GENE SPERLING, DIRECTOR, NATIONAL ECONOMIC COUNCIL, IS INTERVIEWED AT THE ATLANTIC'S ECONOMY SUMMIT MARCH 14, 2012

Transcription

1 GENE SPERLING, DIRECTOR, NATIONAL ECONOMIC COUNCIL, IS INTERVIEWED AT THE ATLANTIC'S ECONOMY SUMMIT MARCH 14, 2012 SPEAKERS: GENE SPERLING, DIRECTOR, NATIONAL ECONOMIC COUNCIL JAMES BENNET, EDITOR, THE ATLANTIC STEVE CLEMONS, WASHINGTON EDITOR AT LARGE, THE ATLANTIC [*] (JOINED IN PROGRESS) CLEMONS: Ali and Sheila, thank you so much. Thank you very much for being with us. Now we have Gene Sperling here, and we have our editor-in-chief, James Bennet. James, this morning, I told you a little bit about our cover issue of the Atlantic, which was just issued today with Ben Bernanke on the cover. I think the deals we're trying to make is that Gene said, "You know, I'm not supposed to be on that cover with a hero." And they'll sort that out in a moment, so without further ado, Gene Sperling, President Obama's national economic advisor and James Bennet of the Atlantic. SPERLING: Thank you. BENNET: Thank you. Gene, as many of you know, being at the center of Democratic policy making and politics for more than 20 years now and served at -- in the same capacity in the second term of the Clinton White House, and if memory serves, was the key negotiator on the bi-partisan balanced budget deal of '97. I think that Sheryl Sandberg of Treasury, formerly of Treasury, now it's Facebook? SPERLING?: She's kind of doing OK. BENNET:... once said of you that -- she said, "I've seen heads of state tower before this man," so maybe you could tell us a couple of those stories. And the Washington Post recently referred to you as Obama's jobs creator, which is actually a pretty mighty responsibility, so I thought we might as well start there. There have been signs lately of a -- what seems like a slow and steady recovery. I think that's been the consensus (inaudible) you on this stage today overall? SPERLING: Yeah.

2 BENNET: Yet we remain in a deep jobs hole, consumer debt remains very high. Where do you think -- what's a realistic range for the unemployment rate in, say, six, seven months from now? SPERLING: It's an absolutely great idea for people in government jobs like mine to make projections of what the unemployment rate will be. It always works out well, and there are never unexpected headwinds or unintended consequences that get in the way, so it's just a great idea, but I'll probably take a pass. So here's what I'd say, and I think people here know the basic story, which is, I mean basically this is a story about climbing out of a very, very deep hole. And again, as this audience would know, when you are doing that in perhaps certain types of recoveries where there's been -- defined by perhaps higher interest rates, higher inflation creating pent-up demand for houses and cars like we saw in '83, '84. A recovery can be robust. You know, morning in America in 1984 was basically people deciding to buy cars and houses again. When you face this type -- when you're coming back from this type of a recession, a financial meltdown, a bubble, you -- you're still -- people are still leveraging. And that's frustrating because you can't get quite the rip-roaring bounce that you would like when you are inheriting such a deep hole, unemployment that's been -- that was bordering on 10 percent. That said, you know, I think we've come a long way under the circumstance, and I think in terms of jobs, we have made significant progress, we just have a long way to go because of how deep the hole we inherited was, and again, in light of the nature of this recession and nature of the type of recovery. But just a couple of points. If you actually looked at last year, the amount of private sector jobs created in 2011 was actually 2.1 million; 2.1 million private sector jobs is a fairly solid year, historically. Why did it not feel so good? It didn't feel so good because the hole was so deep, because people are still hurting, because our country is facing a significant amount of long-term unemployment, which is more difficult on the economy, more difficult for our labor force in the future, and most importantly, most difficult for families to be -- to be unemployed for a year, year and a half, two years or longer. All those things make it more difficult together with still trying to get the housing market coming back. So but when you look at that 2.1 million, then you realize that in the last two months of this year, we've actually seen over 500,000 private sector jobs created in -- in the first two months of So I think when you look at private sector jobs, you do see progress, and again, it doesn't feel as good as it should, not because it's not progress, not 'cause we haven't come a decent way, but just simply because the hole we inherited was so deep. BENNET: Let's take the particular date of the election out of this question, and you are in this extremely important position -- leadership position to try to give us some sense of what lies ahead for the country. How long do you think it's going to be before we see 6 percent unemployment again in the United States?

3 SPERLING: So you keep going back at that. I'm going to -- I mean, maybe I should start... (CROSSTALK) BENNET: All right. SPERLING:... with the -- the -- he told me -- you know what he told me? He said, "You know, I might also ask you to compare President Clinton and President Obama." BENNET: We'll get to that. SPERLING: And I said, "Yeah, and then ask me, do I love mom or dad more?" So those are other good questions to ask. No, but? BENNET: Actually it can be Hillary Clinton and Barack Obama. SPERLING:... but let me make a -- but let me make a very serious point, which is that, you know, we talk about certain -- of the events in the economy, there are certain things of which, there are certain headwinds you have to deal with that you either inherited, like the fact that you were coming off the deep financial recession, and you're leveraging. You can't get a way from that reality. You can't control things like the Arab Spring that -- that increased gas prices, some of the Mideast tensions that are increasing gas prices now, the tsunami's impact on the global supply chain -- that helped slow the recovery last year. But right now, there are things we could be doing or could have done that could clearly and directly have had a greater impact on job creation and reducing unemployment. Let me mention, too, there hasn't been a lot of things wrong with the last two job numbers, but in January, you saw 96,000 teachers lost their jobs. That got better in February. Now that's not an act of God. That's an act of public policy. And President Obama as part of the American Jobs Act called for a $35 billion fund for teachers and first responders. There's no reason that we should not have passed that. There's no reason that we want to have larger class sizes or be laying off teachers at this point. So instead of losing 9,600 jobs, you could have been gaining. That would have helped the unemployment numbers significantly and helped our -- our schools. Secondly, construction jobs was one of the few weak numbers in February. That's another self-inflicted wound. This president has proposed this as part of the American Jobs Act -- he's -- accelerating $50 billion additional beyond the current transportation baseline for infrastructure. He called for $30 billion in modernizing our schools, a third of all of our schools, and a project re-build proposal. Now these are all important proposals. Most of them are dealing with deferred maintenance. You know, you don't get points for not doing deferred maintenance. I always say if I, like, eliminate my, you know, Direct TV NFL subscription, we save $230 of consumption in my family. If I tell my wife I don't want to fix a broken pipe in the basement, I don't get any points for that. You don't get frugality points or fiscal discipline points. It's just something you're going to have to pay for and it'll cost more later.

4 There will never be -- there will never be a better time for us to be dealing with deferred maintenance of our schools, of our roads and bridges than right now. There will never be lower interest rates. There will never be more construction workers out of work looking for a job, eager to get back in, and it would never do -- have a stronger benefit for the (inaudible) economy. Seventeen point one percent is the unemployment rate for construction workers, so I think that had you passed the American Jobs Act in its full form, I believe most people would be projecting that we would soon be heading into under 8 percent into the sevens in unemployment rate. And I think if you just do the two things I spoke of, which were: have the $30 billion fund to prevent teacher lay-offs and the acceleration of $50 billion of infrastructure, $10 billion for the infrastructure bang, the school construction. Unquestionably -- unquestionably, we have -- we'd be seeing strong projected construction job growth, which would have -- give this economy more momentum. And I think it's very sad because the last time I was here, there was nothing more bipartisan than infrastructure. And the fact that the Republicans in Congress have chosen at this opportune time not to work with this president on doing so, I think is very unfortunate for those workers, but for our economy at large. BENNET: But given that, you made fun of me before we came out here for asking you this question, so I might as well give you the opportunity to do it in front of all these nice people, too. Why didn't you propose the American Jobs Act three years ago, two years ago, when everything just? SPERLING: OK. Three years ago, my recollection was the president was -- had just been inaugurated, and on February 17th, he passed the largest recovery act our country has probably ever seen -- $800 billion. So three years ago, he passed something twice as large as the American Jobs Act. He passed by one vote. On February 17th, less than a month after he'd come into office, the president signed the -- the -- the American Recover s Act. $800 billion, it was a two-year plan, and he did it, again, with -- by a one vote margin in the senate having gotten two -- two Republican tethers from Maine to support it, though they insisted on bringing down some of the spending. So this was the most that was possible to get, the boldest proposal you could get in a swift, quick period of time. And I just want to remind people how important the speed was. I see endless articles and carping (ph), which will be the new definition of "always make the perfect the enemy of the very, very, very, very good" about, you know, could it have been a slight bit larger or not? Let's just remember what we know now. In the fourth quarter of 2008, our economy was losing growth at 8.9 percent. I know you hear a lot of numbers, but just take that in for a second. Our economy was contracting at an annualized pace of nearly 9 percent. In the first quarter, it was contracting at 6.7 percent. So over that six months, our economy was contracting at nearly 8 percent pace. That is the worst six month period, other than the demobilization after World War II, since the great depression. We were losing 800,000 private sector jobs a month. Our economy lost 3,000,000

5 private sector jobs in the first four months of The stock market went as low as 6500 in March, and people were betting -- many were betting it would go below 5,000. There was very little demand seen anywhere else in the world. So the president comes in and actually passes into law The American Recovery Act on the 17th, less than one month after he's inaugurated. The idea that one should have waited months and months to haggle over whether you could get a little more here or there would have been tragically irresponsible. We absolutely faced a potential spiral-down that could have been -- could have led to another great depression. Instead, we returned to growth in the second half of 2009 and returned to job growth one year after we were losing 800,000 jobs a month. So that's 800 billion. That goes for those first two years. Yes, in 2010, some people were hesitant in the Congress to do more while such a significant amount, particularly infrastructure, was still being put into place in In in December of 2010, at a time when most people were saying, Congress would come and check their mail and go home during the lame duck. This president fought for 232 billion, which was a payroll tax cut, which was 99 weeks of unemployment insurance, and was -- included 100 percent expensing for businesses, and then the extension of virtually every low-income tax cut. That 230 billion that he did then ended up being absolutely vital insurance for We did not know at the time the gas prices were going up $1. Had the president not put an extra $1,000 in every family's pocket with the payroll tax cut, I think that we would have faced a much more significant chance of a double-dip recession in The things he did then and his insistence on extending the payroll tax cut and unemployment, I think provided a very significant cushion to this recovery to absorb the external shots that our economy took and helped keep our economy resilient enough that we now are in the position where we see the potential for more momentum in our economy. BENNET: I'd like to come back to -- you raised gas prices -- I'd like to come back to that for a second, but first, staying with the question of jobs moving to looking ahead again and to a subject that you have thought a lot about, which is not just quantity of jobs, but quality of jobs. And David Offshore (ph) at MIT is -- is -- made the argument that in this recession that we particularly lost were what he calls "middle skill" jobs that could be good jobs that could be held, like, by people with high school educations. And what we've seen is a lot of lower wage, lower skill jobs being added in food preparation and other areas. You can challenge that if you'd like, but I'd also love to hear you look ahead, I don't mean to make you defensive on this -- SPERLING: No, no. That's OK. BENNET: I'd love to hear you look ahead and talk a little bit about where you see the growth areas of particularly middle class jobs in the United States in -- in coming years.

6 SPERLING: Well, Laura Tyson and there are others out there can correct me, but I think the largest job growth has been in professional and business services by far. If you look at the 3.9 million that have been added over the last 24 months, and on manufacturing, we had well over 400,000 in the last two years, which is the strongest increase in manufacturing jobs that we've seen since the late '90s. So I think -- but -- but I -- but part of the reason that we supported the -- this particular timing for dealing with our deferred maintenance in our roads and bridges and highways and airports and schools was that there is 17.1 percent unemployment in construction workers. And those are a lot of middle class jobs that are important to people. And so again, we -- we accept and embrace the idea that we should be doing much more, and the president spent the entire fall fighting for that. Now what I want to say that I think is -- comes right from the president's State of the Union, and I think is particularly interesting and I think is the reason for -- for greater optimism about the next few years for us could really -- let me say could really be seen when the president did his insourcing forum before the State of the Union. We had about 40 companies there. They weren't our supporters, no -- no reason for any of those people to be there other than they were companies that had decided to bring jobs back to the United States, or when they've had jobs in Mexico, China, et cetera. And if you listen to why they were bringing jobs back, you heard both business leaders and labor leaders saying that they think the United States is more competitive for location now than it has been in a couple of decades. And it was interesting, some of the things that they talked about that would be helpful. One, I think, I know you heard this a lot from the president's job council, and it's something we believe in, which is that the United States should be caring about how strong its manufacturing and particularly its advanced manufacturing base is beyond the 11 million jobs. It is pretty clear that manufacturing punches above its weight economically. It's absolutely essential for an innovation economy. Ninety percent of the patents, 70 percent of private sector research, 60 percent of exports come from manufacturing. There's an excellent article in the Harvard business review, I think in 2009, that talks about that when you let manufacturing decline because of recession or because of particular trade imbalances, that the problem is, is that you lose your innovative and skilled workforce necessary to take leadership in the next new thing in manufacturing. So I think one of the things we're doing is making a strong push to strengthen manufacturing to make it more competitive for people to locate here. And again, I don't think that we're, you know, before, I think, when you made this push, you felt like you had the wind in your face. I think now, you have the wind at your back. And you have the top consultants at many places, Boston Consulting Group and others, telling companies that if you look at a more deeper view of your costs, and if you look at the next 10 years as opposed the previous 10 years, you will find that the United States workers per productivity and salary are now going to be more competitive for them just from a cost basis, efficiency basis, then location in China.

7 And what many of them said were important was one, the degree that you were encouraging manufacturing, the degree the United States was doing things like we're doing a select (ph) USA, we're making it easier for people to figure out how to invest, locate here, encourage foreign direct investment. There was a big push on the community college side. Several companies said that when they look, they're looking for where they have a skilled workforce. So college completion, high school completion, the particular skills were important. But several said that in the absence of that, the commitment of a community college to gear up and to help ensure that they can fill that workforce was essential in their location decisions. So I think that we as a country could have a major commitment to infrastructure, which would be good for our long-term productivity and growth, but would be very helpful for getting some of those middle class workers back into the economy, back on the job. I think the commitment on manufacturing on R&D extension, on not just the general skill increases, but more specific where communities have the ability to figure out where their skill and job needs are with their major employers and orient not ten years from now, but right now how to fill those jobs gives -- was really at the heart of the president's State of the Union speech. It really was giving a blueprint, not just for the next 20 years, and not just to get out of crisis, but what we can do in the next few years to start bringing the good jobs back and making sure that our workers have the skills to fill them. BENNET: What are you going to do about gas prices? What can you do? SPERLING: We would prefer that they went lower than higher. (LAUGHTER) BENNET: You would? You weren't clear. SPERLING: I thought that was a fairly direct answer. No hedging. Obviously, you know, for families who are still struggling having to pay that extra amount at the gas pump is -- is for them on a personal level a headwind they would prefer to be without. But I will say that you saw this president fight, refuse to go on vacation or let anybody else go on vacation until he extended the payroll tax cut. At that moment, the gas prices were at $3.29. Now they're at $3.80. The future's market would suggest they'll go a bit higher. The $1,000, the $80 a month that people get is probably about double what most people are paying in extra gas prices. And so I think it is important that the things that Senator Harper, who's just leaving, voted for and others to pass the payroll tax cut is a cushion and a buffer for families who are dealing with higher gas prices and provides some cushion and buffer for the economy. We also have a situation now where, while that's discouraging for families, you also have more positive things happening at the same time. The strengthening of the -- of the job market, some families starting to see their pension's value going back to where it was prior to the crisis, so

8 it is a headwind that we face, but it's a headwind we face in the mix with other things that seem to be clearly in the right direction. In terms of what we're going to do, as the president says: all of the above. I mean one, you have to seize moments like this to make people realize how just economically insane it is for our economy to be so dependent on the global -- on global crude oil prices when those global crude oil prices are, themselves, so dependent on so many different security issues in some of the most fragile parts of the world. So this is a moment for people to seize things like what the president's called for with his car rule, which seeks to get to 54.5 percent miles per gallon by 2025, something that could reduce our dependence on oil by two million barrels a day. It's a reason to do more, whether it's on the drilling side, but not just for renewable energy, for the advanced car vehicle proposal that the president did. And obviously, it is a moment when you have such high prices to make sure that you're not weakening your cops on the beat who watch whether there is any manipulation or price gouging anywhere in our economy. That's why the president has had a very strong funding for things like the CFTC. I t's why in Dodd-Frank, some of the reforms we did were to make sure that they have the tools to limit the position, the amount that any one trader can control in the future market. It gave them power to deal with margin requirements under extreme circumstance. Those are all things that the president has proposed and passed that give us more tools to at least insure against illegal manipulation of oil and energy prices everywhere, and those are things where we're fighting every day to keep them from being defunded, from lobbyists from weakening it or lobbyists from challenging those measures in court. BENNET: Steve has us on a tight leash, so I'm just going to ask one more question and open it up to you guys if people want to start moving towards the mich, and the question is: we were joking about Obama/Clinton comparisons, but listening to you talk in particularly about how you think about jobs and job creation, I'm -- I'm (inaudible) you were a Clinton guy, you were a Hillary Clinton guy when you joined this administration and you've been portrayed in a number of the books about economic policy making, including this new book by Noam Scheiber as having advocated -- wound up being kind of losing fights for being tougher on the banks during the bailout, seeking more stimulus early, successfully pursuing a social security tax cut. Now you are at the very center of economic policy making of this administration. So without asking you to comment on those books specifically, I'm wondering have you changed, or has the president changed? SPERLING: You know, I think number one, when this president ran, his focus overwhelmingly was on the trends in our economy and globalization and other measures that were creating insecurity for the middle class in greater income and equality, and when I met him and started talking to then Senator Obama in '05 and he asked me to look at a chapter of his book at that time, he was as thoughtful as any political figure I've ever seen about the larger structural challenges our country faces.

9 But one thing President Clinton and President Obama will say is that when you're president, you fundamentally have to deal with the hand you're dealt, and he was dealt the worst final crisis since the great depression. And I think that this president's come on from the beginning with a comprehensive strategy. We inherited the worst job market, the worst financial situation, the worst deficit that you've probably ever seen. And it is difficult, and it is the challenge he inherited to improve all of them. And at times, you have to focus like a laser beam on one particular thing. That's just the nature of our system. So the president focused on getting The Recovery Act and the financial stabilization because if we did not prevent our economy from going into a great depression, none of the other goals would ever be possible. I refuse even for one second to in any way accept or tolerate the notion that this president has not been bold and aggressive and courageous on job growth or on deficit reduction. I think, you know, I read -- I read on my vacation -- it was fun reading, The Lords of Finance. (AUDIO GAP)... as president Obama did. We just take for granted that he passed an $800 billion stimulus. Didn't just propose it. Didn't just propose it. Passed it into law and signed it less than one month taking office. The financial rescue was essentially in place -- the stress test -- within three months of taking office. You take those things for granted. This president went -- so when the president -- when we (inaudible) in 2011, and we face a debt limit crisis, and we are engaged in a fiscal -- an effort to get a fair and balanced grand compromise on fiscal discipline, people said well, for the two or three months you were doing this, you weren't focused on jobs. Well, it is true that when you are locked in a negotiation -- a bi-partisan negotiation -- you have to finish the thing you're doing. It doesn't mean that our plan or our strategy for '09 '10, and '11 was not to both bring back this economy, care about jobs, and to create the confidence in longterm investment that comes from ensuring that nobody thinks the United States is headed for debt crisis. Those are not contradictory goals. They are as complimentary as good hitting and good pitching is to a baseball team, and it's exactly the right recipe -- boldness on jobs at the same time you are giving confidence that your long-term fiscal situation will be improving. So I think this president has been -- had a consistent vision, and what's been difficult is the circumstances he inherited. QUESTION: Lloyd Wood with the America Manufacturing Trade Action Coalition. We represent a significant percentage of the U.S. textile industry producing (inaudible) everything else that you could use. Two short questions.

10 BENNET (?): Can you keep it to one, sir, and make it short? I'm sorry, I'd like to come over here, too. I'm sorry. QUESTION: Yeah. Why hasn't the Obama administration supported the bi-partisan China currency legislation, and two, why include communist authoritarian non-market Viet Nam in the TPP if you're for free trade? SPERLING: I think if you look at our record, this president has been very aggressive in taking action to ensure we have a level playing field with China. This president was the only president who's actually used the 421 escape authority that was part of the China WTO agreement, and he has taken more trade, more WTO actions against China than his predecessor. You've just seen us file a very important case on China Rare Earth. You've seen success of the tire (ph) case, you've seen the president just put forward a new inter-agency trade enforcement task force to make sure we have the capacity, the language skills, the expertise to bring more significant cases against our -- against competitors who are not playing by the rules. So I think this president has taken a very aggressive approach, much more so than his predecessor in leveling the playing field with China, and I think you've seen that -- you've seen that consistently, and you've seen it even over the last -- over the last two months. I -- we do agree that their currency should be market based. It has improved under President Obama's watch and urging, but not enough. But I think if you look at our overall policy towards China, it has been one that has been very tough. It has been one that is essentially saying to them that as you are -- as you are playing a big ol' role in the global economy, you have to play by the rules and that we are willing to use the rule-based structure of the WTO to enforce that. BENNET (?): Let's go over here, please. QUESTION: I'm Mitzi Worth and I'm -- I have to tell you, I think you've done a brilliant story of telling what I call the Obama story, but I don't think it -- occasionally, Obama does it, but I would say most of us have no idea what an extraordinary job he's done 'cause somehow, you're not getting the story out. I've felt this from the very beginning, and? BENNET (?): I'm sorry, could you please move to a question? I'm sorry.. QUESTION: Well, I want to ask why they haven't been more aggressive about getting the story out because it's been so good. BENNET (?): Well, we're going to put you on the road. (LAUGHTER) SPERLING: Look, I -- you know, I'm gonna give a serious answer, which is I think that, you know, any white house lays out, tries to show the country your focusing on a specific thing one at a time, getting that done, making sure that everybody understands the pros and cons.

11 When you inherit a crisis, when you inherit a potential -- economy that could be going into a depression, you don't have that luxury. You have to come with overwhelming force and overwhelming speed on so many different areas. I remember so well, I was at Treasury those first two years, and I -- most importantly, at Treasury that first six months. What was happening, the things that we were dealing with from the Recovery Act to the stabilization to Chrysler, to GM, to AIG, I mean, it was just -- it was just overwhelming. And so that's not a communication strategy, that's an economic crisis strategy, and you have to do what you can. And I do think that people will see that story, and I think -- I think I mentioned the automobile industry. I think that is the most clear aspect. That was something the president did in March of 2009, which his political advisors will be happy to tell you. They knew he was going to be enormously, politically unpopular. And he did it 'cause it was the right thing to do. And I don't think there's anybody anywhere who, unless they have a very, very specific and calculated political agenda, who does not recognize what a difference that has made, not only for the comeback of the American auto industry, not only for the perhaps million jobs that were saved or more, but for what that has done for our manufacturing base and our economic future. BENNET (?): I'm afraid that is all we have time for. Gene, thank you so much. (APPLAUSE) SPERLING: Thank you. (APPLAUSE) " END