Economic Panel: Road to Recovery?

Lawrence Summers, Glenn Hubbard, and Diane Swonk debate the economy.
11:52 | 02/05/12

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Transcript for Economic Panel: Road to Recovery?
News on the economy what it means for the fall election. An upside surprise in Friday's unemployment report showing 243000. New jobs in January -- the stock market to its highest level since the financial crisis. President Obama responded with cautious confidence Mitt Romney was fiery. These numbers will go up and down in the coming months and they're still far too many Americans who need a job -- -- job pays better than the one they have now. But the economy is growing strong. Not so fast Mr. President. This is the 36. Straight month with unemployment about the Red Line. Your own administration through the real unemployment rate is over 15%. Mr. President. America has also had enough of your got to help. And joining us now for some economic analysis and debate Larry Summers -- Obama's former advisor and former Treasury Secretary. Here in the studio Glenn Hubbard dean of the Columbia Business School is advising that Romney. An economist Diane swamp of -- of financial in Chicago thank you all for joining us and mr. Summers let me Begin. We view this on a -- report on Friday one of the best reports the president has seen the country is seen. In months but we have been here. Before last year February through April more than 200000 jobs created every single month. Then the economy hit a wall is this year different. No one did no one can know George but unlike many of the favorable -- -- reports. If you look beneath the surface of this one almost every indicator within it is favorable. The growth is mostly from the private sector. Few alternatives survey the house household survey suggested 500000 or more jobs were created. The revisions the past months were favorable people -- working a longer week. Paychecks are. Going off. The number of vacancies. Firms looking for work are going -- so. Almost everything -- -- frankly I'm. -- obviously is strong supporter of the president but I was surprised by how favorable. These numbers work. And so you have to revise upwards your view but we've got a long way to go. And there are no certainties. This is no time for complacency. That's why every day that the congress fails to extend. The payroll tax cut. Every -- that the congress fails to extend the unemployment insurance that is a day were taking more risk than we need. Q let me bring this comment let me resisting Glenn -- Governor -- in his speech by senator five point -- the lingering problems including -- stunning. That you know that stubbornly high underemployment. -- what's behind that and do you can -- though that this is a very strong report. Well first of all he is a good report we should all be happy we've done. But it's also important to know we'd have to have reports like this straight away every month for two years -- even get us back to December 2007. -- a lot of what's driving the unemployment rate is a drop in the labor force participation rate. That is very -- owners about one -- David Dreier has worked very bad news for our economy and of course we have high underemployment the real question for policies how -- we grow faster and create jobs more. The president's agenda is squarely against -- but don't you agree that if the tax cuts and the unemployment benefits are not extended that that could end up hurting this recovery. I think the jury's -- that he clearly we need a big change in tax policy in the country but that's a very big change I think there's a serious debate over the payroll tax and unemployment insurance benefits. There also needs to be a serious debate on what we can do in tax policy and health care regulation and financial reform to actually create jobs administrations and standing in the way. -- -- what is the biggest challenge to this recovery that is gathering steam. Well what we're starting to see is some new business formation which has been one of the biggest things absent along with housing market let's face it without the housing market you do not have the backbone of the recovery. Along with new business formation that was the backbone of job gains in the 1990s. And we're starting to see a little flicker of new business formation but not enough and it's really kinda like being caught in traffic jam. Where for many people although we've moved forward and -- -- seeing things free up a bit in recent months. Some people's engines and their batteries are just dying out they're being left behind in -- -- -- -- the uneven -- of the recovery is really an issue at this stage of the game. It's a brand new metaphor for manner the traffic jam before they go -- to mr. Summers though they get in responding -- we just heard from Glenn Hubbard -- Recovery and permit -- -- -- would be doing even better going stronger and longer but for -- Obama's policies. Let's start with this. Unlike the past these numbers really were good. Employment is up. Labor force participation. Did not decline this was on employment reduction generated by. More jobs. Look at all of this is -- from. The presidents of policies. It's coming from the program he put in place to contain. What was this situation worse than the Great Depression. -- in 2009. And the steps going forward that the president of proposes. Are the right ones surely we can put more people to work. Fixing the nation's schools fixing the nation's roads and airports at a time when the federal government can borrow money below 2%. At a time when construction unemployment. Remains at record levels. Surely as the president has challenged the congress we need to do more to help those still facing the prospect of foreclosure. And the housing market. And surely this is the time when we need to protect. The economy. From a kind of mistakes that took place in the financial sector all before let's -- -- -- calls for many east many people on either side. To repeal the new financial regulations. Seem to -- to be very dangerous. Get his -- right now. Well I think it's important that we had. A lot of experiments for the president's economic policy and it's been very aggressive but if you look at the consensus forecasts of economists for growth the rest of the year. It's not even -- the economy's potential growth rate there is no wind at the back from policy. That can change the -- -- -- non partisan elements including Congressional Budget Office has said that if this stimulus had been put in place we've been even worse shape. But the question is could we have done much better and could we have done it in such a way that would -- Had better fiscal consequences I think the answer from most economists. Is yes. -- -- in the area another question Diane swank you know there are a lot of other X factors out there they could up end. This recovery lot of focus on Europe and whether or not they're gonna contributed to make progress on their debt problems also concerns about a potential conflict. Where -- -- that certainly was ratcheted up this week concern that perhaps Israel would attack Iran. And the International Monetary Fund has said that oil could rise twenty to thirty dollars a barrel. If Iran stops exporting. Its oil that could push gas prices up to five dollar -- gallon how serious is that concern. Those are very serious is concerned that I would add to that list doing not only having high oil prices -- we have weak global demand lets face it that's not inconsistent. That is he consistent. The other side of it is the political uncertainty in the United States you see it being played out -- Larry Glenn and I -- both wearing gun I know them both but the political debate is not helping the situation on the economy and certainly in the political arena has never been higher with the exception of maybe August of last year. And we know that caused -- -- in economic decision making both by households and by firms. I think you know both sides of the aisle need to start talking to each other than at each other. So the -- get some decisions made to be able to have some certainty we all know that the federal deficit needs to come down over the long haul have a plan for that in the future. Even with potholes in the road I think Glenn and I could agree on many tax reforms I know Larry and I could agree and they entitlement reforms. We could sit there and as economist and has people in the United States agree on what we need to do in our priorities going forward if we all give a little bit. And then in the context of a plan. The United States is very good -- we know where the potholes in the road are we the most flexible economy the world's ever -- of its size -- -- neither braced for those potholes -- around them and that's for a missing at this stage of the game. Glenn Hubbard that debt crisis on -- did hurt the recovery correct. Absolutely and policy and certainly is a big deal the entire tax -- Is about to expire we have a huge debate over entitlement programs. It's time for the two sides the level the American people about -- we do it governor Romney is said. He's a very specific planned to bring down spending is very specific tax plan. And specific policies we really haven't heard it unlikely he hasn't called for more revenues which you think needs to be part of the solution correct. I think we have to have a tax system that can deliver -- healthy amount of revenue and I think we have to have a spending system that comes down to within our limits to pay. Governor Romney's been very clear but what that means to him the president has said nothing and that really contributes close -- let's pick up on that point Larry -- -- -- -- got some finally -- -- -- -- lighted plaza where you want you to -- but I -- also -- -- question -- the question behind that a lot of people look -- -- as it does have to -- major. Tax reform entitlement reform the president made a push last year but as it was not willing to do that again in the state of the union. George look the first thing we gotta do is nature's economy grows. And make sure were able to build on this momentum. An -- goes to the things the president is trying to work with the congress right now. There is no question. That we need. Long term deficit reduction. There are a lot of good ideas in the Bowles Simpson. Report. There's a lot of good ideas and four trillion dollar proposal -- the president made. Last summer that congressman Boehner went part of the way with them on and then eventually the Republicans. Just all walked away from that proposal. President's budget will be -- most awe and the table. We're gonna have to debate these issues during -- is campaign and we're -- need to come together as a country. But I would hope we could all agree. That we've got to do this in a balanced way. Everyone agrees that most of what's gonna happen is gonna come on the spending side but the president believes that it's essential. That we curb tax expenditures. They go to a very small. Off fraction of the population who -- kinda stuff that produces for example fifty million dollar IRAs. -- and that question is is that something we've got bipartisan agreement on or not I'm not really sure it was. Point Ocalan give -- -- responded -- -- then quickly because we're running at a time when she's to east to say bottom line we unemployment rate. Be lower today toward Election Day than it is today. I think the key question for the president's budget is will the president be putting out a budget it does bring down a glide path of spending and bring down the debt to GDP ratios I think we know the answers noble will wait to hear it. The question about unemployment. Maybe slightly below where it is today but the true effect of unemployment rate still way too high -- -- Looking for the unemployment rate king of a close to 8% but again -- -- course it's too high were coming out of a financial crisis sent. All this political -- trains not helping that. Larry last word. Down. Down for the unemployment rate we're on the right road but we've got a long way to go thank you all very much.

This transcript has been automatically generated and may not be 100% accurate.

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