ECONOMY

MARIA FIORINI RAMIREZ, economic consultant, January 11, 2002
CZIKOWSKY: Please try and convince me that economic forecasting is a sound practice. I believe one reason why we see such disagreement among economists regarding economic projections is that no one really knows the future. We can evaluate some trends through econometric forecasting, yet the uncertainties of future events them to make most economic forecasts at best suspicious. What degree f accuracy do you place on most economic projections?
RAMIREZ: It is a lot of guess work because no one knows what the weather will be like tomorrow or what the political circumstances we will have to deal with around the world, how they will impact our lives, our sense of confidence in the future, and our well being A lot of what takes place in the economy short term is written by consumer and business confidence in the future. That confidence is very fragile and it is easily shattered by events that are not predictable. So forecasting the future is virtually impossible because of the unknowns we have to face and deal with.
Unfortunately, I can not truthfully convince you that economic forecasting is a sound practice. At best it is an art based on judgments and assessments of what is going on and limited abilities to predict the unpredictable.

JAMES K. GLASSMAN, American Enterprise Institute Resident Fellow, February 6, 2002
CZIKOWSKY: Numerous researchers have stated it is very difficult to predict future stock market trends and prices. Yet, we see that does not stop analysts from declaring what the future will be. How accurate are stock analysts at predicting the future of the stock market, what bases do they use to make these predictions, and how sound are these bases?
GLASSMAN: You’re right. Predicting sock prices in the short run term is, in a word, impossible. But analysts try to do it all the time. The truth is, research shows that, in the aggregate, analysts are very good at their jobs---that is, their picks do better than the market as a while and their bottom picks do worse. In itself, that’s not easy. The price targeting is something you can ignore. I use analyst reports to POINT me to toward companies worthy more study. Also, a good analyst report will explain a business, tell you the strengths, weaknesses, and prospects.

COURTLAND MILLOY, Washington Post Metro Reporter, April 8, 2002
CZIKOWSKY: Some argue, in the past few decades, that African Americans have made gains in many professions and that outward racism has declined significantly. Others argue that the past few decades have seen African American urban centers deteriorate significantly and urban poverty grow. Of course, both views need not be contradictory. What are your comments and observations on the gains and declines of African Americans as a community over the time you have been writing?
MILLOY: Gains have been made in some cases; ground has been lost in others. The economic gap within the so-called Black community is now larger than the economic gap between Blacks and Whites. What I’d like to see is some serious attention paid to improving public schools. I think that is the only way anything meaningful can be done for the so-called have nots (Black ones as well as White ones).

ABIGAIL TRAFFORD, Washington Post Columnist, and ANN CRITTENDEN, author, April 16, 2002
CZIKOWSKY: How do you see recent public assistance reforms impact motherhood? It is good to see more people leaving public assistance for employment, which I am sure builds confidence and places more people on roads toward further prosperity. At the same time, this means less time that parents are available to spend with their children, which can be damaging to their offspring. Further, is there enough quality child care available to make these reforms work effectively?
TRAFFORD: You hit the problem with proposed welfare reforms right on the head. It’s fine to require more women now on welfare to work longer hours---but without adequate provisions for support---foremost high quality, affordable child care, these reforms can’t be achieved. We are putting the children of these working mothers at great risk. Ann, why is the U.S. behind other industrialized countries in supporting mothers and their families?
CRITTENDEN: I agree it’s good to have women working for money, but we need to also make more accommodation for them to go to school and get more education so they aren’t trapped in low pay, dead end jobs all their lives. Work doesn’t mean you are not poor. Also, it is barbaric, in my view, to push mothers of young children into the full-time labor force without providing for good child care. That’s the real scandal of this current welfare policy. Only about 12% of the kids of those mothers currently receive help with child care costs, meaning they have awful surrogate care. We’ll all have to pay for that down the road.

ISABEL SAWHILL, Brookings Institution Senior Fellow, June 13, 2002
CZIKOWSKY: It strikes me that more should be done to assure that people who move from public assistance into employment should also be provided greater opportunities to achieve progressively better employment at higher incomes. What should be done to assist this to happen, or is it the tendency of the government to just write them off as “success” cases once they have been removed from the assistance roles?
SAWHILL: There hasn’t been much focus on moving people up the ladder in the past, but as a result of the success welfare reform has had in moving people into jobs, there’s much more interest now. The obvious solution would seem to be training or education. Although the programs that have been tried haven’t been a huge success, new experiments with this are underway.

JAMES K. GLASSMAN, American Enterprise Institute Resident Fellow, December 9, 2002
CZIKOWSKY: You make an interesting point of the double taxation of dividends. Yet, in this economic climate, is it possible to talk about any kind of tax cuts? If we’re going to war with a budget deficit, can the Federal government withstand any revenue loss?
GLASSMAN: Good point. But the revenue loss isn’t everything, and it is not clear that ending double taxation will really hurt revenues, in a dynamic sense. If ending double taxation boosts the economy and the stock market, it should more than make up for any short term revenue loss.

STEVEN PEARLSTEIN, Washington Post Financial Staff Writer, May 14, 2003
CZIKOWSKY: The unemployment rate has been increasing in recent years. With the declining dollar increasing demand for domestic goods, are there sings this increased demand is producing an increase in total domestic employment? If so, what appears to be the increased amount of jobs or, if the total number of jobs is not increasing, what else is happening in the economy that is halting job creation?
PEARLSTEIN: You’re right to point out that the effect of the dollar on the economy is best described as “bigger” or “smaller” than it otherwise would have been. In other words, there are other factors at work, too. The U.S. economy is weak because businesses are not investing and hiring and consumers are borrowing and spending a bit less than they were before. Why? Well, that’s more complicated than we can probably get into here but you can probably guess at some of the reasons. And really, that’s all you can do is guess.

STEVE PEARLSTEIN, Washington Post Financial Staff Writer, May 28, 2003
CZIKOWSKY: While representatives of the G-8 meet, are they planning to have any discussions concerning the Asian markets? If so, what is on their agenda about this enormous section of the world market?
PEARLSTEIN: Not likely to be a main topic of conversation, although China might come up in the context of currency. The Chinese yuan is pegged to the dollar even though it should appreciate and they are keeping it artificially low. This is trade and economy distorting, they know it, but they don’t want to take a hit to their export economy to fix it. Instead, they just keep piling up huge trade surpluses with the U.S.

DON EVANS, U.S. Commerce Secretary, June 14, 2002
CZIKOWSKY: Your Department will assist state governments in setting up broadband systems. What is the present status of this, and how should people provide feedback to you?
EVANS: Through NTIA our Department is working with states and local governments around the country to identify best practices and regional policies most supportive to broadband deployment. We have been particularly focused on the rights-of-way issue.
We have been working with NARUC and NATOA to identify best practices. We encourage you to contact NTIA to contribute ideas and to participate in the discussion.

JAMES K. GLASSMAN, American Enterprise Institute Resident Fellow, July 16, 2002
CZIKOWSKY: The public tends to focus on illegal insider trading. What concerns me is what might be called “legal insider trading”. Some in the investing public study market news and invest accordingly. Yet, I believe the market efficiently absorbs news and reacts very quickly. The traders on the floor are the people more apt to gain from breaking financial news. By the time most of the general public reacts, those of the floor have already sent the stock prices to their appropriate new level. In fact, the public is often reacting incorrectly by thinking they are getting in on a deal or making sales the market correction to the price has been made; thus the general public may cause selling at too low a price or buying at too high a price. I would appreciate your reactions to my thoughts.
GLASSMAN: Good question. Stocks often move up before good news is announced, and the reason may indeed be legal insider trading as you put (or even illegal). However, I just read an interesting National Bureau of Economic Research study (Working Paper No. 8793) by Cohen, et. al. that shows that investors generally UNDER-react to good news. In other words, even after positive earnings news comes out and stocks rise, they don’t immediately rise enough to make up for the earnings increase.
Still, I think that the game of reacting or even anticipating good news in a company is not a game that small investors should play. Forget the short-term stuff. Find great companies, buy them, and hold them for a long time.

WILLIAM GALE, Senior Fellow, Brookings Institution, May 28, 2003
CZIKOWSKY: What do economic models say the impact of the tax cut will be? Which sectors benefit the most, and are these sectors with high savings rates or high spending rates? Was this the most efficient way to stimulate economic growth?
GALE: This tax cut certainly is not the most productive way to stimulate growth for the simple reason that IT DOES NOT STIMULATE GROWTH in the long-term and won’t even if it is extended. Analysis by the Joint Tax Committee, by the Congressional Budget Office, by reputable macro consulting firms like MacroAdviser and Economy.com have found that the “jobs and growth” package WILL NOT GENERATE NET INCREASES IN JOBS OR GROWTH in the long-term. The reason why has to do with the fiscal drag created by deficits eventually outweighing the improved incentives by the tax cut.

JARED BERNSTEIN, Economic Policy Institute Senior Economist, June 16, 2004
CZIKOWSKY: Are there concerns that the growing Federal government deficits is placing pressure to raise long term interest rates? May this cause pressure to raise shorter term rates?
BERNSTEIN: Yes, such concerns exist. And there’s some evidence behind them: large, persistent deficits can lead to higher long-term rates than would otherwise prevail. But, depending on what you’re suing the deficit spending for, that might be an acceptable trade off. The problem we face now is one of unsustainable deficits that will force us to drastically cut government program we care about unless we raise more revenue (note that I can say that because I’m not running for office).
Deficits have far less impact on short-term rates, btw.

ALICE RIVLIN, Brookings Institution Senior Fellow, July 1, 2994
CZIKOWSKY: I know that Federal Reserve members and staff consider numerous economic indicators in deciding when and how much to change interest rates. How important are some of the different factors, relative to each other? Which are the most important indicators that are watched?
RIVLIN: Actually, they watch just about everything, especially consumer prices, unemployment, interest rates of various sorts, and foreign as well as domestic growth rates.

LAURENCE MEYER, Former Federal Reserve Board Governor, July 20, 2004
CZIKOWSKY: The Federal Reserve Bank has often noted the advantages of being able to set economic policies independent of the political structure. Yet, do you believe the Federal Reserve Bank is too independent? What steps might improve the coordination of economic goals throughout the entire Federal government?
MEYER: Independent central banks, as I note in my book (“A Term at the Fed”), are one of the really great inventions of all times. The independence of the Fed is not independence from government, however, but independence within government. The political process still has a role—in nominations of Fed governors and setting the objectives, and there is continuing oversight by the Congress. But the Congress has delegated day-to-day operational control of monetary policy to the Fed in an effort to insulate the Fed from the pressures associated with the electoral cycle. A similar independence characterizes most central banks around the world today.

JARED BERNSTEIN, Economic Policy Institute Senior Economist, August 10, 2004
CZIKOWSKY: Is consumer spending down? Aren’t there beginning to be too many factors that are tugging on the economy to slow it down that it may, in fact, slow down too much?
BERNSTEIN: That’s certainly the concern. And yes, consumer spending fell 0.7% in June, and was up only 1% in the second quarter. In their statement, the Fed seemed to attribute much of the current weakness to oil.
That’s certainly part of it—if consumers are spending more on oil (largely an import) they’re likely to be spending less on other stuff.
But as I’ve stressed throughout, I think our current problems cut deeper than that—the weak job market is itself holding back income growth and thus consumption.

LAWRENCE J. WHITE, New York University Stern Business School Professor, October 7, 2004
CZIKOWSKY: What should be the government role towards public lending agencies? Do you believe it should be left to the private sector, or that the public agencies need to be restructured or regulated differently, or what?
WHITE: This is a very broad question. Let me just stay just with Fannie Mae and Freddie Mae. I believe that they should be fully privatized (i.e., they should no longer have a special Congressional charter and all of the special privileges that go along with it). They would then likely seek an ordinary Delaware corporate charter and then become just like any other large corporation in the American economy. Residential mortgage interest rates would increase by about a quarter of a percentage point, but grass would not grow in the backyards of America. The two companies have not been especially good at promoting home ownership among low and moderate income households that are trying to become first-time home buyers—but that’s where good social policy should really be focused. So, in addition to privatizing them, I would institute a program of financial assistance (down payment assistance and monthly payment assistance) for low and moderate households that are first-time home buyers.

JONATHAN WEISMAN, Washington Post Staff Writer, February 2, 2005
CZIKOWSKY: I hear some economists with positive forecasts claiming that the increasing productivity of the American worker should continue to grow and that this increased productivity should allow more employees to support our social systems such as health care and social security for non-workers, such as the elderly and children. I hear other economists predict that the growing markets, especially from China and India, will under-price our products creating substantial competition and lowered profits and lower incomes. What are your thoughts: is our future rosy, profitable, and one with decent incomes, or dreary with declining incomes and growing costs of social concerns?
WEISMAN: Productivity will probably continue to rise, mitigating the impact of aging. But there is a fundamental problem: Much of the increase in productivity comes from business investment in new plants and equipment. Those businesses have to borrow that money, but as the worlds grows older, savings will drain as the elderly spend their nest eggs. The cost of borrowing will grow, investment will be limited, thus limiting productivity gains. China will have a demographic problem that will be worse than ours, thanks to the abrupt changes wrought by the one-child policy. And India has a long way to go to produce the kind or capital to keep the world economy afloat.

STEVE FRASER, author, June 14, 2005
CZIKOWSKY: I see you wrote a book about Sidney Hillman. In general, what are your thoughts on his career and accomplishments? What were his strengths and weaknesses?
FRASER: Yes, I did write my first book about Hillman. He was a remarkable labor leader of the 20th century and I think his accomplishments were considerable. He helped build the CIO which became a powerful representative of workers interests, and he helped develop a close alliance between this new labor movement and the New Deal which introduced vitally important reforms into American economic and social life. I think in the latter part of his career he became too enamored of power for its own sake, but many have fallen prey to that temptation.

EILEEN CLAUSSEN, Pew Center on Global Climate Change President, July 6, 2005
CZIKOWSKY: When a country agree to reduce emissions, what does it physically do? Do most countries assist companies in retrofitting equipment to reduce emissions, do they enforce and make companies lower emissions on their own without public assistance, or do they adopt the standards and hope for the best?
CLAUSSEN: It is really a mix---different countries have taken different approaches. For example, the European Union had adopted an emissions trading scheme that sets targets and allows emitters to choose which way to reduce their emissions. Other countries have enacted carbon taxes. Some have voluntary agreements with their industries to reduce emissions.

JONATHAN WEISMAN, Washington Post Staff Writer, July 6, 2005
CZIKOWSKY: Isn’t a major problem with this entire discussion (on the Central American Free Trade Agreement) is that our government is unwilling to curb the cost of free trade in hopes that the overall benefits of free trade will win out? If we would provide for proper job conversion so that displaced employees would be provided health care along with either a new job or job training to obtain a new job, then the downside of free trade would be eliminated. I probably already know the answer to this question, but why isn’t our government willing to spend the money to do this so its free trade policies will work?
WEISMAN: Because it costs money.

BARBARA EHRENREICH, author, September 13, 2005
CZIKOWSKY: There are people alive who remember how it was possible to get a summer job that would pay for an upcoming year at college. Now, a person earning the minimum wage working full time year round would probably not only have enough time to attend Penn State and do all the homework, but such a person still would not earn enough money to afford to go to Penn State. Why are we making it more difficult to provide the avenue of college to allow people to improve their economic well being?
EHRENREICH: Good question, but that’s definitely what’s happening. Access to higher education is shrinking for middle class people as well as low income people. Tuition is going through the roof and things like Pell grants have been cut or would have not kept up.
CZIKOWSKY: One thing that impressed me with “Nickel and Dime” was how much it costs to be poor. Many people earning wages at the minimum wage could not even afford a mobile home. Would you please enlighten us further on how much it costs to even be poor (and why it is more humane as well as productive to reward low income employees by increasing their wages.)
EHRENREICH: There are a number of ways it’s costly to be poor. For example, if you don’t have enough money for the first month’s rent and security deposit, you can’t get into a normal apartment rental. So you might be stuck in a really overpriced and shabby residential motel. If you got to borrow money you’re going to be paying fabulously high interest rates. If you want a checking account, that’s going to cost more if you have a small balance. Everything is more expensive, I think, for the poor.

NORA RAUM, author, and MICHELLE SINGLETARY, Washington Post Columnist, October 20, 2005
CZIKOWSKY: I saw an ad last night for a credit card company claiming there would be no late fees charged whenever a purchase is made during the billing cycle. Isn’t this just encouraging people to fall deeper and deeper in debt by encouraging expenditures to avoid late fees? Isn’t this going to shove more people towards bankruptcy?
RAUM: You are absolutely right. I truly believe the credit card companies suck people into this and then whine when people go under and file bankruptcy to protect the few assets they have.
SINGLETARY: Ah, as they say, the devil is in the details. Sure you don’t have to pay a late fee but if you are late the companies can significantly increase your interest rate. To me that’s hardly worth the benefit of paying late and if you do the math, could come out costing you way more than a $35 late fee.

GENE SPERLING, President Clinton’s National Economics Advisor, November 16, 2005
CZIKOWSKY: How will we be able to implement effective job training? In this rapidly changing economy, we will need to keep our labor force skills updated. Yet, as people change jobs more frequently, how will we be able to capture employees long enough to provide them updated training requirements during these vibrant times?
SPERLING: This is an important question. Right now some just want to say that retraining has not bee effective enough and wash their hands of it. That would be a very counter-productive and defeating attitude. One thing I do think is that we have to get more serious about ongoing education---not just after you have lost a job (which too many workers look as at burial insurance). So I propose a Flexible Education Account: every worker would be able to get a 50% credit on up to $15,000 of education a decade. People could use it while they are still non jobs---but we will also have to do with with the Internet to make this viable for workers who are parents. I also hope that with the Internet there will be created a better more accountable and performance based market for retraining---where workers will be more empowered to make educated choices and have the support to take on more intensive education efforts. I thinks this requires a longer answer---but that is just a couple of thoughts.

MICHAEL ERIC DYSON, University of Pennsylvania Professor, November 17, 2005
CZIKOWSKY: Would it be statistically alright to state that, statistically, Bill Cosby is incorrect, but there are instances where he is correct? It is wrong to think that one group is more materialistic than another. Yet, there are examples of children, and adults, or all income groups and races who shop according to brand names and designer labels. Such shopping has more of an impact when the family income is lower. When there have been cases in the press where young people have robbed others for their popular brand of clothing or shoes, or to obtain money to buy such items, then the problem does exist, even if it is not statistically widespread.
DYSON: I think it is just fine to say that some of the things Dr. Cosby says are true of ALL groups and classes—for instance, excessive consumerism. But if that is the case, to allege that only poor Blacks have a problem is inaccurate. Next, as I show in my book, stereotypes of poor Blacks lead to misinformation about their spending habits. Finally, there is little question that mistakes made by the poor may deleteriously affect them in ways they may not for those with more resources. However, there is no reason to assail the poor because they seek to achieve the same level of comfort as others---or because they want what others want. Overall, however, Cosby’s framework simply distorts whatever good he might intend because it characterizes poor people in such negative fashion.

GENE SPERLING, Center for American Progress Senior Fellow, December 29, 2005
CZIKOWSKY: What are some of the potential long term consequences of this growing wealth imbalance when it comes time for today’s young to retire? At that point, unless something changes, the imbalances are going to grow even more. Fewer jobs have promised of retirement and health care benefits, especially among lower paid professions. Aren’t we headed towards a national economic disaster unless we can increase the economic viability of the lower economic classes?
SPERLING: This is a big worry for me. What really concerns me as well is that the current Administration is moving our tax system toward one that exacerbates---not moderates---wealth inequality and winner take all outcomes. By making the tax code less progressive and allowing well-off Americans to pay lower taxes on dividends and capital gains than hard-working moderate income families pay on their income, we are further moving toward division---and not a rising tide lifting all boats.

DOUGLAS HOLZ-EAKIN, Former Congressional Budget Office Director, February 6, 2006
CZIKOWSKY: What percent of the current budget is for debt repayments? What are your current forecasts for how this percentage may change into the future?
HOLZ-EAKIN: It’s about 8 percent of spending at the moment. As interest rates and borrowing are expected to rise, this will go up, too.

PETER WHORISKEY, Washington Post National Reporter, May 1, 2007
CZIKOWSKY: Why $50 billion (for the proposed Louisiana coastline rebuilding project)? Why not $30 billion or $40 billion or $49.9 billion? As we saw in the Big Dig, these approximated costs had little relationship to reality. Who is estimating these costs and how much faith is there that cost overruns will not hit this project? WHORISKEY: I think the Louisiana folks who put this plan together will admit the $50 billion figure is just “ballpark”.
They can’t be precise because the plan is still somewhat conceptual. How much water will be diverted from which precise locations has not been determined.
Given the uncertainty I think you are right—the numbers will go up. Cost estimates for public projects rarely seem to go down.
CZIKOWSKY: On a related issue, now many people are still dislocated and what is their living situation like? What is the delay in assisting displaced people in getting their lives back? WHORISKEY: That is a big, big question. There are well over 100,000 people from New Orleans alone who have not come back.
Some of the folks I’ve talked to are doing just fine, thank you, living in Houston or Atlanta or Tennessee. Their jobs moved, or they just relocated themselves. Other people are still living with relatives, and complaining of what might be called “too much togetherness”. Thousands of others are living in FEMA trailers, either in the yard of their flooded property or in one of the FEMA trailer parks.

DANIEL GROSS, Slate “Moneybox” Columnist, May 10, 2007
CZIKOWSKY: When I studied Economics in college, including Econometrics, I was taught that economic statisticians can have some accuracy on predicting ongoing trends. What was very difficult and almost impossible to predict was when trends would reverse, i.e. when economic bubbles would burst. Has there been progress in recent years in better determining when economic bubbles suddenly will downturn?
GROSS: That’s a great question. And unfortunately the answer is no. I’ve written a couple of articles in recent years about the challenge of economic forecasting. If you look back when we had the last recession back in 2001. the quarter before the recession started, all the forecasters were predicting smooth sailing. And the quarter when the recession ended, all the economic forecasts were predicting that the economy would continue to contract
The state of the art of economic analysis has improved vastly in recent years, but economists tend to do very poorly at noting turns. One group-the Economic Cycle Research Institute—has done quite a good job in seeing turns. And they like to say that their fellow economists engage in too much of forecasting by analogy—i.e., they simply extended some unexpected occurrences, the forecasting goes haywire. Frequently, peaks in markets, or in sectors, are only seen in retrospect. And, as investors know, it is exceedingly difficult to time markets.

ZVI BRODIE, Boston University Finance Professor, December 18, 2007
CZIKOWSKY: Are you familiar with the “random walk” theory of the markets and, if so, what do you think of it? If the future of the markets is uncertain, how should investors handle this uncertainty?
BRODIE: The future of the market is definitely uncertain. Stocks are risky both in the short and the long run. If you want safety, consider TIPS and I Bonds.

PHILLIP SWAGEL, Assistant U.S. Treasury Secretary for Economic Policy, January 18, 2008
CZIKOWSKY: Has the Treasury Department made a recommendation on a range of what rebate checks should be in order to effectively create an economic stimulus?
SWAGEL: President Bush directed Secretary Paulson to work with Congress to come up with a proposal. There’s bipartisan agreement that fiscal policy can be helpful now to support the economy and sustain investment and consumer spending. The Secretary will be working closely with the bipartisan leadership on the Hill to figure out the details.

RUTH MARCUS, Washington Post columnist, January 23, 2008
CZIKOWSKY: In the overall scheme of things, how much money will be involved in an economic stimulus that Congress and the President create, compared to the economic effect that was created by the recent Federal Reserve Bank actions?
MARCUS: The stimulus that the President has talked about is about 1 percent of GDP, $145 billion or so, which economists seem to believe has a reasonable chance (if done at the right time, in the right way) of helping the economy. One fear I have going forward is that this number will be bid up and up in a way that will be damaging in the longer run. One things it’s easy for politicians of both parties to agree on is giving away money to voters, especially in an election year.

JOSEPH E. STIGLITZ, Columbia University Economics Nobel Prize winner, March 18, 2008
CZIKOWSKY: Are you familiar with the Comptroller General’s economic forecast for 50 years from now. He claims at the rate we’re going, Federal debt repayments will equal the entire Federal budget and that we will need to find some combination of reducing spending, increasing revenues, and increasing productivity (equal to about 50 million additional employees during times when retirement rates may be higher than rates of new employees entering the workforce) in order for the economy to survive. What are your prospects on the forecasts?
STIGLITZ: The country has large unfunded liabilities (social security, health care) and there will have to be some adjustments to these problems. What is scary, though, is how much worse things have gotten in the last eight years, and the war is one of the main factors. The national debt will have increased by approximately 50% in just eight years! We will have created a new unfunded entitlement—disability and health care benefits for the huge number of disabled veterans returning from the Iraq War.
In fact, for just about one-sixth of the cost of an Iraq War, we could have put the social security system on sound financial footings for the next 50 to 5 years. The problems can be managed—but not if we continue to fight for another 80 years.
CZIKOWSKY: Who holds our debt, when do they expect repayments,. And does it appear we will be able to make the repayments? What happens if we can’t repay the debt?
STIGLITZ: Increasingly, America has turned to foreigners to finance its debt—not surprising since household saving in the last two years has plummeted to zero. China is one of the largest holders of American debt.
We could, of course, always make the payments, simply by printing more money (we simply promise to pay people by giving them dollar bills), but that could set off inflation.
More likely, though, is that these debt obligations will simply erode America’s standard of living in the future. Money spent to service the debt is money that we don’t have to spend on consumptions, good, or on investment in the future.
It is unlikely that others would even demand their money back overnight, for doing so would lead to the value of the dollar plummeting: what they would get back would be worth little.. But we are already seeing an erosion of confidence of the dollar, which is seeing the dollar fall in value.

WALTER E. FAUNTROY, former Delegate to the U.S. Congress, April 7, 2008
CZIKOWSKY: I found Martin Luther King’s statements on economics very insightful and interesting. Would you please provide your perspectives on how Dr. King connected the economic situation people face to the issues of race relations?
FAUNTROY: Dr. King understood that all human beings require five things to achieve a decent quality of life: 1.) access to income, 2.) access to education to earn income, 3.) health care; 4.) access to housing and access to justice so that if one has those four things, no one can take it from you with impunity.
He realized also that humans will use anything as an excuse from taking those five things from another person—race, creed, ethnicity, anything to justify taking from others what they demand for themselves. The Founding Fathers call that “The General Welfare: and stated clearly that there can be no “Domestic Tranquility” unless those five essentials are equitably distributed. Dr. King emphasized economic justice, therefore, as the linchpin of his effort to end the barbarism of war, the decadence of racism, and the scourge of poverty.

STEVEN PRESTON, U.S. Small Business Administration Administrator, April 13, 2008
CZIKOWSKY: How are small businesses, in general, doing in this economy? What are the biggest challenges you see as facing small businesses?
PRESTON: Many small businesses are having challenges, but the issues often have to do with the industries and markets they are in.
Like all of us, higher energy and related commodity costs are affecting small businesses. This is especially hard for those who have vehicle fleets, large facilities, or other energy related costs. Health care continues to be a very large challenge.
In addition, some are seeing a decline in demand for their products.
We are working with lenders and other providers of technical assistance to ensure that we are providing advisory support to businesses who need to work through these issues and helping to get capital to small businesses.
The challenges we are facing today are also another reason why we need to advance health care policy that reduces the cost to small businesses and open new markets for our small exporters, so they can expand.

CURT ELLIS and IAN CHENEY, filmmakers, April 16, 2008
CZIKOWSKY: To what degree do energy costs matter in getting that corn produced and ultimately delivered to one’s table?
ELLIS and CHENEY: We were amazed by the amount of fossil fuel it took to grow our corn. From the anhydrous ammonia fertilizer (made by burning natural gas) to the tractors (diesel) to drying our corn so it could be stored (propane), the whole operation seemed much more extractive than we expected.. When people talk about high food prices these days, they really have to look at the rising cost of petroleum as a big reason for the spike. And when you understand that, alternatives like local food production start to look far more appealing…and competitive in the marketplace.

BILL McKIBBEN, environmental writer, April 21, 2008
CZIKOWSKY: We generally define recession as two consecutive quarters of economic decline, but might slow growth be almost as important a warning of economic troubles?
McKIBBEN: My guess is that we may be reaching the point that people have predicted for some years, where the confluence of limits that we’re reaching being to make continued progress along our old path of economic growth unlikely. That is, one part of our current problem is the credit crunch stuff. But another is the skyrocketing price of energy, now beginning to mix in with the price/availability of food, and both of those impacted in various ways by climate change. I wonder if this won’t turn out to be not just one little downturn in our economic cycles, but a break point.
CZIKOWSKY: How much of a concern in wealth disparity? Does this affect overall buying power?
McKIBBEN: It’s a huge problem, especially internationally. Trying to solve global warming in such an unequal world is conceptually very hard—it means that we need to do some real work to help the poor world bear the cost.

ELISSA SCHAPPELL, editor, April 24, 2008
CZIKOWSKY: Do any writers (in the book “Money Changes Everything”) explore the widening gap between the rich and poor and what this means to Americans and to our economy? If this is addressed, what do they say?
SCHAPPELL: You’re absolutely right. For many years American has seen a widening gulf between the haves and the have nots. The minimum wage is minimum, people are being forced to work two sometimes three jobs, jobs are being shipped overseas, gas prices are sky-rocketing, record numbers of pole are filing for bankruptcy, people are losing their homes. The middle-class is disappearing. A dying breed. And yet the richer are getting richer.
The shrinking wallet is having a devastating effect on the American psyche. America is founded on the idea that we live in a meritocracy. The American dream has always been that anybody who is ambitious and works hard can get rich.
But we know that isn’t true. The American dream is bankrupt.
The idea is that if you can’t get rich there must be something wrong with you—you’re stupid, or lazy, or unlucky. Who wants to be thought of that way?
Increasingly fewer and fewer of us are able to live the middle-class life, let alone the American dream of becoming rich. But given that in our culture the biggest signifier of wealth/success is material goods we are able to create the appearance of wealth.
And because of easy credit, and low-financed mortgages, ATMs, money is easily accessible. It’s not that hard to give the appearance of being wealthy. We can appear to be keeping up with our neighbors the Joneses. What we don’t know is that the Joneses are mortgaged to the hilt, and are about to have their BMS repossessed.
Once you enter America’s unique optimistic can-do spirit into the equation and what you’ve got is the expectation or fantasy that wealth is hovering just slightly out of reach whether it’s an investment, or dumping a cup of scalding hot McDonald’s coffee into your lap while driving. Ever the poorest among us can, in this way, justify buying this flat screen TV, or car, or boat on credit, because we’re pretty sure that’s a bigger payday around the corner.
It’s this optimism coupled with the shame of not being able to keep up with the Joneses—that he who dies with the most toys wins approach to life—and a tanking economy that is causing American to experience this transformation into a society with a caste system-rich and poor. It’s really very sad.

GREG ANDRIG, Century Foundation Programs Vice President, August 5, 2008
CZIKOWSKY: Conservative economists have argued that it everyone acts in their own self-interest that a natural equilibrium will be reached. Doesn’t this ignore that a natural equilibrium may not be one that is socially conscious, that the gainers may leave behind many impoverished, and thus there is a need for a safety net? Haven’t we also noticed that people do not know to act in their own self-interest and may take undue risks? It is often hard to expect rationality from irrational people. Would you agree that this system, while it sounds good on paper, is doomed in practice?
ANDRIG: Yes. Back in the 1950s, the poverty rate, among the elderly, was over 35 percent. Today it’s around 10 percent, largely because of improvements made to Social Security and the creation of Medicare and Medicaid. Those programs directly made our society better in concrete ways. Markets are obviously great and important, but they also inherently create winners and losers. So the government has a meaningful and crucial role to play in helping to make sure that those who lose out in the marketplace aren’t impoverished.

PAULINE FROMMER, travel guidebook author, September 18, 2008
CZIKOWSKY: I was shocked to see the sharp increase in hotel rates in Washington, D.C and New York City over the past year. I should think with gas prices up hotels would want to lower rates to attract travelers. What is going on with these sharp increased rates?
FROMMER: It’s called the value of the Euro. New York City and to a lesser extent Washington, DC have been inundated with European tourists in the past year (N.Y. in particular had 46 million visitors in 2007, up 21%). It’s a huge problem for American tourists.
In my book “Pauline Frommer’s New York City” (second edition just came out last month), I talk about a number of vacation rental companies (such as AffordableNewYorkCity.com and CitySonnet.com) which will place you either in your own apartment or in a room in a local’s apartment for much less than you’d pay to stay in a hotel. There are also lovely guesthouses opening up in the outer boroughs of NYC. Some of my favs include the Sofia Inn and Honey’s B&B in Brooklyn. Charming, welcoming parties, 20-30 minutes from Manhattan on the subway, that go for half of what the Manhattan places are charging. Guesthouses are a good option in DC too. Try the Kalorama Guest house (the one that pops to mind first; there are others.)

ADAM DAVIDSON, “Planet Money” Radio Show Editorial Director, September 19, 2008
CZIKOWSKY: How much do these bailouts threaten our Federal government’s long term financial security? The former Comptroller General is warning we may face financial ruin in 50 years and there are fears this action alone could lower our credit rating and cause inflation. How is this going to affect our Federal government’s financial situation?
DAVIDSON: I do not think we need to worry about our fundamental soundness.
I’m not sure what the Comptroller said exactly.
Our debt is big. It’s not as big—as a percentage of GDP—as Europe’s. It’s too big, though. Definitely.
I don’t think we’re anywhere near the size of debt where we have to worry about a total government meltdown or anything like that.
And my 50 year financial market predictions have about as much validity as any 50 year weather predictions. None.
As our debt gets bigger, there are more US Treasury bonds out in the world—they are our debt. So, each additional bond we sell is a little less attractive to the world. That means the US government has to pay a higher interest.
Higher interest rates are associated with lower growth. So, at a quick approximation, I’d say more debt=deflation not inflation. More debt=less growth.
That’s not good. That’s bad.
But it’s a question of degree. This new proposal seems to have the potential to add 10% on to our debt. Probably a lot less than that.
That’s not great. It would be much better if it didn’t have to happen.
But it’s nowhere near a cataclysmic amount. We can handle this.

LAURA ELLEN KODRES, International Monetary Fund Global Financial Stability Division Chief, October 9, 2008
CZIKOWSKY: From the standpoint of the general public, this crisis emerged quickly, was not well presented to as to the urgency, and we saw a $700 billion bailout swiftly approved only to now be told that it is not enough. In lay person’s terms, to be understood by a public that is not smarter than the average fifth grader, how did this crisis emerge and is this bailout necessary?
KODRES: The situation that resulted in the crisis took a while to build up.In fact, a number of years. In the summer of 2007 we saw the beginnings of it---several entities that had been holding complex securities based on U.S. mortgages (mostly of the subprime variety) found that they were not worth as much because the borrowers were now having difficulty paying them.
The crisis has been building since then because as the housing prices have declined and some of those mortgages had restting (higher) rates, the borrowers couldn’t pay. More and more mortgages went into default. This in turn affected the banks that made those mortgages or held them in a securitized form.
Now that many people understand that these events have transpired, they realize that the banks are not doing very well and have sold the stocks in banks. Banks, in turn, are trying to get rid of the bad mortgages and the securities which drives their prices lower. These two factors are now coming together and that’s why it looks particularly bad.
The added dimension is that some of these U.S. based mortgages were packaged as securities and sold abroad, mostly to European institutions. So the losses from these have spread, weakening their banks as well.
CZIKOWSKY: The American government holds or insures debt, yet it seems un-American for government to share in the profits. What has been the experience in other countries of insisting upon an ownership interest in companies governments bail out, and what are your thoughts on our government doing the same?
KODRES: Interesting observation. This are extraordinary times and extraordinary circumstances. At the IMF we look at a lot of countries’ experiences and that can sometimes help to see what could be done when we get to where we are now. When countries get into systemic banking problems, the government sometimes has to step in---by government, we really mean the taxpayer. The government should only feel obligated to do this when the situation is “systemic”---when the financial system itself is under threat---and affects many of its citizens. We advise, however, when such a situation is reached that we try to minimize the costs to the taxpayer and put in place a framework that will make the event less likely to occur in the future. In many countries that have provided support to their banks, they have asked to participate in any gains that may occur over the longer-run (an equity stake), when the crisis has run its course. In many countries, Sweden is a good example---the government profited enough that over the longer period of time, the taxpayer was not burdened and the costs were less than if the government had not asked for a stake.
Whether this is “un-American” is debatable. One way to think about it is that the government is taking the risk with the taxpayers money and should be compensated for it. Another way to think about it is that protecting the health of financial systems as a whole is like protecting the country from attack---it is a “public good” and in that case, perhaps the government should just view it as money well spent out of the general revenues.

BUD CONRAD, Casey Research Chief Economist, October 24, 2008
CZIKOWSKY: Jeremy Siegel of the Wharton School has written how the stock market has increased at an overall after inflation rate from colonial times to recent times of 6.8 percent. Then even includes surviving several depressions. Has this new economy changed the dynamics of the market that it will no longer continue fluctuation along an average annual increase of just under 7 percent, or should we be hopeful that, in the long run, the market will return to this average?
CONRAD: Jeremy is an academic (like myself adjunct at Golden Gate University) and has contributed to the understanding of earnings and long term investment.
But on the issue of buying and holding with expected returns of 7% on average, the theory misses the kind of experience we are having today. The Great Depression saw 90% losses. I mentioned Japan at 75% loss so far. Investment requires going into many markets.
For example, I recommended Corn in August 2006 because I saw the demand for ethanol. It tripled and on leverage of 20 to 1 on the commodity exchange that was a great play. I recommended shorting Soybeans on August 1 this year and that turned inot a 400% return (trade now closed).
My recommendation beyond gold, is to look for the rate of return from the huge $2 trillion next year, leading to higher interest rates of 3.6% ten year Treasury is just off 30 year lows, and the likely of full-fledged confidence in the dollar is much higher than 4.6%IMO. There are many complex ways to make that play.

HAROLD L. SIRKIN, Boston Consulting Group Senior Partner, November 3, 2008
CZIKOWSKY: I see China has developed the ability to compete with global markets by imitating specialty markets: Italian shoes, English furniture, American steel, etc. Should we have been considering direct challenges to others’ markets, or what strategies should American businesses have considered? Finally, since business decisions are a collective of individual entrepreneurial decisions, how does one guide a collective response to global issues?
SIRKIN: Countries begin by imitating markets---often it’s the ones with the most labor content (like textiles) and then they move up stream. We will see more of this from China and other rapidly developing countries.
However, while more industries will see this change, we are also seeing something else and that is innovation. No longer are companies in these industries providing “copies’---they are providing better versions.
Perhaps the best example is from Goodbaby---the world wide #1 manufacturer of baby strollers. More than 400 million households in the world use Goodbaby products and 28% of all strollers sold in the U.S. are from Goodbaby.
While Goodbaby has lower costs, it is not just a cost play. It’s products are tailored for the local market. For example, in Scandinavia, they have products with sleek Scandinavian design. In Japan, they have strolled that fold up into the smallest space---because space is at a premium in Japan. And in the U.S. their strollers look like SUVs---large and lots of cup holders, just like Americans want.
It’s this type of competition that we need to be ready for and ensure that American companies use our innovative skills to succeed.
CZIKOWSKY: In perhaps too simplistic economic terms, economic countries far away from the U.S. have been able to undercut our markets, despite having to pay higher transportation costs to get their goods to American markets, because their labor and production costs are less than within America. Yet, as the economies in these other countries grow, shouldn’t their wage rates increase, and shouldn’t their costs of production increase as they realize the need to pay for externalities? What type, if any, of a bridging the competitive gap do you see between the costs of American and foreign country production?
SIKRIN: You make a very good point.
Right now wages in China are about $2.50/hour and are over $20 per hour loaded on average. There is a very big spread.
Wages and the Chinese currency (RMB) are also rising quickly, so the gap is closing but it could be 20 years before they are half of the U.S. rate. And at the same time productivity in China is rising so the real increase in rates is smaller in productivity terms.
So, it’s going to be awhile.
Therefore, we need to be more innovative and more productive. And we need to use proximity to our advantage---shorter supply chains and more customized products with faster deliveries.

NIALL FERGUSON, Harvard Business School Professor, November 25, 2008
CZIKOWSKY: How have interest rates shifted through history and what role have interest rates played in determining economic vitality? I recall research that the economy seems to drive interest rates rather than interest rates being a major determinant in what later happens in the economy.
FERGUSON: It depends what you mean by interest rates. At will, central banks can adjust the short term rate at which they lend to the banking system. But other rates are essentially determined by the supply and demand for credit. A good example is long term interest rates, which are essentially determined by the supply of government bonds and the public’s demand for them. The yield on a bond essentially combines the underlying natural rate of interest and a premium for default risk and depreciation risk.
CZIKOWSKY: Do you cover the philosophical discussions over economic systems (in “The Ascent of Money”)? It seems over time that Max Weber better describes the systems of economic management that exist whereas Marx failed in his predictions. Although, considering that China may emerge as the largest economy, does this mean save some of Marx’s theories, or does it show that a future hybrid of Adam Smith, Marx, and Keynes may better describe what is happening in China?
FERGUSON: In this book I really focus on financial theorists, rather than the more general work of economic theory or (in Max Weber’s case) Sociology. I am doing some new work on Weber right now---and especially his view on China—but that’s for another book. I also have little to say about Marx, who was pretty clueless about finance (he was a very unsuccessful stock market speculator, incidentally). The theorists who get more attention are the likes of Milton Friedman (on the monetary causes of the Depression) and Hyman Minsky (on financial crises).

TUCKER CARLSON, MSNBC Political Correspondent. December 9, 2008
CZIKOWSKY: I like how the Treasury can sell bonds to someone at nearly no interest. This literally is how the wealthy hide their money under their mattresses.
CARLSON: I don’t get that. Why don’t they just literally hide it under their mattresses?

JOEL KOTKIN, Chapman University Presidential Fellow, December 15, 2008
CZIKOWSKY: In order to get the economy stimulated quickly, we need infrastructure projects to go as soon as possible. Has someone gathered lists of repair work and prioritized it and developed a sense of which projects can begin as soon as possible that might also employ the most people?
KOTKIN: Great question.
I do not get the sense that there is a strategy among the people coming to the Obama White House. Not yet/
Some Congressional people have some idea of what they want to do and prioritize…That is, what will make us not only efficient and productive, but more long run competitive/
Sadly, I do not think this perspective is widespread.

PAUL KRUGMAN, Princeton University Economics Professor, December 15, 2008
CZIKOWSKY: Some monetarists state now is the time to increase the money supply. Do you agree the money supply should be increased? Where do you agree or disagree with such monetarists?
KRUGMAN: At this point I don’t even know what the money supply means. I mean, there’s an official definition—two. Actually (M1 and M2)---but there are a lot of other assets that are sort of money-like. Funds invested in money-market funds, funds invested in auction-rate securities, before they went belly-up; anything that looked like cash available on short notice.
So, I’m all for a vigorous monetary expansion---which Ben Bernanke is trying to accomplish. But I don’t think there’s any magic in making M-whatever bigger according to the official statistics.