Stiglitz: Strengthening The Economy By Putting People Back To Work The Best Medicine For Our Deficit
WASHINGTON – House Democratic Caucus Chairman John Larson (CT), and Former Chair of the Council of Economic Advisers, Dr. Joseph Stiglitz held a press availability today after the Democratic Caucus meeting on jobs and the economy. Below is the transcript and video:
Chairman John B. Larson: We just concluded a Caucus. It’s not always that the Caucus has the opportunity to hear from a Nobel Prize Laureate who is regarded as the preeminent economist for our nation. Someone who has served as an economic advisor to Clinton and whose advice and counsel are sought not only here in this country, but around the globe, and was definitely appreciated today.
The Democratic Caucus, who is making the point that job creation equals deficit reduction, and since we’ve been home on a break and since we have intensified our hearing process and the select committee had its first hearing today, it is our goal to continue to press the case that making sure that job creation and economic growth are part of the process that has a very concise time line and a trigger if action is not taken.
Fourteen million Americans are unemployed and some 25 million in total are under- employed, and that creates a very severe problem. There is a path forward. Our Caucus has had the opportunity to hear that this morning from the nation’s preeminent economist Joseph Stiglitz.
Professor Joseph E. Stiglitz: What I tried to do is put the country’s current fiscal dilemma in a historical perspective, remind the Caucus that just 10 years ago that we had a surplus of 2 percent of GDP – so large that Alan Greenspan said that if we didn’t deal with this problem we would totally pay back our national debt and it would be difficult for him to manage monetary policy without a national debt. If we want to understand where we are today, we have to understand how we got from the 2 percent surplus to our current situation. And by thinking about that we understand what we can do to put our fiscal house back in order.
There were just four things that made a difference: the first of these was the tax cuts, particularly for the rich that were beyond our country's ability to afford. The second was two very expensive wars, Iraq and Afghanistan, that did not increase our nation’s security with an associated increase in other defense expenditures, adding $2.5 trillion to our national debt. The third was Medicare Part D, an important provision, but in passing that, there was a proviso that the US government, the largest buyer of drugs, could not bargain with the drug companies, adding another trillion dollars in a span of 10 years. And finally, and perhaps the most important, was the economic downturn. That’s where what was just said fits in very much, the best way to deal with the deficit is to put the country back to work. And that’s why the job-creation agenda is really part of the deficit-reduction agenda.
And then what I did in my remarks to the Caucus was to outline a variety of ways in which we could, in a sense, square the circle. How could we simultaneously stimulate the economy, create jobs, and, over the medium to long term, reduce the debt and reduce the debt to GDP ratio. There are a number of ways that I suggest that one could do that, and that are economically feasible, economically would increase the strength of our country.
The question is: is there a political will to adopt them?
Chairman Larson: Thank you, Dr. Stiglitz. And now we’ll entertain questions that the press might have. Yes?
Reporter: The White House just implied that they would be willing to take parts of this job bill and sign them separately, not just as a whole. Say that there was a part of the bill that was sent to the White House, that they would be willing to sign it, saying with the idea--saying “Okay, send us the rest later.” Members of the GOP have been saying that this is what they wanted, saying that the all-or-nothing approach wasn’t what they were looking for and also members of your party have also implied that might be a way forward. What is your opinion as to that being a way forward for this jobs bill?
Chairman Larson: Well the devil, of course, is in the details. And I’d certainly like to think that we can and do have the time to consider the President’s entire plan. I would suggest, as I have before, that we take his entire jobs creation program and take it before the select committee that has a very defined time limit, and has an up or down vote based on a bipartisan consensus within that committee, but they have a trigger— there’s an up or down vote. Whereas if you cherry-pick what items are going to come before Congress or not, we find ourselves in the same kind of morass that we have in the past: subject to a cloture vote in the Senate if someone objects, and subject to cherry picking in the House, with amendable opportunities instead of an up-or-down vote.
Having said that, you asked what my preference was? I think, as the President does, he continues to reach out to the other side, would it be that we can find infrastructure programs and put people back to work, the equation, we think, is very simple. As Dr. Stiglitz has outlined, that if we can reduce the unemployment rate by putting people back to work, our own CBO says that we can reduce the deficit by 25 percent. This is a germane item as it relates to the deficit, but more importantly, to the immediate and most urgent item, short term, before us, which is putting America back to work. So those are the goals that we hope we can accomplish.
Reporter: Following up on that, are there economic repercussions of not doing this one big package and doing it in pieces?
Professor Stiglitz: Well, the fundamental point is the more you do, the stronger the economy. And I think the worry is that you’ll do some of the least effective ... Some of the provisions – you know, as an economist – some of the provisions are more effective, I think, in stimulating aggregate demand than others. And what you worry with is you’ll cherry-pick the things that are least effective, leaving the most effective undone, and that means proportionately, the number of jobs that you are going to get will be that much smaller. So that is the risk to our economy. And remember, just to reemphasize what was said: the deficit was largely caused by the weaknesses in the economy – not the other way around, and we have to remember that. So strengthening the economy by putting people back to work will be the best medicine over the long term for our deficit.
Reporter: Mr. Larson, do the other Democrats that agree with you that you could put the President’s package with a special committee? Is there any effort along that way?
Chairman John B. Larson: Yes, and yes efforts are under way to do that. And there are a lot of Democrats that agree primarily that job creation and economic growth have got to be part of a package. If you look at the time frame – and we’re going to have another caucus, probably tomorrow, and after that caucus, we’ll lay this out in terms of the time frame that we’re confronted with. If you look at the legislative days that we have versus the time from September the 13th to December the 23rd that the Committee is meeting in, and you look at the compressed number of legislative days … for example, there’s only 14 days between now, the first public hearing, and when all committees are to report to the super committee on deficit reduction. That’s why we have a sense of urgency that job creation should be a part of that and presented with them. And then, while November 23rd is the day they report out, again there’s only 15 legislative days until that occurs. So in a mere 29 days of legislative days, we have an awful lot of work to be done and much at stake.
We cannot simply cut our way to the bottom without job creation, and I think Dr. Stiglitz outlined that very succinctly and clearly, and I think also heartened our Caucus Members who have been talking about this. We will be petitioning the committee. Obviously we have bills, but I think even in the case of bills, although the bill is a worthy alternative to pursue, the time frame that we have, and even for the President’s agenda to make it through has got to have the same kind of time frames, deadlines, and absent the politics that has bogged this place down, most notably the cloture vote in the Senate and the ability to cherry-pick and have a bill come to the floor that’s amendable, an up-or-down vote on what the committee bipartisanly suggested is the fairest way for both sides to have a bite of the apple in their beliefs to put America back to work.
Professor Stiglitz: Can I just make two comments? One of them is the urgency of what you might say putting money into the economy. The economy is weak and if we let things get weaker it is often difficult to reverse, and therefore making sure our economy doesn’t go down is important and that means getting something into the pipeline as quickly as possible is an imperative.
The second is that, as an outside observer of Congressional politics, one of the things that has worried me is the tendency to put poisonous amendments on provisions. So you say I’m in favor of something then you put an amendment on that will make it very difficult to get through. And we’ve seen that over and over again, and that’s one of the advantages of the approach that’s been suggested.
Chairman Larson: Any questions? Well thank you again for joining us, and we want to thank Dr. Stiglitz for joining our Caucus. As I said at the outset, it’s not every day you have a Nobel Prize Laureate and the preeminent economist of the country addressing your Caucus, so we’re most grateful for this true American treasure. Yes you had a question, I’m sorry.
Reporter: The pay-fors the President suggested in the jobs bill, they’ve been tried before in a Democratically-controlled Congress with House and Senate and that did not work. Why would it work this time?
Chairman Larson: You know, we just, in a roundabout way, addressed that issue as to why I think personally that this is a matter that ought to be taken up in a larger context with the timeframes and constraints that the Committee has. Because, to Dr. Stiglitz point, left to regular order, and you weren’t here when I went through the timeframe of the compressed legislative agenda absent what the Committee is doing, the compressed legislative agenda, there are only 36 legislative days left. And then at each of those benchmarks in terms of what we have to deal with, you have to ask yourself, and there are a lot of veterans around here, whether or not there would be ample time to deal with this legislatively subject to cloture votes, and, as Dr. Stiglitz pointed out, poison pill amendments that could take place within the regular order.
Thank you very much.