Former Obama adviser: Uncertainty is slowing economic recovery
MILWAUKEE -- The former chairman of President Obama's Council of Economic Advisers told an audience here that anxiety and fear are stalling the country's recovery from the Great Recession.
"What is Washington doing to alleviate our anxiety? Ha, ha, nothing! The opposite of a thing," said Austan Goolsbee (left), who was the chief economist for President Barack Obama's Economic Recovery Advisory Board. "What's going to happen in the next three weeks? ... I'm nervous that they can't compromise."
He also said he was unsure about how the current government shutdown would end.
"As I look at the shutdown, I think one of the most likely outcomes is that we go right up to the deadline and then they just choose to extend it for two months, and so we just revisit this in two months," said Goolsbee, who blamed a fear of compromise for the gridlock.
Goolsbee told a sellout crowd of 600 business professionals at a Tuesday economic forum sponsored by the Milwaukee Jewish Federation that fear is stalling recovery, even as he described a highly optimistic view of the United States' economic potential.
The economist also participated in a panel discussion with Jeff Joerres, chairman and CEO of Manpower Group; Cory Nettles, founder and managing director, Generation Growth Capital, Inc.; and Catherine Jacobson, president and CEO, Froedtert Health.
Goolsbee said the U.S. remains a leader among major nations in economic strength, worker productivity, access to affordable energy and culture of entrepreneurship and innovation.
"Even the aging of our population and the rise of health care costs -- the demographic problems at the root of our government budget issues -- is way less pronounced in the U.S. than in any other advanced country in the world," he said.
Unlike Japan, China and many European nations, the U.S. population is growing, he said, and unlike nations in economic crisis like Greece, which he says "already has income tax rates well above the U.S, and a debt-to-GDP ratio of over 100 percent," the U.S. has policy choices to bring itself out of recession.
"We start from lower tax, spending and debt levels as a share of our income than virtually any country in the advanced world," said Goolsbee.
While expressing optimism, Goolsbee said economic recovery will not be "V-shaped," where a sharp downturn is followed by a steep upturn. Instead, he predicts a "slow, painful recovery period" over several years. A traditional V-shaped recovery can only happen if business is able to return to exactly the way it was before -- and that's not possible this time, he warned.
"Too many parts of the economy are sitting and waiting for the bus on routes that don't run anymore," he said.
He said it's dangerous for economists to pin recovery hopes on an improved real estate market, warning that businesses must think global, not local expansion.
Goolsbee said U.S. cities with diversity of industries and a large number of skilled workers and educated citizens will attract business growth.
"I'm actually very optimistic for the U.S. and for the Midwest in general -- Wisconsin, Illinois, Ohio, a lot of the places that over the last 20 years it seems like it's been a tougher period," said Goolsbee, a professor of economics at the University of Chicago's Booth School of Business.
But he warned that both federal and state governments must "resist the urge to join a race to the bottom" by scaling down training programs and education.
Afterward, Goolsbee told WisPolitics.com that in his experience, it's a mistake for states to spend all their money on incentives to attract businesses at the expense of funding universities, scientific research and worker skills training.
"They're really important and have to be protected, yet when we get into an economic crisis, often those are the first investments states say, 'Oh, we can't afford,' " he said.
Panelists on Tuesday seemed less optimistic about job growth, while agreeing with Goolsbee's optimism for overall economic recovery.
"We're one of those industries that's in transformation," said Jacobson of Froedtert Health. "Business is not as usual anymore, at least in our space. How do we re-create that? I don't know if we'll going to continue to add jobs -- they'll probably be very different jobs. That's a very big reality that we're living, at least in terms of health care."
Nettles said the Great Recession led businesses to slash their workforces, eventually adapting to maintaining the same productivity with fewer people.
"(Businesses) learned they can manage more productively and efficiently than they ever thought they could," said Nettles. "There's been this tremendous amount of improved productivity, but we're not going back to (previous staff levels). That's not going to be the new normal."
Joerres, of Manpower, said robotics and technological advances have permanently reduced jobs, despite a hopeful trend of companies like GE and Ford Motors bringing back manufacturing jobs from overseas.
"Re-domiciling manufacturing is not bringing back what left," said Joerres. "What left was a plant with 1,000 people. What's coming back is a plant with 100 people."
David Lubar, president and CEO of the Milwaukee-based Lubar & Co. investment firm, said Goolsbee's appearance drew by far the largest crowd in the Milwaukee Jewish Federation's 20-year history of economic forums.
Linda Gorens-Levy, who co-chaired the event, said the crowd was highly diverse, being comprised of both Republicans and Democrats, large and small businesses, younger professionals and senior citizens.
"This year was a risk," she said of booking a nationally known economist associated with a specific political party. "We were hoping for 300 people," she said, but had to turn people away after more than 600 signed up. Gorens-Levy said she thought Goolsbee succeeded in appealing to the diverse members of the audience and in avoiding political statements in his presentation.
-- By Kay Nolan