Departing Council of Economic Advisors chairman Austan Goolsbee defends Obamanomics. I push back. But he’s for pro-growth tax reform. I’m for it. So where’s the president?
KUDLOW: So now I am personally honored to be joined for an exclusive interview by the former chairman of the President’s Council of Economic Advisers, that being Austan Goolsbee. He is returning to the faculty of the University of Chicago’s Booth School of Business this week. An old friend of the show.
Good evening, Austan. Let me just say congratulations on your government service.
GOOLSBEE: Hey, thank you, Larry, and it’s great to be back and see you again.
KUDLOW: All right, that’s the good news. The bad news, Austan, as you well know, America is not working. Many fear a double-dip recession. There has already been a debt downgrade. What is your man, President Obama, going to do? Can you tell us what he’s going to say in this so-called new economic growth plan?
GOOLSBEE: Well, you know, I’m not going to give away any secrets. It’s his to make. You and I, Larry, for many, many years, have been the growth guys. And while we may disagree on this or that or some other policies, fundamentally we got to get the country growing if we’re going to be generating jobs, and we saw that last year when the economy was growing at a faster clip. We added more than two million jobs, as well as the stock market was doing well and you were starting to see more business investment. As we slowed down this year, we took a hit on all of those fronts. So hopefully it’s going to be in the style of the education, innovation and investment, which I kind of think is–has got to be the fundamentals of any growth strategy.
KUDLOW: Yeah, but Austan, I don’t–look, let’s go back to basics. The $800 billion stimulus package hasn’t worked. The $2 1/2 trillion Fed stimulus package hasn’t worked. Cash for clunkers hasn’t worked. These green energy ideas hasn’t worked.
KUDLOW: Your president is out there talking about raising taxes on millionaires and billionaires.
GOOLSBEE: Well, let’s–now hold on a second, Larry.
KUDLOW: What kind of message does that send to entrepreneurs and free enterprise business people who, frankly, are immobilized and don’t want to create jobs, Austan? Isn’t it time to turn over a new leaf and start something new?
GOOLSBEE: Have you been saving this all up since I’ve been–last been on, Larry?
KUDLOW: Only for you, my friend. Only for you, because you’re such a good guy.
GOOLSBEE: Well, look–look, what I will say is this, I don’t agree–if you start looking at the impact of various programs. We avoided a depression, which was a scary moment, but all of that stuff was two-and-a-half years ago. If you look at the president cutting the capital gains rate to zero for people starting their own businesses, cutting taxes 17 different times for small business, I’d a thought you’d be for that stuff, Larry.
KUDLOW: Those are not tax cuts. You see, the whole…
GOOLSBEE: How is that not a tax cut?
KUDLOW: One of my problems with your line of thinking is you believe that little teensy-weensy, temporary, targeted tax cuts; and from what I gather from our John Harwood, you’re going to go there again. Another one year payroll tax cut will not do it, Austan. Don’t you understand, businesses think longer term. Is there anybody in the White House that’s ever worked in a business that sees a five-year horizon, permanent reductions in tax rates work? These teensy-weensy tax credits never work, Austan. That’s why we’re at 1 percent growth in the economy.
GOOLSBEE: Look–oh, you and I are both for a low rate and a broad base.
GOOLSBEE: Now when the president has proposed…
KUDLOW: Where is that? Where is that, Austan?
KUDLOW: Where is his broad base? Yes, let’s start there.
GOOLSBEE: Go ask the members…
KUDLOW: We can agree on that.
GOOLSBEE: …of Congress. When the president proposed a grand bargain with a low rate and a broad base, they said, `What do you mean broaden base? We don’t want to broaden the base. That would be a tax increase.’
KUDLOW: Well, but if you lowered the rates and broaden the base, if you rolled back regulations, if you stopped the National Labor Relations Board from attacking businesses, Austan, you would see companies spending the several trillion dollars of cash that they’re not spending now, my friend.
GOOLSBEE: Well, now, hold on, Larry. You see that same accumulation of cash in other countries that have totally different policies than we have in the US. So I think it’s very unlikely to attribute that to the policy decisions that are taking place in the US, first of all. And second of all, you have seen that the president has actively been trying to streamline regulations. And just going back to the policies that led to the downturn hardly strikes me as the wisest course of action.
KUDLOW: I don’t see…
GOOLSBEE: We ought to do some third thing.
GOOLSBEE: And I think you will likely see the president proposing that.
KUDLOW: I mean, I don’t see–you’ve tried all this big government spending and regulate. Why not have flat tax reform? Why not roll back regulations? Why not put yourself in the position of a small business, Austan? They’re worried about Obamacare. They’re worried about…
GOOLSBEE: Look, the president has done that.
KUDLOW: They’re worried about Dodd and Frank. Why not understand that community banks are afraid to make a loan because of overregulation?
GOOLSBEE: Well, Larry, again, I think you’re being highly unfair. The president has cut taxes for small business 17 times. It’s not my job to come down and get in a big battle over things that happened two years–two-and-a-half years ago in the stimulus. If you look from this point forward, what do we need to grow? As I look at what the administration is doing, where they are in those areas where streamlining of regulation can be effective, trying to streamline the regulations. They’re trying to cut taxes for small business. And they’re trying to make the investments. It seems like you were making fun of an infrastructure bank.
GOOLSBEE: That’s one of the only things that the Chamber of Commerce and the labor unions agree on…
KUDLOW: I don’t care if the chamber is for it.
GOOLSBEE: …that the infrastructure will be critically important.
KUDLOW: Austan, you spent a lot of money.
KUDLOW: And the president himself said those jobs were not shovel ready. I don’t think an infrastructure bank or any other form of additional spending is going to help grow the economy and unleash entrepreneurship, with all do respect.
GOOLSBEE: Well, you know…
KUDLOW: And I want to ask you about another one. Is the president going to extend unemployment benefits for another 99 weeks, because many economists, as you well know, believe that this kind of unemployment benefit extension is actually keeping unemployment high?
GOOLSBEE: Well, the evidence that I’ve seen on that suggests that it’s not keeping unemployment high. You have to be looking for a job to get unemployment benefits. If you stop looking for work, you are no longer eligible to receive and benefits. And though it’s come down substantially, we still have more than four-and-a-half people looking for a job for every job that’s out in the economy. So I, you know, I think that’s a little unfair to be trying to pin our economic problems on the fact that we’re trying to give people some time to help them find a job.
KUDLOW: All right, my last one is–look it, you’ve been very patient. I appreciate that. But this is such important stuff, Austan. You’ve a good man. We’ve known each other long time. All this green energy stuff has been an abject value. You’re never going to do more than 1/2 percent or 1 percent of American energy. Why doesn’t that administration come out full throated for American energy production? We’ve got the oil shale. We’ve got the natural gas shale.
GOOLSBEE: We did.
KUDLOW: No, see…
GOOLSBEE: How can you say that?
KUDLOW: They don’t…
GOOLSBEE: They did. Domestic production is the highest it’s…
KUDLOW: They refused to call off the EPA dogs.
GOOLSBEE: …been since the–for many years.
KUDLOW: I understand. But they refuse to call off the EPA dogs that are investigating the infras–the fracking structure and the water levels. And this is one of the great job…
GOOLSBEE: Wait, look, look.
KUDLOW: …creators of all time.
GOOLSBEE: Look, we have to–we have to promote domestic energy consumption. We have to do that in a way that’s safe. We don’t want to have the biggest oil spill again that has ever been had. We don’t want to poison the ground water. But the president, as I’ve viewed it, the administration believes that we can do that in a safe way, and domestic production is ramping up quite dramatically. Now it seems like you’re making fun of some of the alternative energy stuff, but if you look at China, if you look at Europe and if you look at a lot of the faster growing regions of the world, they’re heavily investing in it.
KUDLOW: It’s been a dismal failure in Europe.
GOOLSBEE: (Unintelligible)…alternative energy.
KUDLOW: It’s been a dismal failure in Spain. It’s been a dismal failure in Europe. I say, Austan, if the market…
GOOLSBEE: It seems like in China and Brazil it’s been quite a success.
KUDLOW: If the market wants to produce clean energy, it’ll produce clean energy. Natural gas from shale is clean energy.
GOOLSBEE: Look, I agree with that.
KUDLOW: I just don’t see why we don’t…
GOOLSBEE: I agree with that.
KUDLOW: …call the EPA dogs off. That’s one of these regulatory issues. Call the National Labor Relation dogs off of Boeing, Austan. In other words, some of this stuff, there’s very little presidents can do. I get that.
KUDLOW: But the signals, the messages, is it pro-confidence or anti-confidence? We have got to get America working again and right now it’s not happening. I’m going to give you the last word, my friend.
GOOLSBEE: OK. All I’ll say is if you look at countries where it is–where they are rapidly growing, they’re investing in their infrastructure. They’re investing in their educations. They are trying to streamline regulations but they’re not neglecting key investments. The president when he’s out looking at fiscal consolidation for the long-term, but making the key investments that are pro-business, I really think that’s the–what we should be doing, and I feel that that could be certainly a bipartisan thing.
KUDLOW: Well, all right. I say make it pay more after tax for all business ventures. But, Austan, we’ve ran out of time. You’re very kind to come on the show. It is a pleasure to see you.
GOOLSBEE: Great to see you, Larry.
KUDLOW: I hope you’ll come back now that you’re going back to college.
GOOLSBEE: You bet.
KUDLOW: And I appreciate it very much. You know I have the highest regard for you. Austan Goolsbee.
GOOLSBEE: It’s great to see you.