Obama Economic Adviser Offers Recovery Insight

MELISSA BLOCK, host:

When President-elect Barack Obama presented his economic team today, he talked about a stimulus plan to get the economy moving.

(Soundbite of speech)

President-elect BARACK OBAMA: We need a big stimulus package that will jolt the economy back into shape, and that is focused on the 2.5 million jobs that I intend to create during the first part of my administration. We have to put people back to work.

BLOCK: President-elect Obama did not specify just how many hundreds of billions of dollars he thought should be spent to jolt the economy back into shape. He did say the stimulus plan would include jobs, programs such as rebuilding roads and bridges, modernizing schools and creating a clean energy infrastructure. We've called a senior economic adviser to the Obama transition team, Austan Goolsbee, to try to fill in some blanks. Thanks for being with us.

Professor AUSTAN GOOLSBEE (Senior Economic Adviser, Obama Transition Team): Oh, my pleasure.

BLOCK: And I know, Professor Goolsbee, that you will not give me a dollar amount, so I'm not going to ask you for one. The numbers have ranged wildly from about $175 billion to $700 billion. I'm curious to find out what it would take to come up with the number. How do you do that? What factors do you weigh?

Prof. GOOLSBEE: Well, I would say two things. Number one, the 175 billion was in the plan that then-Senator Obama, President-elect Obama said in the campaign. And we know the economy has deteriorated quite substantially since that time.

BLOCK: So we should assume it will be more than 175.

Prof. GOOLSBEE: I would say it's going to be bigger than 175 billion.

The second reason we don't have a specific number is the president-elect did not give us the charge as the economic team to come up with a number-based stimulus. He said, let's hit this jobs target, and let's be aggressive about it, pursuing these various areas of direct investment, and also tax relief to 95 percent of workers. And so we're trying to hit those job goals.

BLOCK: If you - if we can't talk about specific dollar amounts, I wonder if we can talk about a timetable. How long you think the stimulus plan would take to put into effect?

Prof. GOOLSBEE: Well, the directive that President-elect Obama gave us is he wants to do this in a two-year time frame. So there are a great many investments that we can and we will make under President Obama's leadership, but those are not part of the immediate economic recovery program because they are not in that two-year time frame.

BLOCK: Are there pitfalls of a potential big stimulus package like the one you're talking about?

Prof. GOOLSBEE: There are two dangers, and they're on opposite sides. By far the bigger danger in my view is that you don't get the money out the door quickly enough. And we are not able to turn the corner on this severe downturn that we are clearly in. The other pitfall is that, in the effort to ramp up and do so much spending in such a rapid timeframe, you do have to be mindful that you aren't spending money on programs that are not actually effective. And each of those is important.

BLOCK: Professor Goolsbee, a lifetime ago, back in April of 2007, at a very different economic time, obviously, you said this, make no mistake, deficits still matter. Do deficits still matter where we are now?

Prof. GOOLSBEE: Yes, they do matter. That's different from saying this year. In the article that you are citing, the reason why I said we want to control deficits is because, when a national emergency arrives, we want to be able to expand the deficit dramatically, if we have to, to cope with the national emergency. And I cited examples like Hurricane Katrina. Make no doubt about it. This is the most pressing, serious economic crisis we have faced in 75 years. It is like a Hurricane Katrina hitting the entire country, and it is totally appropriate and indeed necessary that we have large deficit spending as rapidly as possible in the short-term period to prevent this thing from morphing into a depression. We should not be trying to balance the budget in the next 20 months in the face of this recession. That was one of the terrible errors that Herbert Hoover made at the beginning of the depression. As the economy started going into the tank he began trying to balance a budget, and it really drove them down through the floor.

BLOCK: You've been talking about the need for speed on all of this. How do you assess the role of the outgoing Bush administration at this moment on the economy? Are they taking the lead? Are they working fast enough?

Prof. GOOLSBEE: No. I mean, to be perfectly blunt, I don't think they're taking the lead at all. The president-elect called repeatedly on the president to pass a stimulus, and as he said in his first press conference, the economy is in trouble. It needs a stimulus right now. The president should pass one, but if he won't, I will be ready to do so on the first day I'm in the office, and that's basically where he is.

BLOCK: Austan Goolsbee is a senior economic adviser to the Obama transition team. He's also an economics professor at the University of Chicago. Thanks for talking with us.

Prof. GOOLSBEE: Hey, my pleasure. Transcript provided by NPR, Copyright NPR.