Q: Why do we need economists? Didn’t most fail to see the financial crisis and recession coming?
A: Economists are valuable in terms of helping individuals and companies understand what is taking place in the economy and helping them to react to changes in events, and also in preparing for the future. It is true that very few economists understood the depth of this downturn, but it was a very unusual experience. It improved our ability to prepare for future crises.
We are not crystal-ball gazers. Perhaps, we did overpromise in terms of expectations. Most economists did not see these extraordinary events bringing about almost a collapse of the financial system.
Q: How much of the meeting in Denver will be looking back as opposed to looking forward?
A: Economists in our business-application side typically look forward more than they look back. We try to learn from our mistakes and determine what policies should be implemented to help us get back on track.
We will be taking a longer-term view as we deal with demographic issues, a new regulatory regime in the financial-services industry, a major budget deficit and a world economy where globalization is a predominant element, emerging markets are growing their overall share and economies may be operating at very different speeds.
Q: What’s your favorite economist joke?
A: The first lesson that economists learn is to give a number and a date, but never both at the same time.
There’s no shortage of jokes, which is probably one of the important lessons from our field, and that is to have more humility about our profession.
Q: What actions, if any, do most economists agree should be taken to improve the economy now?
A: There are differences of opinion as to, for instance, what actions the Federal Reserve should take. According to our recent policy survey, there is a view that another major stimulus package is not appropriate.
There is a very large consensus that the No. 1 problem facing the United States over the next decade is the federal budget deficit and debt.
Q: The survey said a majority supported extending the 2003 tax cuts. Why?
A: The U.S. economy is struggling to get back on its feet. There’s a lot of uncertainty on the part of businesses. Now is probably not the right time to be raising taxes and risking another downturn in the economy.
Q: Is there a connection between the tax cuts and jobs?
A: There is in terms of the capital gains tax, for instance. To the extent that you need capital to help start new businesses, raising capital-gains tax rates could impair some of that capital coming into the economy.
Q: What will it take for businesses to resume hiring?
A: One, companies need to see a consistent and significant pickup in their sales. Second, they need some greater certainty about economic policy, including health care costs, energy policy and tax rates. Third, they need to have some confidence that we in this country will be dealing with our overall budget deficit.
