Tracking the U.S. economy these days is like watching the Titanic go down, except the crew members are running around the deck, waving their arms and saying, "Everything's fine, don't panic! Everybody back to the all-you-can-eat buffet!" On This
June 5, 2011

Tracking the U.S. economy these days is like watching the Titanic go down, except the crew members are running around the deck, waving their arms and saying, "Everything's fine, don't panic! Everybody back to the all-you-can-eat buffet!" On This Week with Christiane Amanpour, White House economic adviser Austan Goolsbee insists this is not a jobless recovery and everything's moving along just the way they planned.

It seems clear that economists like Paul Krugman, Joseph Stiglitz and Dean Baker were right about the disastrous long-term consequences of an inadequate stimulus, while the White House keeps insisting it worked. Not only do they insist it worked, they want to emphasize more of the same pro-business, deregulation strategy. To me, this very risky half-assed approach is sort of like a parent patting herself on the back that, when her kid had a strep throat, she saved money by only filling half of the antibiotic prescription. So now the infection's gone into his heart, but he no longer has a sore throat. Progress!

Bottom line? Voters will not trust this president with a second term if they don't hear an economic narrative coming out of the White House that resonates with their own experience. They will not trust President Obama to fix the economy if he can't identify what they perceive as the real problem:

AMANPOUR: So you've heard all that. John Berman set it up. This Friday, this last jobs report was meant to be the acid test. What is that telling us? Is the recovery threatened?

GOOLSBEE: Well, hold on. And I said last month when we had an excellent jobs report, 100,000 above expectations, and I said again this last Friday when it came in below expectations, don't -- don't make too much of any one month's job report, because they're highly variable. You want to look at a little bit of a trend to get a more accurate barometer, and the overall direction is, yes, somewhat slowed from the stiff headwinds of gas prices, of the events in Japan, of some of the events in Europe. But overall, the last six months, we've added a million jobs in the private sector.

AMANPOUR: Right, but every economist, including many of your advisers and colleagues, have said that in order for this to be sustainable, you have to actually have above 150,000 jobs per month. And it was way below that this month.

GOOLSBEE: Well, and in the three months before that, it was well above it. What I'm emphasizing is the -- every economist knows that the monthly numbers are highly variable, so you want to look at a little bit more than just one month before concluding on a trend.

AMANPOUR: So what happens if this same kind of report comes out next month? What does that then tell you?

GOOLSBEE: Well, look, what we know is that we have moved a long way from when the economy is in a rescue mode, the private sector's in freefall, and the government is the only thing standing between us and falling into another Great Depression. We were losing 780,000 jobs a month when the president comes into office. Fast-forward to now: We've added 1 million jobs over the last six months.

If we face stiff headwinds, that are shocks like the -- like the Japanese earthquake, we have to deal with that, but I think the -- the trend is relatively clear.

AMANPOUR: But what do you say to the American people when so many economists were expecting something, according to a Bloomberg survey, of 165,000 to 170,000 to be created this month, to see the unemployment come down a little, which it didn't? What do you say to the American people about that? Where is the light, in other words?

GOOLSBEE: The first thing that I say is the same thing I said one month ago when it came in the opposite, 100,000 above expectations, and that is, let's not conclude too much of anything from one report. Let's look at what's happened over six months.

And what has happened over six months is we've added a million jobs in the private sector. The president has enacted -- we passed a tax policy in December, which has come into place this year and will continue over the course of this year, to put -- to give a payroll tax of $1,000 plus to 150 million workers and to give direct incentives for business to start investing. And they've accumulated money on their balance sheet.

Our -- our effort now as a government should be to get the private sector, to help them stand up and lead the recovery. It -- the government is not the central driver of recovery.

Yes, that attitude continues to be the problem. When you have 9% unemployment and no consumer demand, the government should be driving the economy to get spending cash back into the hands of people who will spend it, and they're not. As Jared Bernstein told us last week, the White House just wasn't interested in that approach.

AMANPOUR: Right, but, again, it is slower than expected. So, economists are asking and people are asking, is this kind of a wake-up call, do you think, to sort of shift the political debate from what's been all about debt reduction and shift it back to job creation? I mean, is this an opportunity, for instance, to try to talk about creating jobs and adding maybe another stimulus? Let's say there was no politics involved, in a perfect environment. What would you do to get this off the slow burner?

GOOLSBEE: Well, I would say two or three thing. The first is, the president has never stopped talking about jobs. For him, the growth strategy is the number-one issue.

Now, we must live within our means. We have a moment that we can talk about long-run deficit reduction. And the vice president's leading an effort to do that, that the president has asked him to. But the president is getting up every day -- on Friday, he's going out to Ohio to talk about jobs in manufacturing, which manufacturing is having its best employment year in almost 15 years.

Look at how he answered that question. She wanted to know what they'd do if there were no political obstacles, and he responded by bringing up deficit reduction. If that isn't a major clue about the Obama administration's determination to cut entitlement programs, I don't know what is.

AMANPOUR: And yet that came down, as well, manufacturing jobs...

GOOLSBEE: Well, durable goods manufacturing was up.

AMANPOUR: But what specifically can you do to change this?

GOOLSBEE: OK. So the -- we have shifted in the economy from a rescue phase, which is government-directed, to a phase in which government policies have got -- we've got to rely on government policies that are trying to leverage the private sector and give incentives to the private sector to be doing the growth.

And that -- so the president has started these tax cuts that will continue over the rest of this year, has put in place this regulatory review in which all of the major agencies are going to go through, find any outmoded regulations, ones that are excessively costly for their benefits, find ways to streamline.

AMANPOUR: Would there be more payroll cuts...

GOOLSBEE: The free-trade agreements...

AMANPOUR: ... tax cut holiday?

GOOLSBEE: Well, we still -- there will be more payroll tax cut over the entire course of this year. It's more than $1,000 a worker for 150 million workers.

The free-trade agreements, trying to increase exports, which are rising at 15 percent annual rates. The infrastructure bank that the president has called for, which, again, is trying to leverage, using government incentives to get private capital to enter and help grow the economy. That -- that -- those are the things that we've got to be doing.

And I would just emphasize, the president's plan is putting us on the right track. Over the last 15 months, we've added more than 2 million jobs in the private sector. That's far in excess of what it was in the comparable period after the last recession.

AMANPOUR: So are you -- are you not worried -- well, I mean, a report that's about to come out is saying that this is the longest jobless recovery, it's going to come out this month, that'll it take more than 60 months...

GOOLSBEE: It's not a jobless recovery.

AMANPOUR: ... of GDP recovered. It'll take until 2016.

GOOLSBEE: It's not a jobless recovery. That is an incorrect phrase. After the last recession, in this comparable period, post-recession, we had lost 100,000 jobs. We've added more than 2 million jobs. There's a major difference between a jobless recovery and a very deep hole that we're climbing our way out of, and that is what -- the position we're in.

AMANPOUR: So a part of the whole that everybody is looking at right now is the debt ceiling. Do you anticipate that this is going to be resolved over the next -- over the next month or so...


GOOLSBEE: I do. I do -- I -- I definitely think it's going to be resolved, because it has to be. The U.S. is a nation that pays its bills, and ultimately we're not going to decide that we refuse to pay the bills that we already have.

AMANPOUR: Are you concerned that Moody's is saying that it may look at downgrading if certain benchmarks aren't met?

GOOLSBEE: Look, I think what Moody said is, you have to pay your bills, and if you don't pay your bills, there are going to be consequences. And I think everybody agrees with that.

Now, I'm relatively optimistic that -- because you've seen leaders on both sides of the aisle saying they don't want to push this all the way right up to the -- to the edge of the -- of Treasury's authority of what can be done. This is not an alarm clock. It would be extremely dangerous to get right up to the edge or -- you've seen some people even saying, well, it'd be OK if we defaulted for a short period. That's not true; we shouldn't do that. We should resolve this over the next month.

AMANPOUR: Austan Goolsbee, thank you very much, indeed, for joining me.

Can you help us out?

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