Photo: CNBC screenshot
The big event on CNBC today was Steve Liesman interviewing Goldman Sachs CEO Lloyd Blankfein, Erskine Bowles, and former Alan Simpson on the fiscal cliff and the deficit.Erskine Bowles and Alan Simpson are the duo behind the eponymous “Eskine-Bowles” debt reduction plan that many folks on both sides of the aisle in DC think is a fabulous framework.
Steve Liesman is CNBC’s top-notch economics reporter, who frequently gets flak from Rick Santelli and the internet, because he doesn’t knee-jerk hate the Fed, and buy into a lot of popular nonsense.
And it’s because Liesman is such a smart guy that he performed the best Simpson-Bowles interview of anyone yet.
See usually, when Bowles and Simpson appear somewhere, they’re mostly given softballs that accept the premise of their charge, that the biggest crisis in the economy is the national debt, and that their “pox on both their houses” message is right on. Nobody ever seems to question whether it makes sense for Washington to be spending so much time talking about deficit reduction at a time of 7.8% unemployment and ultra-low borrowing costs.
And yet! That’s exactly what Liesman did.
For example, here’s a question that almost never gets asked, but which Liesman asked today to Alan Simpson:
Senator, it’s hard to look at a 1.6% yield on the 10-year right now to see the money that floods into the U.S. Treasury market any time there’s concern about anything in the world and say, you know what? “The deficit’s the big problem right now.”
Alan Simpson was forced to follow that up with a cliche and then a falsehood…
“Well, we’re the healthiest horse in the glue factory… the trajectory of debt, deficit and interest in
this country is exactly the same as the PIIGS countries. except we’re lots bigger.”
As noted, the glue factory line is just an old cliche (along with cleanest dirty shirt, etc.) and the trajectory of debt, deficits, and interest is not at all the same as in the PIIGS countries.
As Martin Wolf and others pointed out, Spain was running a surplus pre-crisis. It’s just a myth that they had some history of fiscal irresponsibility.
PIIGS fiscal profiles aren’t comparable to US ones in any way.
Liesman didn’t let up, and continued to point out how there was no economic evidence that the national debt is an issue. Very refreshing.
Later on though, Liesman asked a more subtle question…
Lloyd,there’s a school of thought that what the fed is doing, buying treasuries, enables the deficit spending that’s going on in Washington. do you subscribe to that?
This question is kind of designed to challenge shibboleth that can expose how people think about US fiscal economics.
It was kind of unfortunate that the question was directed to Lloyd, who took an politics-free middle-ground answer… it would have been nice to get a direct response from Simpson and Bowles on this question, as claiming that the Fed enables “reckless spending” is a myth.
After a period of more doom talk from Bowles, Liesman turned to Blankfein again and asked:
“Lloyd, to listen to the situation as laid out by misters bowles and simpson, you wouldn’t think we’d have a stock market at an all-time high. if things are in such bad condition, why is the market as it is?”
Blankfein answered that it had a lot to do with interest rates and dividends, but Liesman hung on and pressed on this point about reconciling all this doom and gloom about the debt and the fiscal cliff with the relative confidence of the market. At one point, one of them answered that the market is pricing in a big deal (which seems dubious).
Liesman wasn’t out to be confrontational, but it was incredibly refreshing to hear all three of these men interviewed by someone with some real chops on the issue that wasn’t going to accept every premise.
You can watch the video here.
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