Peter Morici, University of Maryland Professor of Economics:
Stuart Varney: “Are you predicting that the economy is going to fall off a cliff?”
PM: “Well, if we have a double dip, if we turn into a second recession, the economy won’t recover. The definition of a depression is a recession from which you cannot recover. The economy has natural resuscitative qualities, due to the inventory cycle, things of that nature; we’ve used that up this time around. If we take a second dip that won’t be present. What we’ve seen is the Obama administration is incapable of crafting economic policies that have permanent positive effects on the economy; its attack on the private sector from cap-in-trade, to higher marginal taxes, higher health care costs and so forth, all of these little things are adding up. What’s more, as we have discussed so many times in recent years Stuart, they are not addressing the fundamental problems; the trade deficit with China, the huge hole in demand for US Goods and services, and the bank reforms do nothing for the regional banks, those eight thousand banks don’t have cash to lend. Obama worries about Wall Street, not main street, finance not manufacturing, that’s why this could happen.
SV: Okay, now bring us up to date, and bring us up to speed on the big debate. I’m saying that the great debate is: Do we spend more and stimulate more with government money now, or do we cut back on spending and concentrate on deficit reduction now? Where do you stand in that debate?
PM: We certainly don’t spend more, I would not take back the remaining stimulus money, I would let it work itself through the system. However, I would at this time take very strong steps to address the trade deficit with China.
SV: Yeah but, but okay ...
PM: I would have a policy that …
SV: I know that’s your point …
PM: Hold on, hold on ...
SV: I know that’s your point …
PM: If you do that ...
SV: But, but …
PM: If you do that, if you do that, then you can cut spending.
SV: Okay.
PM: Because the increased demand that you’ll create that way for domestic goods and services permits you to cut spending. It permits you to lower the deficits in the United States, in Europe, if you do that.
SV: Am I right in saying that you’re looking for, overall, a loss of 150,000 jobs tomorrow morning?
PM: Yes I am. We’re essentially going to lose 200,000 census jobs, in round numbers, it’s very hard to get a fix on that even though they give us data. And so the question is: How many jobs are created net of that? Last month it was about 30,000, maybe this month it will be 50,000, that’s hardly enough to sustain this recovery.
SV: Okay. Professor Morici, it’s always a pleasure. Thanks very much for joining us again sir, appreciate it.
PM: Take care.
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