Interview | Austan Goolsbee

    Gearing up for this week's Tufts Daily Radio show, we sat down with Austan Goolsbee, the senior economic advisor to Sen. Barack Obama's (D-Ill.) presidential campaign, before he met with Tufts Trustee Alan Solomont's political science class. He blamed many of the country's current economic ills on President George W. Bush's relaxed approach to economic oversight and said adopting Obama's more interventionist strategy would be critical to fostering an environment in which graduating Tufts students and other Americans looking for work can succeed.
    The following is a partial transcript. To hear more of the interview, listen to this week's radio show on WMFO, 91.5 FM, at 11 a.m. on Sunday or log onto www.TuftsDaily.com next week to download a podcast.

Sarah Butrymowicz: Do you think our economy is fundamentally changed forever as a result of this crisis? And if it is, how is it going to be different? If it's not, how long does it take to get back to where we used to be?

Austin Goolsbee: Yes, but not in the negative sense of, "Hey, we're in a crisis and will we never get out of it" ... I would anticipate that once we get through this crisis we will fundamentally change the oversight of financial institutions in a pretty substantial way and that will last for a long time ...
    At the very least, we're on path for a pretty serious recession. If the government takes aggressive steps, my view is it could be fairly short-lived and hopefully nobody will ever really remember it ... If the government sat around and waited too long — which, disturbingly, the Bush administration has kind of taken that as their approach — … or, in the worst-case scenario, if the government started doing things that were counterproductive, it could last for a very long time.

SB: The prospect for finding a job after graduation seems more daunting than ever as a result of this. I'm curious as to what an Obama administration would do to create more jobs.

AG: There is a direct link between what's happening in this financial crisis and the availability of loans and money to businesses ... Obama's view is on policy grounds — direct tax credits to companies for creating new jobs, direct spending from the government on critical things for the economy — be they investing in the economic infrastructure of the country [or] money for college to help make college more affordable ...
    In the short run, these key additional stimulus measures — money for infrastructure, money to the states, immediate tax relief for middle-class people — try to prevent an admittedly serious downturn from turning into something a lot worse.

SB: I know that at the end of last week [Treasury Secretary Henry M. Paulson, Jr.] proposed a plan of investing directly into U.S. banks. What do you think about that plan?

AG: Senator Obama has been calling for him to consider such an option from the beginning … The fundamental problem of the current financial crisis is that our banks and financial institutions are under-capitalized. Putting money directly into the banks on a strictly temporary basis is the most direct way to recapitalize banks. You have to be very mindful, [one], that the government is getting its money worth. Two, you've got to make sure that if the government is putting in money, they're not just taking the money and lining their own pockets ... And three, you have to have an orderly plan for the government to get out of that business, because the track record of long-term investing for the government into the banking system is not good. The government ends up steering the loans to places that are more politically palatable rather than profit-making.