To my surprise, Secretary Reich and I agreed on a lot. We both came out strong against protectionism, and complimented the G-20 leaders for making a strong statement about this. We’ll see if the leaders follow through this time.
Heidi also asked me about the auto loans. I said I was surprised (and not in a good way) that the Wagoner firing decision was made in the West Wing. That creates an impression that politics, rather than economics or policy, may be involved in the decision. We were careful during the Bush Administration to have decisions about individual firms’ CEOs made outside the White House.
I complimented the President for using the word “free” so much, and for talking about free trade in Strasbourg today, especially given the setback for “free markets” in the G-20 statement.
Secretary Reich and I parted ways on the budget. I argued that we needed much less spending and not to raise taxes. Especially with long-term entitlement spending pressures building, we need to start cutting spending now.
He responded that in the short run, government is the only possible spender, since neither consumers nor businesses are doing so. Had I had time, I would have observed that the spending bills so far, which claim to be short-term stimulus, spend most of their money in 2010 and later. That’s not short-term macro stimulus. That’s just increased government spending.