I’ve never been a fan of Treasury Secretary Tim Geithner. Nevertheless, I have to give the guy credit for delivering a great speech at the Economic Club of Chicago on April 4. The event took place in a building which was formerly home to an off-track betting parlor, with an “upscale” section called The Derby Club (where Gene Siskel spent lots of time and money) – in an era before discretionary income became an obsolete concept.
At a time when the U.S. Chamber of Commerce is suffering from “buyer’s remorse” after bankrolling the election of ideologues opposed to infrastructure spending, Geithner spoke out in favor of common sense. We have come a long, painful way from the days when the Chamber of Commerce aligned itself against the interests of the “little people”. As Keith Laing reported for The Hill, the Chamber no longer considers “stimulus” to be such a dirty word. Laing discussed the joint efforts by the Chamber of Commerce and AFL-CIO executive Edward Wytkind to advance the transportation bill through a Congressional roadblock:
“We’re going to be pounding away during the recess to get House members to know they’ve got to check their party at the door,” Wytkind said of Republicans in the House who opposed accepting the Senate’s transportation bill.
Other transportation supporters were similarly pessimistic. U.S. Chamber of Commerce executive director of transportation and infrastructure Janet Kavinoky said the 90-day extension could lead to a longer agreement, but only if lawmakers get right back to work after the two-week recess.
“No length of time is going to be good for construction or business, but at least 90 days provides a length of time Congress could get a long-term bill done,” Kavinoky said. “But the House in particular is going to have their nose to the grindstone, or whatever metaphor you want to use, to get a bill off the House floor and into a conference.”
The timing could not have been better for someone in a position of national leadership to deliver a warning that premature austerity policies (implemented before economic recovery gains traction) can have the same destructive consequences as we are witnessing in Europe. To his credit, Tim Geithner stepped up to the plate and hit a home run. Here are his most important remarks, delivered in Chicago on Wednesday:
Much of the political debate and the critiques of business lobbyists misread the underlying dynamics of the economy today. Many have claimed that the basic foundations of American business are in crisis, critically undermined by taxes and regulation.
And yet, business profits are higher than before the crisis and have recovered much more quickly than overall growth and employment. Business investment in equipment and software is up by 33 percent over the past 2 ½ years. Exports have grown 24 percent in real terms over the same period. And manufacturing is coming back, with factory payrolls up by more than 400,000 since the start of 2010.
The business environment in the United States is in numerous ways better than that of many of our major competitors, as measured by international comparisons of regulatory burden, the tax burden on workers, the quality of legal protections of property rights, the ease of starting a business, the availability of capital, and the broader flexibility of the economy.
The challenges facing the American economy today are not primarily about the vibrancy or efficiency of the business community. They are about the barriers to economic opportunity and economic security for many Americans and the political constraints that now stand in the way of better economic outcomes.
These challenges can only be addressed by government action to help speed the recovery and repair the remaining damage from the crisis and reforms and investments to lay the foundation for stronger future growth.
This means taking action to support growth in the short-term – such as helping Americans refinance their mortgages and investing in infrastructure projects – so that we don’t jeopardize the gains our economy has made over the last three years.
And it means making the investments and reforms necessary for a stronger economy in the future. Investments in things like education, to help Americans compete in the global economy. Investments in innovation, so that our economy can offer the best jobs possible. Investments in infrastructure, to reduce costs and increase productivity. Policies to expand exports. And reforms to improve incentives for investing in the United States – including reform of our business tax system.
A growth strategy for the American economy requires more than promises to cut taxes and spending.
We have to be willing to do things, not just cut things.
To expand exports, we have to support programs like the Export-Import Bank, which provides financing at no cost to the government for American businesses trying to compete in foreign markets.
To make us more competitive, we have to be willing to make larger long-term investments in infrastructure, not just limp forward with temporary extensions.
Any credible growth agenda has to recognize that there are parts of the economy, like the financial system, that need reform and regulation. Businesses need to be able to rely on a more stable source of capital, with a financial system that allocates resources to their most productive uses, not misallocating them to an unsustainable real estate boom.
Cutting government investments in education and infrastructure and basic science is not a growth strategy. Cutting deeply into the safety net for low-income Americans is not financially necessary and cannot plausibly help strengthen economic growth. Repealing Wall Street Reform will not make the economy grow faster – it would just make us more vulnerable to another crisis.
This strategy is a recipe to make us a declining power – a less exceptional nation. It is a dark and pessimistic vision of America.
Is this simply another example of the Obama administration’s habit of “doing the talk” without “doing the walk”? Time will tell.