Economist Mark Zandi of Moody’s Analytics was in the spotlight at the Christian Science Monitor breakfast this morning, where reporters quizzed him on policy and predictions, some more heartening than others. Jay and Crowley both addressed House Minority Leader John Boehner’s economic-themed speech yesterday, but below are some excerpts showing where Zandi, an increasingly ubiquitous pundit, might bolster or bicker with the man who hopes to become the next House leader.
Boehner: “Right now, America’s employers are afraid to invest in an economy stalled by ‘stimulus’ spending and hamstrung by uncertainty … All this “stimulus” spending has gotten us nowhere.”
Zandi goes halfsies here. He certainly agrees that uncertainty, in terms of consumer and business-owner confidence, as well as investors being nervous, is hampering growth. It is not helpful, he emphasized, that businesspeople are confused about how new financial regulations apply to them, though new financial regulations had to be passed in the wake of such a recession. “The collective psyche is incredibly fragile,” he says, “though uncertainty is abating.”
But Zandi, as many economists, couldn’t be more behind the stimulus. When asked whether the administration could have done anything better in responding to the turmoil, his response was that the stimulus could have been bigger in order to give the economy “a bigger kick.” Without the stimulus, Zandi estimates America would have lost 11 million jobs instead of 8 million, putting us around a national unemployment rate of about 11.5% rather than 9.5%. He says the economy seems sluggish now not because there was stimulus spending but because stimulus spending is running out.
Boehner: “First, President Obama should announce he will not carry out his plan to impose job-killing tax hikes on families and small businesses … We will not solve our fiscal challenges until we cut spending and have real economic growth — and we won’t have real economic growth if we keep raising taxes on small businesses.”
As Jay noted, many of the tax increases included in the Democratic plan would only affect high-end companies—hedge funds and law firms—that are a pretty far cry from the mom-and-pop vision that comes to mind when politicians invoke the protection of small businesses. And Democrats are proposing extending tax cuts for those who make less than $200,000 per year.
Zandi’s feeling is that raising taxes across the board, something neither side is suggesting, would be a “Japanese”-level policy error. Right now, he’s singing a tune similar to Boehner’s, saying that no taxes should be increased until 2012 or 2015, though he parts ways with the Grand Old Party there. Once the economy has recovered, a convalescence he believes will be surprisingly good in the next year (barring any unforeseen economy-shocker), Zandi says tax increases on those making $250,000 or more should be phased in. In terms of those two deficit-battling prongs, Zandi puts much more importance on spending restraint than higher taxes, though he believes we must have both.
Boehner: “We’ve tried 19 months of government-as-community organizer. It hasn’t worked. Our fresh start needs to begin now.”
Zandi might also raise a finger here to disagree. Although the Obama administration certainly could have done things better, something easy to see in hindsight, he believes “we’ve been incredibly productive,” especially in passing health care and financial regulation reform. The political vitriol and the consensus on how divided and unproductive Congress seems is a red herring to him. “It’s therapeutic,” he says of the right-left bickering, though some might argue there are more effective and less painful forms of therapy. (Electric shock comes to mind.)
The “fresh start” line is going to work and keep working for Boehner and other Republicans though, if some of Zandi’s predictions hold true. Although he was espousing much economic sunshine this morning, he thinks unemployment will continue to rise before it falls—meaning those numbers could be pretty painful for Democrats as the midterms roll around. He also gives the recession a 1 in 3 chance of double-dipping, which isn’t exactly the kind of statistic anyone associated with the status quo can hang their hat on.