Monday, June 01, 2009

Tales from the Meltdown 18: The Olympic Diving Committee

Austan Goolsbee responds to Jack Welch's call for fiscal restraint, and other criticisms of the Obama Administration's approach to dealing with the meltdown. As quoted by Henry Blogett:

Context: Jack Welch has just opined that Barack Obama's budget is "from the moon."
Goolsbee: The budget is from the moon, Jack is from Mars and Joe [Stiglitz] is from Venus.

Look, we enter the government essentially in a hotel that is on fire. We’re throwing people from the windows into the pool to save their lives and this is the evaluation of the Olympic diving committee: Well, the splash was too big.


[L]ook, we were facing in the fourth quarter of 2008 and the first quarter of 2009 epically horrible declines in GDP, every measure of the economy falling through the floor, completely on fire.

Joe will tell you, in every Ph.D. program, students - in economics, students must take an economic history class and in every economic history class, the professor says, “There could never be another Great Depression because we’re smarter than we were then and we would never allow that to happen.”

We were put to the test to answer that question. If you had asked people in 1929, “Here is what is about to happen. How much would you pay to avoid the Great Depression from occurring?” The answer is they would have paid a lot.

They would have borrowed money if it could be used to prevent the Great Depression.

The fact that we are here to bitch about the economy and about this policy and that and the budget forecasts for GDP growth are 1 percent too low, I’m thrilled, I’m overjoyed that we aren’t all out of our jobs and we prevented the Great Depression. That in itself is an overwhelming accomplishment.
So, yeah, we haven't had to nationalize the banks, which is a good thing; instead, the banks are recapitalizing. That means that the toxic asset buyout program doesn't need to happen either. Also a good thing. Now, the banks need to go forth and sin no more.

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