LULU GARCIA-NAVARRO, HOST:
For an insight into where President Biden may want to steer this economy, we'll turn now to Austan Goolsbee. He chaired the Council of Economic Advisers during the Obama administration, and he's now at the University of Chicago's Booth School of Business.
Thank you so much for joining us.
AUSTAN GOOLSBEE: Yeah, great to talk to you, Lulu.
GARCIA-NAVARRO: So first, I want to ask you a couple of questions based on what we just heard there. Do you have any concerns that the good economic data we're seeing may be fleeting because it's based so much on those stimulus payments?
GOOLSBEE: That's a guarantee. For sure, we're not going to sustain GDP growth of 8%, 10% at an annual rate. We had such a horrible downturn that we absolutely have wanted to be short lived. And if it is short lived, we shouldn't be bemoaning that. We should be happy about that.
GARCIA-NAVARRO: What about those shortages, though? I mean, shortages, prices rising for things like lumber don't seem like the signs of a fundamentally healthy economy.
GOOLSBEE: In the short run, we're going to have hiccups as we try to get back on to our regular path. And that could be annoying for six months. Prices are going to go up. You want to go buy a piece of wood at Home Depot or something for a project - that's going to be expensive, or they're going to be sold out. But as I say, this is kind of the natural course of affairs.
GARCIA-NAVARRO: And yet we've heard economists like Larry Summers, with whom you served in the Obama administration, sound the alarm about inflation. That's the persistent rise in prices. How concerned should we be?
GOOLSBEE: We should definitely take it seriously. I think the questions that Summers raised about inflation, the pushback has been, wait a minute. If it is a temporary relief package, why should the inflation be anything more than temporary as we get back on the path?
GARCIA-NAVARRO: OK, so I want to widen this out now. The word transformational has been bandied about when we talk about some of the ambitions of President Biden to do with this economy. That word bring to mind programs in the vein of Lyndon Johnson's Great Society, in which he created programs like Medicare. Do you think that that is a word that you could apply?
GOOLSBEE: If they go through, there's a lot that's pretty significant. There was an argument about, should it be called infrastructure or not? Regardless of what you call it, these issues about labor force participation problems because parents can't get affordable child care or during the pandemic because schools are closed or because they don't have access to health care - all of those are very real issues and were issues before the pandemic. And the pandemic just stuck them right in our face that you could see how serious they were.
GARCIA-NAVARRO: I mean, there is a discussion - right? - that this is a complete reversal of what we saw over the past, you know, several decades, the long tail end of Reaganomics, where, you know, less is more lower taxes, fewer regulations, trickle-down economics, less government. What is by Bidenomics in your view?
GOOLSBEE: Thus far, Bidenomics looks to put significantly more attention on public sector investments of things that could help grow the private sector, I would describe it. So investments in infrastructure, in the care economy and education and health care and trying to address inequality. And coupling that with, for sure, higher tax rates back to rates that kind of prevailed historically on high-income people and on corporations.
As I look at what Biden's proposing now, in a way, it's the will of the voters. It's an interesting comparison, in a way, to back up to the 2016 election where Donald Trump wins, saying, I have a mandate to cut taxes. And they do cut taxes unpaid for $2 trillion, just straight increase the deficit. And at the time and since, it never received majority support in polls. It was remarkably unpopular for being a tax cut. But they did it anyway on the grounds that he said he wanted to cut taxes. He won the election. So now he's going to do it.
And I feel that that lesson first that you could take from Trump, you could take before from Barack Obama. You could take before that from George W. Bush. I think that lesson says Joe Biden wants to reinvest in infrastructure, in health care and education. And he said that's what he wanted to do. He got the votes of the American people. So that's what he's going to do.
GARCIA-NAVARRO: In polls, a lot of what he's proposing is popular. There's, of course, you know, partisan split on that, but it is overwhelmingly popular. He did pass that first targeted package, which had to do with the coronavirus pandemic. This is a much bigger deal. President Obama also came into office with big plans, and he focused on one thing, which was health care. Do you think instead of this sort of wide gamut of proposals, President Biden needs to focus perhaps on one of the challenges ahead?
GOOLSBEE: I mean, in a way, I'm just the policy guy, so I don't know. I don't know. Somebody's got to determine what's the most politically advantageous way to get to get things through.
GARCIA-NAVARRO: As an economist, obviously, who has been involved in government before, I mean, do you think the focus is the correct one?
GOOLSBEE: If you look at, what are the constraints on the U.S. economy? - I really don't think it's that we haven't cut taxes for high-income people enough. And if we would just do that more, that would unleash the growth. I think now we've gone about as far as you could go on that dimension. And we'd probably be better off making a few more investments.
GARCIA-NAVARRO: Economist Austan Goolsbee of the University of Chicago, thank you very much.
GOOLSBEE: Thank you, Lulu.
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