This interview was Friday on board Air Force One. Photo above is on Air Force One.
Q. You said it’s going to take a long time to get out of this economic crisis. Can you assure the American people that the economy will be growing by the summer, the fall or the end of the year?
A. I don’t think that anybody has that kind of crystal ball. We are going through a wrenching process of de-leveraging in the financial sectors – not just here in the United States, but all around the world – that have profound consequences for Main Street. What started off as problems with the banks, led to a contraction of lending, which led in turn to both declining demand on the part of consumers, but also declining demand on the part of business. So it is going to take some time to work itself through.
Our job is to do a couple of key things. Number one, to put in place key investments that will cushion the blow. Our recovery plan had provisions for unemployment insurance, for food stamps, what we just saw today, grants and assistance to states so layoffs aren’t compounded. The second thing we’ve got to do is we’re going to have to strengthen the financial system. We’ve taken some significant steps already to do that – just for example this week, opening up a trillion-dollar credit line. But there’s going to be more work to be done there because there are some banks that are still limping along and we’ve got to strengthen their capital bases and get them lending again.
We’ve got to be able to distinguish in the marketplace between those banks that have real problems and those banks that are actually on pretty solid footing. We’ve still got the auto situation that we’re going to have to address. And finally, we’ve got to make the investments for long-term economic growth around energy, education and health care. I’m not trying to filibuster, it was a big question.
Our belief and expectation is that we will get all the pillars in place for recovery this year. Those are the things we have control over and we have confidence that working with Congress we can get the pillars of recovery in place. How long it will take before recovery actually translates into stronger job markets and so forth is going to depend on a whole range of factors, including our ability to get other countries to coordinate and take similar actions because part of what you’re seeing now is weaknesses in Europe that are actually greater than some of the weaknesses here, bouncing back and having an impact on our markets.
Q. Can you envision allowing a major institution to fail? Can you say with certainty that you won’t need to ask Congress for any more money beyond the $250 billion placeholder in your budget.
A. I am absolutely committed to making sure that our financial system is stable. And so I think people can be assured that we’ll do whatever is required to keep that from happening. For example, that would mean preventing institutions that could cause systemic risks to the system being just left on their own. We’re going to make sure that the financial system is stabilized and in terms of the resources that are involved. We think the $250 billion placeholder is a pretty good estimate. We have no reason to revise that estimate that’s in the budget. One of the benefits I think of this budget was we tried to surface as honestly and as forthrightly as possible, all the costs of this crisis, all the costs of the war in Iraq and Afghanistan, all the potential costs of things like fixing the AMT, which historically have been left off the budget. Something that I don’t think people recognize is that had we used the same gimmicks that had been used previously, we could have driven down our budget projections over the next 10 years, down to point where debt was only 1.3 or 1.5 percent of G.D.P. We could have made ourselves look really good, but I felt very strongly that part of what got us in trouble in the first place, both in the private sector and the public sector, was a failure to do honest accounting about what risks are out there, about what costs are out there and factoring those in, and that’s something that we’ve tried to change. read the rest here, along with audio