All Things Considered, April 10, 2009

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MELISSA BLOCK, host: If you're trying to figure out just where we are now economically, if we've hit bottom or if worse is yet to come, well a glance at the headlines today might set your head spinning. From the Washington Post this sunny headline "Signs of Revival in Retail, Banks." Not so says the grey lady. Today's gloomier New York Times headline in "March Retailing Report, Bright Spots Are Few." We're joined now by two noted economic columnists to get their views and maybe a little guidance, Paul Krugman of "The New York Times" and Robert Samuelson of the "Washington Post" and "Newsweek." Welcome to you both.

Mr. PAUL KRUGMAN (Economic columnist, "New York Times"): Hi, there.

Mr. Robert Samuelson (Economic columnist, "Washington Post", "Newsweek"): Nice to be with you.

BLOCK: And let's start with you Mr. Krugman. We just heard from President Obama that he has seen glimmers of hope in the economy. Are you seeing those same glimmers of hope?

Mr. KRUGMAN: Actually, I think what Larry Summers said the previous day was right. They're - the freefall might be coming to an end, you know, that there are lot of shoes have dropped, and we haven't seen any big things dropping in the last few weeks. So it may not be - you know we may have gotten past the stage where every week is kind of, oh my God, this is worse than we possibly imagined could happen. But that's a long way from saying that the economy is actually turning around. Things are still getting worse. They're just getting worse a little bit more slowly.

BLOCK: Robert Samuelson that comment from Larry Summers, the top economic advisor, was the sense of freefall will be arrested within the next few months. Do that seems reasonable to you?

Mr. SAMUELSON: It might happen. I mean the stock market is up substantially from its bottom. It's up about 27 percent. On the other hand, it's down 45 percent from its peak. And that gives you some sense of the sort of the tensions that are going on. Mortgage refinancings, as the president mentioned, are way up. They're up almost 90 percent since February. That'll make people's cash flow slightly better, that's a good sign. On the other hand, personal income is still going down, unemployment is still going up. So we're in a kind of grey area here. But I think it's plausible - what Summers said it's plausible that in a few months we might hit bottom.

BLOCK: So we're not there yet.

Mr. SAMUELSON: I don't think anybody thinks we're there yet.

BLOCK: Paul Krugman do you agree on that?

Mr. KRUGMAN: Yeah, I think you really want to bear in mind there are several different definitions of bottom. We might see industrial production bottom out, for example, and that would depart because businesses basically are working off a lot of unsold inventory and they may get to that point and start producing a little bit more now that they're no longer, you know, have lots of stuff on hand. On the other hand, getting it to a bottom in terms of the labor market, getting to a situation where the unemployment rate actually starts falling, there's no sign of that. There's no hint of that in the data. And if, you know, previous experience is any guide the last recession officially ended in November 2001 but unemployment kept rising for another year and half after we were supposedly recovering. So in terms of the things that matter to most people, there's no sign that that's going to be a turnaround anytime, even within a year.

BLOCK: I'd like to ask you both whether you think the stimulus plan is working, whether we're seeing any effects of that now. Paul Krugman, you've been making the case for some time that the stimulus plan is fine as far it goes but there should be much more spending. Do you think what is going on now shows that maybe it's enough?

Mr. KRUGMAN: Well, not - almost nothing that you're seeing now is the result of the stimulus plan. I mean, you know, that money basically is just starting to trickle into the economy. It's not doing anything out there. The bank - the various things they've been doing on the financial side have helped a little bit on some interest rates. The only thing you could say is if the economy is really about to bounce back spontaneously then maybe I'm wrong and the stimulus plan was big enough. But as I said I don't see any sign of that.

BLOCK: And Robert Samuelson what do you think about that?

Mr. SAMUELSON: Well, I agree with Paul. I don't - I - it's - the president signed this six weeks ago. This money is not really affecting the economy - this is $14 trillion economy. On the other hand, I think if we can get sustained growth in later this year and next year, that's when you could credit the stimulus with having a positive effect but not now for sure.

BLOCK: And in terms of the bank bailout do you see a loosening of lending, do you think that's taking effect?

Mr. SAMUELSON: I don't see a loosening of lending so much as I see the Federal Reserve having driven down interest rates, which allows people to refinance. I think, you know, the main credit here goes to the Federal Reserve and not so much to the banks.

BLOCK: I want you to take a listen to some tape from yesterday. This is the president at the White House and his role is basically pitchman. He's urging the homeowners to take advantage of low mortgage rates and refinance. Let's take a listen.

President BARACK OBAMA: If you are having problems with your mortgage and even if you're not and you just want to take some money, you can go to,, and the way Web site is designed.

BLOCK: And it goes on from there. Paul Krugman, is this a proper appropriate role do you think for President Obama.

Mr. KRUGMAN: I'm a little uneasy. I mean, next he'll be selling vegematics.

(Soundbite of laughter)

Mr. KRUGMAN: It's a bit, it's a bit much you know, it's - all right, we do want - but really, the bully pulpit ought to be reserved for really bully events, I think. You know, this is a small stuff. I mean, if was, really, this was the key to recovery was people refinancing their houses, sure, but it is a marginal thing. Better to have Tim Geithner out there making that speech if - or something like that, not the president.

BLOCK: Robert Samuelson?

Mr. SAMUELSON: Well, I agree with that. But on the other hand, Obama, you know, is a master of the media. He's on the late night shows and all that sort of thing. So maybe he's blazing new grounds. Maybe this is his equivalent of FDR, so, there's some chance.

(Soundbite of laughter)

BLOCK: One big unknown, still, is the fate of at least two of the big three automakers. How big of a - of a what if is that out there? Paul Krugman?

Mr. KRUGMAN: Well, you know, I actually think it's - in some ways, we know, regardless of exactly how this plays out, that they're going to be much shrunken. So, it's not as if we're going to be have a big General Motors out there supporting the economy. There's still some, you know, if it actually completely goes under, that's a big issue thing, but I don't think that's the core of it. I think - I'm still waiting to see whether the banks, you know, are - I think that's more important. I just - I don't believe what the Wells Fargo thinks need to say, right? It may be that Wells Fargo is being accurate in its reporting, those questions are being raised about that, but it's - are they representative where we are? And I don't think it is.

BLOCK: And I'm afraid we'll have to leave it there. We're out of time. Thanks to you both.

Mr. KRUGMAN: Thank you.

Mr. SAMUELSON: Thank you.

BLOCK: Columnist Paul Krugman of The New York Times and Robert Samuelson of The Washington Post and Newsweek.

Originally broadcast, 4.10.09