Treasury Secretary Jack Lew on future of the U.S. economy
We always say the economy is not the stock market, and the stock market is not the economy, but today, they seem to be more or less on the same page.
There’s a lot of economy numbers out there: The Dow hit 18,000, consumer sentiment is at an eight-year high. But we’ll start the show with the biggie, gross domestic product last quarter was up more than it’s been in a decade, 5 percent.
U.S. Treasury Secretary Jack Lew joins us to talk about the outlook for the U.S economy.
Adriene Hill: This is the fastest quarterly growth we’ve seen in more than a decade. It sounds like good news, but I wonder, what’s the picture look like for the middle-class here?
Jack Lew: It is good news. I think what we’ve seen, over the past several quarters, is that the economy is growing at a healthy rate. Growing at the fastest pace in over a decade is significant. And we’ve seen a number of economic indicators that show improvement in the labor market, increase in domestic energy security, lower health-care costs.
We took a lot of steps in 2009 and 2010 to rescue our economy and to build a foundation for growth, and we’re now seeing the strongest year for job growth since the 1990s. I think when you look at the effect on workers, creating more jobs is incredibly important. And we’re seeing job growth in areas where wages are better and better.
I think for working families who went through the experience of the Great Recession, there’s some deep scar,s, and they’re looking to see it in their pay. They’re looking to see it in their family budgets. I think we’re seeing signs that is going to begin to break through, and that’s the challenge going forward.
AH: In the White House press release today, it says, “We have more work to do to boost wages for middle-class families.” What’s that look like, what’s that mean?
JL: It means a few things. First of all, it means we need to keep focusing on making sure that there is an environment conducive to creating jobs in areas like manufacturing and technology and areas like construction where jobs are good middle-class jobs. I think at the bottom end, it means we have to make sure we keep working to see increases in the minimum wage, so that workers who are working full-time at least get their income above the poverty line. The growing economy, the confidence in a growing economy will continue to put some steam behind the labor markets and some energy behind what the future looks like. That confidence in the future … will be part of what helps create the jobs that create more and more good middle-class incomes.
Our work isn’t going to be done until every American who wants to work can work and can have a decent middle-class shot. And that’s what our efforts are about, it’s what our programs and policies have been about. It’s what they’ll continue to be about.
AH: Is there anything your office can do to help push things in that direction?
JL: You know, I think that one area we have worked a lot on, you look at at all the things that are going well in the economy, we’ve been looking at what can you do to create more activity in construction in housing. And I think we’ve seen some good progress there but we need to see more. The challenge of continuing to make the investment climate one where there’s confidence in the future where employers are willing to make the investment … is always important. I think you know we’ve just come out of a couple weeks where Washington has shown that we can get our work done. That there can be stability and not just this week or this month, but for the next year.
I think you look back on the last few years, it wasn’t that way in 2011 and 2012. There was reason to be nervous to be nervous about what was happening in Washington. I think the fact that we were able to reach agreement on an approach that creates as I say certainty, will help. And will help to create an environment where more jobs are created. That was frankly one of the most important reasons to get behind the budget deal in the last week.
AH: We’ve seen very positive growth in the economy in the last two quarters. And I wonder, how much of that is about factors that could change quickly? Things like low oil prices and the strength of the dollar?
JL: I think the drop in oil prices is fairly recent. It is serving to reduce the cost of gasoline and to essentially be a tax cut for families that are stretching their budget. That’s a good thing. Obviously, it’s meant a little bit of a slow-down in new development in some areas, but I think that over time that will kind of work itself out, resources will be developed, if it’s not this month or next month, it’ll be a little bit later. I don’t think that the progress we’ve seen in the economic indicators over the last few quarters are directly a result of oil prices being low. I think it’s a result of core strength, you look at the manufacturing and job creation numbers, they started before oil prices started coming down.
The sense that the United States was the best place in the world to do business was improving before oil prices started to come down. Obviously, lower oil prices are a plus for the general economy. I think that the fact we’ve developed our own energy resources is actually very significant, it’s part of the reason why the U.S. is such a good place to do business, because we have political stability, we have the best workers in the world, and we have now abundant energy resources. So, I think that I don’t look at it as the developments of the last couple of weeks, it’s really the developments of the last couple of years in energy area that have been more significant.
AH: Now, we now still that people aren’t earning much more than they have been, which means that they’re been borrowing. And I wonder, how healthy is it to have economic growth based at least in part on record consumer debt.
JL: I think that if you look at family balance sheets, we’ve seen a lot of de-leveraging take place. Family balance sheets are in a much better place than they’ve been in a very long time. So I actually don’t think that we’re seeing more growth now that fueled by excessive levels of debt. Frankly, we’re in a place now where I think there’s every reason to believe that more people should be able to get mortgages, and to buy a home, and to take that step where they have the income and the economic record to qualify. What they need is the confidence to go forward, and that sense that next year and the year after are going to be better than what they came out of in the Great Recession. I hope we’ll bring more people out into the housing market for example. That’s not bad, it’s bad if people get in over their heads, it’s not bad if people who can afford a home buy a home of their own, that’s the American dream.
AH: A lot of people though are sitting on the sidelines right now of the housing market, how do you pull them back in?
JL: If you look at people sitting on the sidelines, they fall into different groups obviously. A lot of young people graduate school at a time they couldn’t find a job right away, and they’re taking a few years to make a lot of decisions in life to make sure feel comfortable about the future.
A series of good economic reports helps a lot. Government working smoothly making decisions one a time to move things in the right direction helps. I think fundamentally, individuals and businesses alike will benefit from an extended period of confidence. And if businesses have confidence that the future is going to be better, they’re going to invest and hire more. And if individuals have confidence in the future, they’re going to willing to take that leap and buy a family home for the first time. I think there’s every reason to be optimistic about 2015, we’re ending the year quite strong. We had kind of an anomalous first quarter that did not represent where the rest of the year has been, many of us thought at the time that it was kind of not where we really were. The last three quarters are proving that. And I think going into next year, we have every reason to think the year will start strong and be strong.
AH: We asked you this last time you were on the show, but it’s worth asking again. The numbers look great, but when we talk to regular people, I as a reporter am talking to regular people, they’re still not feeling it. And I wonder, what needs to change to really translate these numbers into real life?
JL: You know, what I think what we were talking about [earlier] is very real. The recession in ’08 was very deep. The experience that people went through was very bruising. It takes a while for confidence to come back, and it’s taken a while for incomes to get back. We’re seeing incomes rise too slowly, but we’re seeing incomes rise again. i think that needs to continue. I think that the combination of time and things moving in the right direction will help.
But, to be clear, there’s more work that we need to do. We need to make sure that whether it’s in education, or in the way we create an environment that’s conducive to investment and manufacturing, in housing, there’s more policy that we need to do. And the president’s actions in 2009 and 2010 have a lot to do with the strength of the macroeconomic indicators today. And I think that the vision for the future involves making more progress going forward. And I’m optimistic that even in a period of divided government we will make progress on things that are important to the American people.
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