Midterm election makes budget debate more partisan
TEXT OF INTERVIEW
Steve Chiotakis: Leaders from the 20 biggest economies on Earth are meeting in Toronto this weekend. There’s a big debate between Europe and the U.S. whether the global economy is still in economic crisis mode or whether it’s time for budget cuts. There’s a similar partisan debate going on in this country. Former Labor Secretary Robert Reich is professor of public policy at the University of California Berkeley and he’s with us this morning. Good morning, Bob.
Robert Reich: Good morning, Steve.
Chiotakis: So conservatives warn against more deficit spending, while liberals say that without it, the economy may not fully recover. Why has economic policy become so polarized?
Reich: Because it’s being played out against the age-old ideological debate about the size of government. And with a midterm election coming up, the old debate becomes even more partisan.
Chiotakis: But we do have a huge budget deficit, I mean why can’t everyone agree that it needs to be reduced?
Reich: Well almost everybody does agree. The insider’s policy debate, Steve, is really over the timing.
Chiotakis: So why not start right now?
Reich: Because consumers are still holding back. They’re getting out from under a huge pile of debt and they can’t use their homes any longer as ATMs. Without enough consumers, businesses also are holding back on hiring. So most inside-the-beltway policy mavens think the federal government has to continue to take up the slack for now.
Chiotakis: But what if the government waits too long?
Reich: Ah. Wait too long and global lenders start worrying America can’t repay its mounting debts or will inflate them away by printing more money. So lenders start charging higher rates to cover their risk and those higher borrowing costs start slow economic growth.
Chiotakis: So when is the timing right, Bob?
Reich: Well, this is where the president’s deficit commission comes in, along with any ideas to trim the rising costs of Medicare, the biggest-ticket item in the future. If there is a credible plan to cut the long-term deficit, lenders will breathe a bit easier. At least until the economy is growing at a healthy clip.
Chiotakis: All right. Former Labor Secretary Robert Reich, professor of public policy at the University of California Berkeley. Bob, thanks.
Reich: Thanks, Steve.
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