Q&A with CEA Chair Austan Goolsbee
President Obama's chief economist, Austan Goolsbee, discussed the economic impact of rising oil prices, why he believes corporate leaders will create jobs in the US, and why it's a bad idea not to raise the US Government's debt ceiling at a Feb. 24 Monitor breakfast.
Washington — Presidential economic adviser Austan Goolsbee chairs the Council of Economic Advisers and sits on President Obama's Cabinet. On leave from the University of Chicago's School of Business, Mr. Goolsbee holds a PhD in economics from the Massachusetts Institute of Technology in Cambridge. He was a guest speaker at the Feb. 24 Monitor breakfast in Washington.
"We will be monitoring the circumstances in the Middle East and higher oil prices.... [I]f you look at energy consumption per dollar of GDP [gross domestic product] in the economy now, it's dramatically lower than it was in 1979 [when rising oil prices had a major negative effect on the economy].... [T]he sensitivity of the economy to fuel prices is not as great as it was [then].... The impact of oil prices comes from long-run sustained increases to price and not from short-run variations. At anything like what we're seeing so far [in price increases], neither we nor the private sector has forecast that that would derail our recovery."
Concentration of wealth in the US:
"It has gotten seriously concentrated.... The president has often said that in the 2000s we saw the first boom in recorded US history where ... the middle-class family saw its income fall by $2,000.... Virtually all of the growth of that growth period was concentrated in a very small number of people.... That type of unbalanced growth is not sustainable. It's prone to generating asset bubbles, when you have a very small number of people chasing a certain class of assets."
Why he believes corporate leaders will create jobs in the US:
"The comparative calculus ... of locating in the US is moving in the US's favor.... The wages in some of these other countries have gone up as they get richer.... It gets more expensive relative to the US. And capital is very productive in the US, and the capital intensity of a lot of these businesses is pretty high."
Why it is a bad idea not to raise the US government's debt ceiling:
"Virtually no other country in the world has an arbitrary debt ceiling. If you hit the debt ceiling, the government defaults on its obligations, and the implications of the US government defaulting [are] not good for the economy.... It's not a game, and it doesn't make sense to play chicken on the debt ceiling. We should have a discussion about the budget, where the priorities should be in the budget. That's totally fine."
The US government's decision to save Chrysler, which press reports have indicated he did not favor:
"There have been reported internal deliberations I'm going to decline to express. I am extremely happy to see the recovery of the US auto industry, that they've been profitable, they've been adding jobs. It's part of a broader comeback of manufacturing in the country, and the shift of us out of rescue mode into growth mode."
The importance of economic growth:
"Growth is not just the most fundamental thing needed to get the job market accelerating; it's also the most important thing dealing with ... getting the fiscal house in order. It's clear that the immediate-term deficits are due almost entirely to us coming out of the worst business cycle since 1929."