're almost back to the level before the crisis, despite how deep this crisis was. But job growth has been much slower, it's been much weaker.
It's probably because businesses put so much emphasis in improving productivity early-- early in the recovery. And I think over time, though, you're going to see as we grow, you're going to see more job growth going forward. But again, that ultimately that depends on what Congress can do, what we in Washington can do to help confidence improve.
That fairy is sure getting a work-out. But if you were wondering about the Big Master Plan, here it is:
GEORGE STEPHANOPOULOS: And what would you ask Congress to do right now to get the unemployment rate down?
TIM GEITHNER: Get this budget agreement in place behind us so we remove the threat of default in the economy. Pass these trade agreements to help expand exports. Find a way to help make sure we can expand investment infrastructure so more people particularly in construction get back to work, and find ways through tax reform we can strengthen —
GEORGE STEPHANOPOULOS: How can you strengthen investment when you’re calling for overall deficit reduction?
TIM GEITHNER: Well, you have to figure out a way to pay for it responsibly but there -- we've got a long term tradition of making sure we finance infrastructure over time in a way that's deficit-neutral. We can do that. We can afford to do that.
Well, that's good. The jobs program will be deficit neutral, otherwise known as robbing Peter to pay Paul. Since they're already devastating discretionary spending, I'm genuinely curious about what they plan to cut in order to make room for their infrastructure program. If we follow the logic we've seen here we'll see them firing large numbers of federal employees in order to create the "incentives" for someone to hire construction workers. If my 'lil' friend Mitch agrees, of course. Which he won't.
Stephanopoulos ended the interview asking Geithner when he planned to announce his departure. Sadly, he didn't say. I suspect that the confidence fairy would give "the markets" a big goose on that news.
digby 8/02/2011 05:30:00 PM