CQ TODAY ONLINE NEWS
Aug. 2, 2009 – 12:07 p.m.
Economy Steps Back From Precipice, Geithner Says
By CQ Staff
While the economy has shown some signs of revival — an increase in home sales and a decrease in jobless claims — the nation still has to “make Americans confident about their future,” Treasury Secretary Timothy F. Geithner said Sunday.
Appearing on ABC’s “This Week,” Geithner said there are indications the recession is easing compared with last year’s “economy in free-fall, a financial system on the verge of collapse.” He cited the Obama administration’s efforts as being “very effective in helping stabilize conditions, help repair the financial system, bring down the costs of credit ... But I think we have a ways to go.”
Geithner stressed the “basic realities” that unemployment remains high and, “We need to make Americans more confident about their future.”
When asked how the administration could achieve that, he responded that current economic policies in place, like the stimulus package (PL 111-5), are “designed to provide the very substantial support to make sure we get through this” and predicted positive growth in the second half of the year.
On the chance of another downturn, Geithner said, “I think that’s something we’re very focused on. Again, we need recovery to be built on private demand, private spending, businesses taking a chance again in the American economy, putting investments to work, starting to rebuild their employment base. That’s the ultimate test for recovery.
“And the very important thing for us is to make sure we’re sticking with this until we’re very confident we have a strong, private sector-led recovery in place.”
However, he added that the focus should be on the long term. With “the stimulus program and what we’ve done in the financial sector are designed to have a sustained impact, again, because the damage we had done to our economy was so great, it was just going to take a long, sustained effort,” he said.
“Our job is not just to repair the damage done to this economy, bring growth back,” Geithner said. “We need to make sure that we’re making the kind of investments that are going to build a more productive economy, gains of growth more broadly shared.”
He also cited the need to trim the annual federal budget deficit, now more than $1 trillion, for the economy to have a sustained recovery and he did not rule out new taxes.
The nation must understand that the administration will do what’s necessary to foster a healthy economy, he said, but he offered no details on plans to shrink the deficit, though he said overhauling the health care system and lowering costs are essential.
Health care overhaul is one of puzzle pieces to restore economic viability, he said. “The necessary path to fiscal responsibility, the necessary path to getting this country living within our means again is not just health care reform, to bring down those costs, but we’re going to do a range of other things. And that’s going to be a very difficult challenge to this country.”
Still, Geithner said it was possible to achieve those goals. “We can do this,” he said. “It just requires the will to act.”
Lawrence H. Summers , chairman of the National Economic Council, said when taken as a whole, “the overall output statistics, the GDP, as economists call it, a very great likelihood — and this is what most professional forecasters say — is that we’ll see growth going forward in the second half of this year.”
However, he added, “The jobs picture’s going to be serious for a long time to come. The best that can be said so far is the rate at which we’re losing jobs is declining. But there, too, the picture is improving. We’ve got a long way to go, we’re going to need to carry through with the full program that the president has put in place.”
Appearing on NBC’s “Meet the Press,” Summers said given the current jobs picture, the administration “will work with Congress to make sure that unemployment insurance continues to perform its basic function of protecting the unemployed. That was an important element in the recovery and reinvestment program. It’s helped people who’ve become unemployed; it also helped the economy by maintaining spending. And we’ll do what’s necessary to make appropriate unemployment benefits available.”
Like Geithner, Summers said that despite the slight gain in the economy “this is why we are absolutely not complacent, we continue to be just very dissatisfied with where the economy is ... historically, increased hiring typically lags increases in output, so it’s going to take time before you see it in the unemployment and the employment statistics, so we’ve got to keep pushing.”
Former Federal Reserve chairman Alan Greenspan, who also appeared on the ABC program, agreed with Geithner’s assessment that the economic downturn is easing but not over, and he expected unemployment and job losses to continue but at a slower rate.
“Well, I’m pretty sure we’ve already seen the bottom. In fact, if you look at the weekly production figures for various different industries, it’s clear that we’ve turned, perhaps in the middle of last month, the middle of July,” he said. “And indeed you’re seeing a major increase in assemblies in auto and trucks before the [cash for] clunker issue even arose.”
Greenspan said the auto trade-in program has helped. “It’s an interesting issue. I mean, I have qualms about the concept, but there is no doubt that very extraordinary response is a very important indicator that the state of confidence in the economy is beginning to pick up,” he said. “If the clunker program had been put in place six months ago, it would have probably been a dud.”
Comments
In regard to the stimulus investment, my understanding is as follows: 1. The current surging fuel cost (World oil prices doubled during the last 6 months) is overwhelming the market rally. And the pending clean energy bill might serve as a second stimulus package world-wide boosting private investments. 2. People are so worried about losing their job, coverage, denial of treatment, which seems to increase bank deposit latetly. That means stimulus funding mainly goes toward bank deposit for a rainy day increasing jobless rate. It proves again that a healthy society yields better productivity, prosperity. It is time to 'Change' the notion of the public health as a fundamental human right and install 'a safety system for all' like all of the other industrialized nations, I think. 3. The stimulus funding begins to mobilize just 11%, meanwhile, the auto industry has undergone its restructuring with the massive job-related impact. To expedite its process, it is highly recommended to streamline the procedure. 4. The pandemic swine flu has been hurting the global economy seriously protecting the pork industry.
A pay for outcome / value payment system, key to the deficit-neutral, might be capable of bringing all groups together. Supporters of the agreement say it could save the Medicare System more than $100 billion a year and 'improve' care, that means more than $1trillian over a decade, and virtually needs no other resources including tax on the wealthiest. (Please visit http://www.kare11.com/news/news_article.aspx?storyid=820455&catid=391 for detailed infos). As much as 30 percent of all health-care spending in the U.S. -some $700 billion a year- may be wasted on tests and treatments that do not improve the health of the recipients," Thus the remaining $239 billions over a decade do not matter. Supposedly even the conservative number of such savings might be able to meet the goal. Dr. Armadio at Mayo clinic says, "If we got rid of that stuff, we save a third of all that we spend and that is 2.5 trillion dollars on health care. A third of that and that is 700 billion dollars a year. That covers a lot of uninsured people." Apparently, just in case of the difference between the estimate and result, or the worst case of scenarios, Obama officials may have made a statement taxes may rise to pay health care.
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