RSS Feed MenuIn my latest column for CNN.com, I try to image what Treasury Secretary Tim Geithner is thinking as he waits for the economy to rebound and with the midterm elections drawing closer.
William Safire used to write a column in which he’d try to read the mind of some world leader and imagine what Mikhail Gorbachev or Anwar Sadat really thought, as opposed to the diplomatic niceties they were obliged to utter aloud.
In homage to the master, let me try an imitation: reading Treasury Secretary Timothy Geithner’s mind:
“Everybody asks me what the next plan is. There is no plan! We have broken our leg and we have to wait for the leg to heal. It’s just a matter of time. And most of the bright ideas to heal faster will only make things worse.
“The banks need time. They are all broke. We have them on life support, lending them money at 0 percent and then allowing them to buy Treasury bonds at 2 percent. It’s basically welfare to help them reduce their debts.
“Consumers need time. We can sprinkle money at them, but they aren’t going to spend it. They borrowed and borrowed during the real estate bubble. Now they are paying off their credit cards, paying down their home equity lines. Don’t look to them to start buying again until they feel more confidence they won’t be laid off tomorrow.
“Employers need time. They won’t resume hiring until business revives, and business won’t revive until consumers have paid off their debts. Paul Krugman keeps telling me that the U.S. government should play the role of consumers: Borrow another trillion dollars and start buying something, anything. Easy for him to say — he won’t get the 2 a.m. margin call from the central bank of China. …
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Elvis Elvisberg // Aug 30, 2010 at 3:00 pm
Given that businesses are hoarding cash, why not set a modesty inflation target? Dunno if there’s much a Treasury Secretary can do there. Also, the markets seem to think that the government should borrow more money (see bond rates) to ameliorate the problems we’re facing. Do you think they’re wrong? Is it fear of China calling in its loans? I suspect they won’t do that; it wouldn’t help them any if we go careening off the cliff.
unclereggie // Aug 30, 2010 at 3:12 pm
Bashing Tim Geithner has become a national past time- a waste of national past time.
sinz54 // Aug 30, 2010 at 4:44 pm
I don’t know how much Tim Geithner gets involved in domestic politics.
But it’s politics that got us to our present situation.
It would be much more interesting to read Rahm Emanuel’s mind.
He was one of those advising Obama to go with a smaller stimulus package, in order to save up political capital to push health care reform through in Obama’s first year.
So we ended up with a health care reform package, many of whose elements don’t kick in till 2014, while we have millions of Americans who haven’t found jobs in over a year, and the Obama Administration missed their projected targets on unemployment by nearly two full percentage points.
I wonder how Emanuel would justify that type of thinking.
DeepSouthPopulist // Aug 30, 2010 at 4:52 pm
Obama can save a lot of seats for the Democrats if he fires his whole economic team.
easton // Aug 30, 2010 at 5:20 pm
“Borrow another trillion dollars and start buying something, anything. Easy for him to say — he won’t get the 2 a.m. margin call from the central bank of China. …”
Sure, at nearly zero percent interest I would love to see 50 nuclear power stations start to be built, and fixing our decaying infrastructure, very high speed rail would also be great. I could burn through a trillion right quick and add much more than a trillion of value.
And the Director from the Central Bank of China went to an American University, he ain’t no dummy, Americans can easily meet any “margin call” that China were to ever put on us, not that they would.
The simple truth is Bush had far more destroyed the American economy than many in the administration even believed, to think otherwise is simply foolish.
Normally, government borrowing drives up the cost of credit, but it hasn’t, so that is one bad thing that did not happen. Now since that did not happen, how in the world can anyone imagine a long term future debt financed at nearly 0% interest has made things worse in the present?
I simply don’t understand this counterfactual Republican delusion that borrowing money at no present cost would not benefit you in the present. How can anyone state that spending 800 billion from China and spending it in America does not equate with at least 800 billion being spent in America? (forgetting about the multiplier effect)
Oldskool // Aug 30, 2010 at 6:22 pm
Better keep my mouth shut or they’ll impeach the president.Yeah, I think we all know that’s already being planned, Geithner notwithstanding.
And if I were a betting man, I’d say the articles of impeachment will be perfectly reasonable, probably for things like STARTING the war in Iraq.
We live in an Idiocracy, after all.
SkepticalIdealist // Aug 30, 2010 at 9:50 pm
Mr. Frum, you sir are a comedic genius.
pnumi2 // Aug 30, 2010 at 11:21 pm
The problem is, with this double dip recession we are in an economic terra incognita. The panics, depressions and recessions of 19th and 20th centuries never had a mortgage default element like we have at the present.
The longer this recession goes on the more the demand for housing shrinks. The more it shrinks, the greater the supply becomes. All that leads to lower prices which leads to more households underwater. And more forced selling.
Obama, Geithner et alia had the Hobson’ choice of stimulate or stimulating or maybe stimulation of the economy.
I hope that it works because there will be no second bite of this apple.
But what is really mind boggling is that Republicans decided that obstruction was the honorable thing. That it would be good for the confidence of the American consumer. Which is what’s supposed to get us out of this mess.
midcon // Aug 31, 2010 at 7:29 am
I believe that this is the first time in history that the housing market is being faced with “strategic defaults” where homeowners are walking away from from homes where they have no foreseeable chance of breaking even in their lifetime, even though they are current and can afford to service their mortgage. While there may be bright spots in certain areas, in general the housing market, which drives much of the economy, remains stagnant. This reality is mostly afflicting the middle class and as we all know government programsl are designed to help the “ends” – those who have everything and those who have nothing. The largely middle class is left hanging in the wind. Their response to this – walk away, thus adding to the supply of homes, spiraling downward prices, and losses for investors. Too bad the economic geniuses can’t figure out how to solve this problem. Don’t look for any significant recovery for serveral years. Most consumers have a bunker mindset at this point and nothing Congress has done is going to change that.
armstp // Aug 31, 2010 at 9:13 am
I think what Krugman rightfully points out over and over again, is there really is no debt and deficit problem and the Chinese have no problem with our level of debt, as if they did then interest rates would be significantly higher. The fact that the U.S. government can continue to borrow at near 0% tells you that investors are not too worried about the risk. That is simple economics. In fact, any conservative who believes in free markets should understand this. There is virtually no risk premium in the number. So where is the big risk?
Geithner and Bernanke have done a hell of job at rescuing the financial system from collapse and helping to get the economy growing again in such a short period of time. The financial community should be kissing Geithner’s and Bernanke’s asses, as they have been the only thing standing between them and the people, who bascially want to put the financial community in jail.
I know there is a huge political advantage in trying to talk down the economy, particularly before November, but the reality is that there are plenty of signs that things are getting better. Sure things have slowed down recently, but we are still growing and adding private sector jobs.
Private sector forecasts from Bloomberg still show improvement and respectable growth. The average consensus GDP forecast from 67 economists/forecasts are:
3Q10 2.5%
4Q10 2.8%
2010 3.0%
1Q11 2.7%
2Q11 2.9%
2011 2.8%
2012 3.3%
In fact, the growth for the four quarters after the end of this recession (end of negative gdp growth) has been stronger than the four quarters of growth coming out of the last two recessions.
In addition; “Today’s report on gross domestic product showed consumer spending, which accounts for about 70 percent of the economy, rose at a 2 percent annual rate in the second quarter compared with a previously reported 1.6 percent pace.” which means that consumer sentiment is improving.
Bernake also recently said:
“Still, he said a handoff from fiscal stimulus and inventory re-stocking to consumer spending and business investment “appears to be underway.” He also said that the “preconditions” for growth in 2011 are “in place.” “
And did you see the latest unemployment claims, although they are volatile, they were better than expected.
Overall, the stimulus worked. It kicked started growth. Without the stimulus the CBO recently estimated that negative growth would have continued right through to the end of the recent second quarter.
“The Democrats’ stimulus raised economic growth by as much as 4.5 percent in the last quarter and may have increased the number of people with jobs by more than 3 million, according to a Congressional Budget Office (CBO) report released Tuesday.”
See: http://www.cbo.gov/ftpdocs/117xx/doc11706/08-24-ARRA.pdf
Over at Nate Silver’s blog now on the NYT there is a pretty good article breaking down the recent GDP number. The second quarter GDP number actually was not that bad, as the only thing that really held it back was a significant increase in imports. More imports, although it negatively impacts the GDP number, is actually not that bad of a thing, as it points to better demand in the economy.
Check it out:
http://fivethirtyeight.blogs.nytimes.com/2010/08/30/a-closer-look-at-the-second-quarter-g-d-p/
midcon // Aug 31, 2010 at 11:55 am
While the data may indicate that things are better overall, at the individual level the people are not convinced. People are holding back on spending and instead are either saving or paying down debt. Both are good things, but what the Adminstration, Congress, and the financial industry whizzes fail to remember is that most of the people don’t buy the data. Not only do they mistrust the source, but the data belies what is evident in their daily lives, abandoned homes, lack of jobs, and local business failures. The economy is local, not national. What the people have seen are programs for those who have everything and those who have little, leaving nothing for those who used to classify themselves as comfortable and around whom the economy revolves. It’s ok though because those folks have learned a valuable lesson – get what you can, whatever way you can, while you are able because no one is going to do anything for you unless you are the haves or the have nots.
armstp // Aug 31, 2010 at 2:45 pm
midcon,
I can tell you if the govt did not take the action that it has over the last 18 months, things could have been much much worse.
The collapse of AIG alone could have taken down many many more banks; Morgan Stanley, Merrill Lynch and even Goldman were on the edge of failing. The financial meltdown would have been significantly worse. The auto sector was very close to a complete collapse, which would have thrown another 2 million out of jobs. Without the stimulus we would have likely lost another 3 million jobs. If Freddie and Fannie were left to completely collapse, it would have put the entire U.S. housing sector into much much more turmoil. etc. etc. etc.
We could easily have still been in negative recession growth and unemployment could have been closer to 15%. The cost to dug us out of that hole would have been much much higher.
At the “individual level’ things would have been much much worse.
midcon // Sep 1, 2010 at 5:27 am
armstp. I don’t disagree that government action has had an impact. In an Aug 25th report from the Commerce Department, the new homes sales numbers were at a 40 year low. 40 years!
Perhaps everyone is just waiting it out and in 2011 things will look and be brighter. I am skeptical and so are my family, friends, and neighbors.
Candy83 // Sep 2, 2010 at 12:48 am
ATTN: Donald Trump
MEMO: Please do for us what President Obama refuses — meet up with Tim Geithner, a disastrous “Secretary of Treasury,” and fire his ass!
(Thank you!)