Fallout: The Financial Crisis

A conservative wish list for Obama plan

Scott Jagow Jan 20, 2009
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Fallout: The Financial Crisis

A conservative wish list for Obama plan

Scott Jagow Jan 20, 2009
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TEXT OF STORY

Scott Jagow: We have a pretty good idea what Barack Obama wants to do once he becomes President Obama today. And he said he wants bipartisan support for his economic plans. So, let’s hear from a more conservative viewpoint on fixing the economy.

We’re joined by Kevin Hassett. He’s director of economic policy studies at the American Enterprise Institute. Kevin, what do you think Obama’s number one priority should be?

Kevin Hassett: I think the top priority is to be much more clear about what economic policy’s going to look like than President Bush has been. Treasury has been running this TARP program and been doing it kind of under this cloak of secrecy. I think that that uncertainty, or the uncertainty created by that, has discouraged market participants from jumping in and throwing their own capital in there. It would be crazy, for example, to invest in a bank right now, because you don’t know if the Treasury’s gonna get in front of you. List the things that you think are the core principals of your policy and then stick to them.

Jagow: Well, what’s at the top of your list?

Hassett: I think that it’s very important for Congress to keep money in reserve. And I think that it’s very important that Congress or Treasury be careful not to fritter away the top funds. You know, the temptation will be to go out and put out a little fire every day, and then we’ll wake up a couple months from now and we won’t have any money left. I think it’s important for the TARP moneys to be a backstop so that if things start to go wrong again, then we’re ready to move quickly.

Jagow: And Kevin, as far as the stimulus package goes, what do you think about the way it’s shaping up?

Hassett: I think that stimulus is necessary right now, but it needs to be tied again with clarity about what the long-run strategy’s gonna be. If we go out and we build bridges and buy fighter planes and you know mail people checks and so on, and at the same time signal that we’re serious about returning to normal when the economy does, then it’s likely that the stimulus will be quite effective. Now, getting a check in the mail that’s financed by money we borrowed by the Chinese is not really cause for optimism.

Jagow: But Kevin, you’re a conservative — I thought you liked tax cuts.

Hassett: Oh, I do like tax cuts, and you’ll notice the nuance of my language — I said there must be ways to get more revenue. I think that if we cut the corporate tax, it’s likely you’d get more revenue, and we don’t get a lot of revenue relative to GDP in the U.S., we have about the highest corporate tax. So it’s not necessarily the tax rate that has to go up, but you know, absolutely you have to be willing to lift some rates and change things around right now. Because look, if you reverse the Bush tax cuts, you’re probably gonna reduce the long-run deficit by, oh I don’t know, about 10 percent right now, as big as the deficit is.

Jagow: Kevin Hassett is director of economic policy studies at the American Enterprise Institute. Thanks, Kevin.

Hassett: Thanks, it’s been great to be here.

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