Austan Goolsbee, the University of Chicago economics professor and former chairman of President Barack Obama’s Council of Economic Advisers, began his lunchtime speech at the Morningstar ETF Invest conference Thursday by listing some of the problems with the country, not least the “craziness” in Washington around the current government shutdown.
He followed up, however, with another list that demonstrated why he remains optimistic about our economy.
As for his negative thoughts, Goolsbee said he anticipated that the stubbornly slow economic recovery would continue, noting that this recovery was similar to the non-V-shaped one that followed the dot-com bust.
He went on to quote a headline (actually from July 2008) from the satirical publication The Onion: Recession-Plagued Nation Demands New Bubble To Invest In (sample facetious quote from that article: ”What America needs right now is not more talk and long-term strategy, but a concrete way to create more imaginary wealth in the very immediate future,” said Thomas Jenkins, CFO of the Boston-area Jenkins Financial Group, a bubble-based investment firm. “We are in a crisis, and that crisis demands an unviable short-term solution.”)
So what can actually get the economy growing faster? Goolsbee considered and rejected a number of potential saviors, including housing, the Federal reserve and emerging markets.
“Growth is high” in China, he admitted, while questioning the official data about the Chinese economy, but “it’s starting from a smaller base.”
Forget about Europe, he said, where politicians became excited recently because new data suggested that the Continent was finally approaching growth of … zero.
How long will the current government shutdown last? Goolsbee suggested two weeks, until it becomes apparent that “one side is winning” the argument.
Current polling “suggests people are getting angrier with the Republicans” than the Democrats in the shutdown standoff. He said that Republican lawmakers “who are in the middle” will face mounting pressure to force a compromise from their party, though he expects any deal will only last for the next six months.
That’s a shame, he said, because while “everybody knows that we have a long-run fiscal challenge, what everybody doesn’t understand” is that the challenge “is totally manageable.”
Returning to the prospects for renewed economic growth, there are three positive characteristics of the U.S. economy that will eventually bring us more complete recovery, the gravel-voiced Texas native said.
First is entrepreneurship, which he argued has made the United States the richest country on earth and will continue to do so. That trait, combined with American innovation, is something that isn’t limited to small startups and Silicon Valley companies, he argued. Research has shown that large and midsize companies are open to innovation as well as smaller, newer companies.