Up | February 03, 2013
>>> such that it is. you just made this discussion about inequality.
>> sure. i think joe made three points. first, in a recovery, you see capital recover before labor because you had high unemployment and the wages rise. so i don't think the pattern is so unique here. the second is as inequality driving the slow growth the we know we have much higher inequality than europe and japan and much higher growth over the past decades. it's difficult to make the case that inequality slows growth, more hours of work for a working wager, i think that stems from the difference between joe and i about what is causing the inequality. is it the success of the top 1% and the innovation in the u.s. economy or is it capitalism? but the last also is voe takes a va additional view of investment which is we're simply building capital to meet the demands of consumers as opposed to what we're doing in our economy which is pouring money into innovation. you don't need demand to fund innovation. if you really part through the numbers and recalculate investment to include innovation, which is largely salaried and appears as the intermediate cause of product, not as investment in and of itself, you see we've had a very high rise in investment and we'll have a more volatile economy but all the indications are consistent with that higher productivity, fast her growth, more employment.
>> you know, i think that joe 's point is well taken. and i think the fourth reason says you talk about inequality in your "new york times" article. the one that is most compelling to me is the issue about investing in education. our participation in education is about the future. and what we've seen with much of higher education is that financial aid has switched from need to meritocracy. so you have a lot of working class folks who want to send their kids to college but who can't. in addition, people are taking on a lot more debt. i graduated from boston college in 1974 . i left with two grand worth of debt. the average student today with about 25,000. the average african-american students leaves with 30,000. i used to go through the seniors that graduated to see what they owed. i saw numbers as
high@as $80,000. this is a drain on our future. that starts inequality, but cause is inequality to be --
>> it's also the burden of that because you can't discharge even bankruptcy.
>> but there's this broader question about indebtedness of the american consumer, right? which is one of the things -- one of the reasons that you have this reduced consumption and slow growth in the wake of the financial crisis , right, is that you have to go through the process of deleveraging, right? and deleveraging is a big part of what we've had to do for the last four years.
>> but the debt has now exceeded credit card debt . that's really a change.
>> i think one of the dangers -- and i think a lot of your points make a lot of sense. but one of the dangers with the inequality, driving the discussion, is that it starts getting into thinks big questions like, oh, eye structural, is it an education problem? is it a problem with how much we outsource our industry? all of these are interesting questions, but then they start to detract from the demand, napped, demand, spend, spend, spend, which is how we should get out of the recovery. so are we underinvesting in education and infrastructure? an interesting question, but they're not core to what needs to be done to get back to default.
>> but as you say spend, spend, spend, and you have all this debt that exists, people can't spend, spend, spend. with the unemployment rates, with the slow level of growth, you really cannot spend, spend, spend. you think about people who are in economic distress to spend and the way that we advertise, you've got to have -- everybody has a black dress. sort of pushing the pressure on to people to spend, spend, spend, but these are folks who have so much credit card debt that they probably couldn't buy a pencil on their mastercard.
>> but the weird right, the weird paradox is that the we don't want the savings rate to go up, we want it to stay low to boost aggregate demand during this period.
>> we gave more income to people in the middle. that is the way we can square that circle.
>> and there's a whole notion of cutting government spending at a time like this which i would argue is part of the reason why we saw such poor numbers for the fourth quarter. cutting government spending , cutting government and others, i mean, 18% of the whole economy works for the federal government . so you're cutting government spending , which means you're cutting jobs.
>> i want to talk about the role the government has played in this recovery. and also whether -- whether we are in a new normal or not, right, whether basically the way the recovery has gone has been surprising or predictable. i think that's an interesting question because it makes us think about the what path forward is right after