Is America’s Economic Recovery Built To Last?

Apr 29, 2012 4:03pm
abc TW Panel wide jt 120429 wblog Is Americas Economic Recovery Built To Last?

“This Week’s” panel of economic experts debated the status of the economy and the opportunities and barriers that lie ahead on the path to recovery from the worst recession since the Great Depression.

Sunday’s broadcast, in partnership with the Miller Center at the University of Virginia, tackled the critical topic, “America’s Economic Recovery: Is It Built to Last?”

A new report Friday showed that the country’s GDP had grown by only 2.2 percent in the first quarter of the year, down from 3 percent in the last quarter, while the latest jobs report showed slower growth than expected in March, after several strong months.

ABC News’ George Will questioned whether the economy was recovering at all, given the distance from pre-recession employment levels.

“The threshold question is not is the recovery built to last, but does it exist?” Will asked. “Fifty months have passed and we’re not nearly back to the pre-recession employment level. This is the longest string of consecutive months of 8 percent or more unemployment since the Depression, 5.5 million fewer people are working today than were working before the recession.

But Nobel Prize-winning economist and New York Times columnist Paul Krugman said the current recovery is showing some stronger signs, with “vastly better” private sector job creation under President Obama than during the Bush administration.

“Private employment is almost back to where it was when Obama took office, whereas under – under Bush, it was down more than two million at this point in his presidency,” Krugman said. Krugman, author of the new book “End this Depression Now!” said instead that cuts in public sector jobs have dealt the largest blow to the economy’s recovery.

Former Hewlett-Packard CEO Carly Fiorina cited structural challenges to the economic recovery, including a poor education system, high corporate tax rates, and not enough support for small businesses.

“If we don’t solve education, get small businesses up going and growing again and have a competitive tax rate for businesses in the world, then we will not have a robust recovery,” Fiorina said.

Google executive chairman Eric Schmidt agreed that lagging education and training has left a skills mismatch for technology companies searching for new employees.

“Our industry is growing rapidly. We are unable to hire the technically trained people we need,” Schmidt said. “There are shortages not just in my industry, but in many technical industries … because the sum of our educational system is not producing enough.”

Searching For Solutions

While the panelists agreed on many of the problems facing the economy, they often disagreed on the best solutions for spurring economic growth.

“The question is, in this economic time, when we have a slow recovery, what are the policies that we can adopt that would grow jobs in the United States?” asked former Michigan governor Jennifer Granholm, now host of Current TV’s “The War Room.”

“Can we tie tax policy to growth in the United States? Can we look at what other countries are doing to be more active about planning and about inviting investment clusters?” Granholm added. “We just don’t do any of that because it’s wrong to intervene in the economy.”

Granholm and Krugman both advocated for additional federal stimulus spending to boost job growth and pull the country out of its ongoing unemployment struggle.

“The most important thing right now is to end the depression we’re in,” said Krugman, who advocated for the re-hiring of laid off public sector workers such as teachers.

“By not having enough jobs in the economy right now, by not doing stimulus, by not ending this depression, we are condemning a lot of recent college graduates to not getting a job that makes use of their skills,” Krugman added. “This is destroying people’s lives. It’s destroying human capital. We’re paying a huge price.”

Granholm cited her own state of Michigan as an example of effective government stimulus, saying federal investments and the bailouts for the auto industry helped the state’s economy recover.

“Our unemployment rate was 14.5 percent. It’s now 8.4. It’s the second fastest drop of any state in the country,” Granholm said. “There was a decision made to intervene to allow us to diversify the economy. And as a result, Michigan is now seeing a recovery.”

Former U.S. Comptroller David Walker, the nation’s former chief auditor, said that neither political party was presenting solutions that would address the country’s long-term economic challenges on taxes, spending, and entitlement reform.

“The Republicans … they believe we can solve our problem without more taxes. They’re not right. They believe we can solve our problem without cutting defense spending. They’re not right about that, either,” said Walker, now CEO of the Comeback America Initiative.

“The Democrats for the most part don’t want to renegotiate the social insurance contract, and they think that the Affordable Care Act will save us money.  Not right… So, the truth is, we have to recognize reality.”

Fiorina argued that fundamental tax reform was needed to bring new growth.

“I think we need to do three things with the tax code. One, lower the rates so that they are competitive.  Two, close every loophole with the possible exception of a tax exemption for charitable giving… And three, simplify it dramatically… We have to restore the entrepreneurial foundation of this nation.  It is what creates jobs.”

George Will agreed, joking, “Will Rogers once said the difference between death and taxes is that death doesn’t get worse every time Congress meets.”

“Wouldn’t it be nice to have a tax code that looks like someone designed it on purpose?” Will asked.

Walker said the country could achieve tax reform if “we broaden the tax base and recognize that we’re spending $1.1 trillion a year in deductions, exemptions, credits, exclusions and differences in tax rates, we can lower the top marginal tax rates for corporations, individuals and estate taxes 25 percent.”

“Between capital gains, dividends and ordinary income and we will accomplish multiple objectives in a prudent and sustainable manner,” Walker added.

Will, however, said he had to throw a “wet blanket” on the idea of fundamental reform, saying it may not be politically feasible. “There is such a thing as a system, such as our tax system, that is so complex that it is permanently un-reformable,” Will said.

Schmidt said the debate over taxes, which he believes can reach some resolution after the November elections, may distract from focusing on job growth.

“This perpetual argument over taxes is simply a lever to try to do the right thing… The right thing is to get people employed in jobs that matter,” Schmidt said. “And how do you do that? It’s done largely by the private sector, largely with intelligent regulation and not too much of it.”

“There’s a great opportunity to fix this,” Schmidt added. “Let’s get the lame duck session to at least settle some of this so that people have enough certainty as to what tax policy will be. Businesses can invest, how education is going to work, so we can go about doing what’s great about America.”

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