Rep. John Boehner, the House Republican leader and speaker-in-waiting, isn't getting much pundit love for his speech on the economy Tuesday at the City Club of Cleveland.
The headline was his suggestion that President Obama fire Treasury Secretary Tim Geithner, economic adviser Larry Summers and the rest of his economic team. Conservative blogger Ed Morrissey called that sound counsel. But economist Mark Zandi, who has advised candidates of both parties, including Obama and 2008 GOP nominee John McCain, said Wednesday that would be counter-productive.
"Certainly changing leadership doesn't engender any confidence, significant confidence. I don't think that would be prudent or that would be helpful in any way," Zandi, chief economist of Moody's Analytics, said at a Christian Science Monitor breakfast with reporters.
Zandi also said Boehner was "just wrong" to characterize the economy as "stalled" by stimulus spending. In fact he credited the $814 billion stimulus, passed early last year, with ending the recession and saving the country from an 11.5 percent unemployment rate -- two points higher than it is now.
About $200 billion in stimulus was spent in the second and third quarters of 2009, Zandi said. "That's the change that provides the economic juice and that's when the recession ended," he said. He called "exactly right" a Congressional Budget Office report this week that said the stimulus has raised GDP, reduced the unemployment rate and increased employment by 1.4 million to 3.3 million jobs.
In his speech, Boehner said uncertainty about federal policies is crippling business activity. "The prospect of higher taxes, stricter rules, and more regulations has employers sitting on their hands. And after the pummeling they've taken from Washington over the last 18 months, who can blame them?" he asked.
Zandi said some in the business community "feel like they're being beaten up on in a public way, and it's enervating. It's tiring." He said that should be addressed by the administration so everyone feels like they're working on the same team. However, he said employers are holding back primarily because of the trauma they experienced or witnessed when the economy crashed.
New financial regulations had to be passed after the collapse, and there was logic in taking up health care reform as well, in Zandi's view. That did create some uncertainty, he said, but with the two laws signed and regulations now being written, "we're past the worst of it."
There is a question of what will happen to tax rates when the Bush tax cuts expire in January. Obama campaigned on a promise to let the lower rates expire for families making more than $250,000. Boehner urged him to keep the lower rates for all income levels. Zandi supports a middle ground -- raising no one's taxes in 2011, but phasing out the cuts for high-income people over three years starting in 2012.
The highest-ranking critic of Boehner's speech was Vice President Joe Biden, who kicked off an event touting stimulus achievements Tuesday by rebutting the Republican leader's proposals -- especially his call to fire the economic team. "Very constructive advice, and we thank the leader for that," Biden said sarcastically. He said the Bush administration turned a $237 billion surplus into a $1.3 trillion deficit and added: "Mr. Boehner is nostalgic for those good old days, but the American people are not. They don't want to go back. They want to move forward. And so, folks, I'm still waiting for what it is that they are for."
One of Boehner's proposals was to cut non-defense discretionary spending to 2008 levels. Derek Thompson, a business writer for The Atlantic, noted that a Boehner spokesman mocked the same proposal when Obama made it in January. Boehner's speech also bombed with Washington Post columnist Ruth Marcus, who called it "a depressing blend of tired ideas, tired-er one-liners . . . and cheap attacks." She said it had killed for her, at least for now, the idea that divided government would work better for the country.
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