Forget Politics, A Sense of Urgency is Needed to Improve the Economy

SUSIE GHARIB: President Obama vowed today to put out new proposals every week to boost economic growth and job creation. He also called on Congress to complete work on a deficit-reduction plan.

But speaking to workers at a battery plant in Michigan, the president said the country`s financial house must be put in order in a responsible way.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: So what I want to say to you, Johnson Controls (NYSE: JCI), is there is nothing wrong with our country. There is something wrong with our politics. We know there are things we have to do to erase a legacy of debt that hangs over the economy.

GHARIB: So how do we get the U.S. economy back on track? Joining us with some ideas, Robert Brusca. He`s chief economist of Fact & Opinion Economics.

Hi, Bob.


GHARIB: So, is the president right? That it`s really not the economy that`s broken, it`s the political system?

BRUSCA: I think a lot of things are broken. I think it`s true that we have basically a bad economy because you don`t have a good economy in wartime. And right now we have got a civil war between Democrats and Republicans. They`re fighting all-out battles with their partisan agendas. And the nation, I think, has been left to suffer. It has become collateral damage.

GHARIB: So what should the president do though?

BRUSCA: Well, you know, I think options are limited to some extent. One of the problems is that, you know, we`ve leaned on the Fed so much and with the sports season coming, you know, we know in football that if you run the ball and run the ball and run the ball, eventually they stop that.

The way you`re successful is by mixing your strategy. And what has happened is Republicans are redlining any kind of fiscal policy move, and I don`t think we should take anything off the table. I think with 9 percent unemployment the most risky thing that can happen is not to get control of our budget, but to slide into recession.

And I think there should be everybody focused on that. I think the president needs to call Congress back into session. They need to take a look at this weak economy and pay some attention to it.

GHARIB: You know, earlier this week, Mohamed El-Erian, the CEO of PIMCO, came on the program and he said that the way to get the economy growing and to create jobs is that we have to make structural reforms. Now that`s not a short-term fix. That`s a long-term thing. Do you agree with that?

BRUSCA: Well, I think there are probably structural problem problems in the economy. You know, you really cut down the auto industry and as result you have got people migrating, for example, out of Michigan, where the president was just speaking. You have got the mayor in Detroit trying to shrink the size of the city for which he has got to provide services.

I mean, those are obviously clear examples of structural change. But I think you also need to provide incentives. And I think there`s something to this argument that businesses are just too burdened with various kinds of regulations. And I think we need to figure out what we can do to make business more attractive.

I also think that the bankers have really tightened their conditions way too much. I think they`re partly responsible for this. You know, part of this issue, you read about the low interest rates, but people can`t get to them. They`re like kids in a candy store looking through the window and they don`t have money. You know, the credit scores you need to get re-fis are just so incredible, very few people are qualifying for that these days.

GHARIB: But let me just go back to some of these other things you were saying. You talk about businesses and some of the burdens on business because they do complain about tax burdens and regulatory burdens. Do you think that if those were lifted that businesses would hire more? That they would invest and expand?

BRUSCA: Well, the problem is they might over time but we`ve got a problem now that needs some kind of an instant start. And, you know, the markets are turbulent. This is wrecking confidence. The thing that happened today that really disturbed me, we had this big rally because people liked jobless claims.

That`s a fickle weekly number. What really happened today was the export numbers were terrible. The trade deficit got bigger. We`re losing our export growth. And that has been a big driver of GDP.

You know, every time we get something that`s driving the economy, it seems like it stops growing. And, to me, that`s one of the big risks. We really need to get our trade in gear and that really is a problem because the rest of the world has started to slow down.

And so we`re really running an uphill race here. I think we need to have a sense of more urgency. I don`t think the president nor Congress has any sense of urgency. I think they`re still planning for the elections. And I don`t want them planning for the elections. I want them planning for this month.

GHARIB: OK. We just have a few seconds left. And I wanted to ask you a big question. The Fed, does the Fed have any urgency? It said this week that it would do — use a range of policy tools. Are those tools any good for fixing this economy?

BRUSCA: I don`t think the Fed has quite the right tools. I know that Ben Bernanke has been very creative and I applaud him for what he has been trying to do. But I think that at some point interest rates are going to be too low and a Fed balance sheet that`s too big scares more people than it does good.

So I`m a little bit concerned about that.

GHARIB: All right. Well, it`s a big problem and we`re going to come back to you for more ideas another time around. Thanks so much, Bob.

BRUSCA: Thank you, Susie.

GHARIB: And we have been speaking with Robert Brusca, he`s the chief economist of Fact & Opinion Economics.

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