As headlines about the state of the world economy dominate the news, one of President Obama's chief economic advisers is packing his boxes to leave the White House. It is Austan Goolsbee's last day on the job as chairman of the White House Council of Economic Advisers. He is returning to his position at the University of Chicago. Melissa Block talks with Goolsbee about Friday's job numbers, the nation's stagnant economic growth and what he has learned from his time in government.
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MELISSA BLOCK, host: Those new jobs numbers come on the last day on the job for Austan Goolsbee. He's leaving his post as chairman of President Obama's council of economic advisors and going back to the University of Chicago, where he's a professor of economics. Austan Goolsbee joins me now from his office. Austan, welcome back to the program.
AUSTAN GOOLSBEE: Thanks, Melissa.
BLOCK: Let's talk about today's jobs numbers, 117,000 jobs added in July. You could look at that and say, well, you know, that's better than May and better than June, which were both abysmal, but we still have unemployment stuck over 9 percent where it's been for almost all the months of this presidency. It's hard to see that as good news.
GOOLSBEE: Well, look, I don't disagree with that. We got a long way to go. Even with this report being better than expected, it's still basically a call to action. And there are several major bipartisan things that we could do right now. They all kind of got put on hold with the debt ceiling silliness, but we should come back to those. You know, we should pass the free trade agreements. We should extend the payroll tax cut for 150 million workers. We should pass an infrastructure bank that allows us to leverage private capital and add that to public monies to expand economic infrastructure.
We should pass the patent bill. All of these are things that were created in a bipartisan way and it does feel like people might be feeling a little better about Washington in general if they thought they could do some things together.
BLOCK: You're talking about a call to action. I want to run by you what Paul Krugman wrote today in today's New York Times, the liberal economist. He said this, "the president needs to come up with real job creation proposals. We already know what isn't working, the economic policy of the last two years and the millions of Americans who should have jobs but don't." Austan Goolsbee, you had a prominent seat at that policy table. Paul Krugman says it isn't working. What do you say to him?
GOOLSBEE: Well, I mean, everyone knows that we come in at a moment that the economy's losing 800,000 jobs a month and there is no - the private sector's in freefall. There is no alternative at that moment, but that the government be the primary driver of expansion or primary preventer of a depression. We did avoid some cataclysmic event, but we have a long way to go. I don't disagree with Professor Krugman in any way about that. Most rapid recoveries in the history of the U.S. took place in a context where the economy could just go straight back to what it was doing before the recession began.
And this time, we couldn't do that. We had an expansion that was fueled by a bubble, consumption that we couldn't afford and housing construction that - now that the bubble has popped, we're unlikely to go back to those being the two primary drivers of recovery. And it does take some time to make the shift to investment, to exports, to innovation, but we are doing that. And if you look at this jobs report this month, hopefully it's pointing to some broader based comeback.
BLOCK: How do you explain that when corporate profits are on a tear, a lot of companies seeing all-time high profits, they're sitting on a lot of cash, those earnings are not translating broadly into jobs? Why not?
GOOLSBEE: Well, look, that is a key puzzle facing economists everywhere, to try to figure that out. It's not just in the United States, I might emphasize. I believe that the main reason that you have seen that happen is businesses are still highly uncertain about how rapidly is the world economy coming back. And I think that the - to have seen the dysfunction of the debt ceiling debate in Washington, you know, a series of absolutist positions and threats that the U.S. government might actually default on some of its obligations, I think that was deeply unsettling.
Fortunately, we're now past that. We've laid out some - couple of trillion dollars of longer run fiscal tightening and I think it behooves us now to go back to what we were talking about before we got diverted into that discussion, which was how do we grow and it is only by growth that we're gonna add these jobs.
BLOCK: Let's talk a bit about the debt ceiling deal that was that was signed this week. Spending cuts with no tax revenues, at least not for now. Do you share the worry that that adds up to a further drag on the economy?
GOOLSBEE: Well, all of the trillions being cut, something like 1/1000 of it will be in 2012, so there is no sense in which this is going and putting a huge drag on the immediate prospects of the business cycle. We knew we have to address these longer run fiscal challenges. We've known about that for 30, 40 years.
So I think making a down payment on some of that some time in the future to address the next 10 year's budget is perfectly healthy. I think that it's teed up that there would be a balanced plan to come out of the super committee that we could have some revenues from my income people, that we could have some spending cuts in a variety of areas so that it's a shared sacrifice and a balanced plan. You know, but we'll see how that one plays out.
BLOCK: Austan Goolsbee, as you leave Washington, I wonder if there are realities that you've learned here that set all the economic theory from the ivory tower on its head. Just sort of real world applications that you've encountered here that you found just didn't square with what you've been taught, or what you've been teaching in the classroom all these years.
GOOLSBEE: Well, somewhat. I think the challenge to economists everywhere is not as much coming from Washington, but more the events of the economic crisis and a series of things that were, you know, the model said were never supposed to happen. That has pervaded the economics profession and I think it's a great time of, let's call it intellectual ferment, where we're going to - I think everybody is going to have to rethink some of the theories that they had before.
I found working in Washington, you know, as I say, you don't come to Washington for the fun and then you won't be disappointed.
(SOUNDBITE OF LAUGHTER)
GOOLSBEE: Because it's not - I wouldn't say that it's necessarily that fun. There's a lot of bickering and dysfunction in the political system now. And hopefully we can get past some of that and get back to a place where we're doing the things that people can agree on and saving the things that we really don't agree on and are going to fight about for another day.
BLOCK: I've been talking with Austan Goolsbee on his last day as chairman of President Obama's council of economic advisers. He's heading back to teach at the University of Chicago.
Austan Goolsbee, thanks so much.
GOOLSBEE: Great talking to you, Melissa. Transcript provided by NPR, Copyright NPR.