Wednesday, August 17, 2011

An Interview with Austan Goolsbee

Departing Council of Economic Advisers chairman Austan Goolsbee defends Obamanomics. I push back. But he's for pro-growth tax reform. I'm for it. So where's the President?


So now I am personally honored to be joined for an exclusive interview by the

former chairman of the President's Council of Economic Advisers, that being

Austan Goolsbee. He is returning to the faculty of the University of

Chicago's Booth School of Business this week. An old friend of the show.

Good evening, Austan. Let me just say congratulations on your government


Mr. AUSTAN GOOLSBEE: Hey, thank you, Larry, and it's great to be back and

see you again.

KUDLOW: All right, that's the good news. The bad news, Austan, as you well

know, America is not working. Many fear a double-dip recession. There has

already been a debt downgrade. What is your man, President Obama, going to

do? Can you tell us what he's going to say in this so-called new economic

growth plan?.

Mr. GOOLSBEE: Well, you know, I'm not going to give away any secrets. It's

his to make. You and I, Larry, for many, many years, have been the growth

guys. And while we may disagree on this or that or some other policies,

fundamentally we got to get the country growing if we're going to be

generating jobs, and we saw that last year when the economy was growing at a

faster clip. We added more than two million jobs, as well as the stock market

was doing well and you were starting to see more business investment. As we

slowed down this year, we took a hit on all of those fronts. So hopefully

it's going to be in the style of the education, innovation and investment,

which I kind of think is--has got to be the fundamentals of any growth


KUDLOW: Yeah, but Austan, I don't--look, let's go back to basics. The $800

billion stimulus package hasn't worked. The $2 1/2 trillion Fed stimulus

package hasn't worked. Cash for clunkers hasn't worked. These green energy

ideas hasn't worked.

Mr. GOOLSBEE: Well...

KUDLOW: Your president is out there talking about raising taxes on

millionaires and billionaires.

Mr. GOOLSBEE: Well, let's--now hold on a second, Larry.

KUDLOW: What kind of message does that send to entrepreneurs and free

enterprise business people who, frankly, are immobilized and don't want to

create jobs, Austan? Isn't it time to turn over a new leaf and start

something new?

Mr. GOOLSBEE: Have you been saving this all up since I've been--last been

on, Larry?

KUDLOW: Only for you, my friend. Only for you, because you're such a good


Mr. GOOLSBEE: Well, look--look, what I will say is this, I don't agree--if

you start looking at the impact of various programs. We avoided a depression,

which was a scary moment, but all of that stuff was two-and-a-half years ago.

If you look at the president cutting the capital gains rate to zero for people

starting their own businesses, cutting taxes 17 different times for small

business, I'd a thought you'd be for that stuff, Larry.

KUDLOW: Those are not tax cuts. You see, the whole...

Mr. GOOLSBEE: How is that not a tax cut?

KUDLOW: One of my problems with your line of thinking is you believe that

little teensy-weensy, temporary, targeted tax cuts; and from what I gather

from our John Harwood, you're going to go there again. Another one year

payroll tax cut will not do it, Austan. Don't you understand, businesses

think longer term. Is there anybody in the White House that's ever worked in

a business that sees a five-year horizon, permanent reductions in tax rates

work? These teensy-weensy tax credits never work, Austan. That's why we're

at 1 percent growth in the economy.

Mr. GOOLSBEE: Look--oh, you and I are both for a low rate and a broad base.


Mr. GOOLSBEE: Now when the president has proposed...

KUDLOW: Where is that? Where is that, Austan?

Mr. GOOLSBEE: Well...

KUDLOW: Where is his broad base? Yes, let's start there.

Mr. GOOLSBEE: Go ask the members...

KUDLOW: We can agree on that.

Mr. GOOLSBEE: ...of Congress. When the president proposed a grand bargain

with a low rate and a broad base, they said, `What do you mean broaden base?

We don't want to broaden the base. That would be a tax increase.'

KUDLOW: Well, but if you lowered the rates and broaden the base, if you

rolled back regulations, if you stopped the National Labor Relations Board

from attacking businesses, Austan, you would see companies spending the

several trillion dollars of cash that they're not spending now, my friend.

Mr. GOOLSBEE: Well, now, hold on, Larry. You see that same accumulation of

cash in other countries that have totally different policies than we have in

the US. So I think it's very unlikely to attribute that to the policy

decisions that are taking place in the US, first of all. And second of all,

you have seen that the president has actively been trying to streamline

regulations. And just going back to the policies that led to the downturn

hardly strikes me as the wisest course of action.

KUDLOW: I don't see...

Mr. GOOLSBEE: We ought to do some third thing.

KUDLOW: Well...

Mr. GOOLSBEE: And I think you will likely see the president proposing that.

KUDLOW: I mean, I don't see--you've tried all this big government spending

and regulate. Why not have flat tax reform? Why not roll back regulations?

Why not put yourself in the position of a small business, Austan? They're

worried about Obamacare. They're worried about...

Mr. GOOLSBEE: Look, the president has done that.

KUDLOW: They're worried about Dodd and Frank. Why not understand that

community banks are afraid to make a loan because of overregulation?

Mr. GOOLSBEE: Well, Larry, again, I think you're being highly unfair. The

president has cut taxes for small business 17 times. It's not my job to come

down and get in a big battle over things that happened two

years--two-and-a-half years ago in the stimulus. If you look from this point

forward, what do we need to grow? As I look at what the administration is

doing, where they are in those areas where streamlining of regulation can be

effective, trying to streamline the regulations. They're trying to cut taxes

for small business. And they're trying to make the investments. It seems

like you were making fun of an infrastructure bank.


Mr. GOOLSBEE: That's one of the only things that the Chamber of Commerce and

the labor unions agree on...

KUDLOW: I don't care if the chamber is for it.

Mr. GOOLSBEE: ...that the infrastructure will be critically important.

KUDLOW: Austan, you spent a lot of money.

Mr. GOOLSBEE: With...

KUDLOW: And the president himself said those jobs were not shovel ready. I

don't think an infrastructure bank or any other form of additional spending is

going to help grow the economy and unleash entrepreneurship, with all do


Mr. GOOLSBEE: Well, you know...

KUDLOW: And I want to ask you about another one. Is the president going to

extend unemployment benefits for another 99 weeks, because many economists, as

you well know, believe that this kind of unemployment benefit extension is

actually keeping unemployment high?

Mr. GOOLSBEE: Well, the evidence that I've seen on that suggests that it's

not keeping unemployment high. You have to be looking for a job to get

unemployment benefits. If you stop looking for work, you are no longer

eligible to receive and benefits. And though it's come down substantially, we

still have more than four-and-a-half people looking for a job for every job

that's out in the economy. So I, you know, I think that's a little unfair to

be trying to pin our economic problems on the fact that we're trying to give

people some time to help them find a job.

KUDLOW: All right, my last one is--look it, you've been very patient. I

appreciate that. But this is such important stuff, Austan. You've a good

man. We've known each other long time. All this green energy stuff has been

an abject value. You're never going to do more than 1/2 percent or 1 percent

of American energy. Why doesn't that administration come out full throated

for American energy production? We've got the oil shale. We've got the

natural gas shale.

Mr. GOOLSBEE: We did.

KUDLOW: No, see...

Mr. GOOLSBEE: How can you say that?

KUDLOW: They don't...

Mr. GOOLSBEE: They did. Domestic production is the highest it's...

KUDLOW: They refused to call off the EPA dogs.

Mr. GOOLSBEE: ...been since the--for many years.

KUDLOW: I understand. But they refuse to call off the EPA dogs that are

investigating the infras--the fracking structure and the water levels. And

this is one of the great job...

Mr. GOOLSBEE: Wait, look, look.

KUDLOW: ...creators of all time.

Mr. GOOLSBEE: Look, we have to--we have to promote domestic energy

consumption. We have to do that in a way that's safe. We don't want to have

the biggest oil spill again that has ever been had. We don't want to poison

the ground water. But the president, as I've viewed it, the administration

believes that we can do that in a safe way, and domestic production is ramping

up quite dramatically. Now it seems like you're making fun of some of the

alternative energy stuff, but if you look at China, if you look at Europe and

if you look at a lot of the faster growing regions of the world, they're

heavily investing in it.

KUDLOW: It's been a dismal failure in Europe.

Mr. GOOLSBEE: (Unintelligible)...alternative energy.

KUDLOW: It's been a dismal failure in Spain. It's been a dismal failure in

Europe. I say, Austan, if the market...

Mr. GOOLSBEE: It seems like in China and Brazil it's been quite a success.

KUDLOW: If the market wants to produce clean energy, it'll produce clean

energy. Natural gas from shale is clean energy.

Mr. GOOLSBEE: Look, I agree with that.

KUDLOW: I just don't see why we don't...

Mr. GOOLSBEE: I agree with that.

KUDLOW: the EPA dogs off. That's one of these regulatory issues.

Call the National Labor Relation dogs off of Boeing, Austan. In other words,

some of this stuff, there's very little presidents can do. I get that.


KUDLOW: But the signals, the messages, is it pro-confidence or

anti-confidence? We have got to get America working again and right now it's

not happening. I'm going to give you the last word, my friend.

Mr. GOOLSBEE: OK. All I'll say is if you look at countries where it

is--where they are rapidly growing, they're investing in their infrastructure.

They're investing in their educations. They are trying to streamline

regulations but they're not neglecting key investments. The president when

he's out looking at fiscal consolidation for the long-term, but making the key

investments that are pro-business, I really think that's the--what we should

be doing, and I feel that that could be certainly a bipartisan thing.

KUDLOW: Well, all right. I say make it pay more after tax for all business

ventures. But, Austan, we've ran out of time. You're very kind to come on

the show. It is a pleasure to see you.

Mr. GOOLSBEE: Great to see you, Larry.

KUDLOW: I hope you'll come back now that you're going back to college.

Mr. GOOLSBEE: You bet.

KUDLOW: And I appreciate it very much. You know I have the highest regard

for you. Austan Goolsbee.

Mr. GOOLSBEE: It's great to see you.

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