At Davos, U.S. Economic Recovery Widely Lauded
AUDIE CORNISH, HOST:
Last night President Obama was crowing about the economy.
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PRESIDENT BARACK OBAMA: We've seen the fastest economic growth in over a decade, our deficits cut by two thirds, a stock market that has doubled and health care inflation at its lowest rate in 50 years.
CORNISH: But wait - just the other day, Senate majority leader, Republican Mitch McConnell, suggested that growth didn't come from the Democrats. Here's what he said on the Senate floor.
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SENATOR MITCH MCCONNELL: The uptick appears to coincide with the biggest political change of the Obama administration's long tenure in Washington, the expectation of a new Republican Congress.
CORNISH: So who should get credit for a possible economic recovery? We're going to ask Kenneth Rogoff. He's professor of economics at Harvard University and a former chief economist of the International Monetary Fund. Welcome to the program.
KENNETH ROGOFF: Thank you.
CORNISH: So you just heard those two quotes. Do you hear two parties claiming real credit, or is there some hedging in those boasts?
ROGOFF: Well, they were both there when it happened. I mean I think there's just no debating that this recovery, given the depth of the financial crisis, has really been very solid. Both parties are trying to claim credit for it, but it's certainly true for a long time the Republicans were criticizing President Obama and saying it's not good enough. But if you look at other countries, it really could have been a lot worse.
CORNISH: At this point, what is the consensus among economists about what actually did help the economy recover?
ROGOFF: Ah, consensus among economists - you're asking a tall order. I think there's no doubt that the Federal Reserve did a lot of heavy lifting, although it had to do a lot of experimentation along the way to see what worked. I think that the so-called bank stress test where back in May 2009 they tried to figure out just how bad things were - that also was something that helped tremendously. It sort of put a floor under how bad the panic was. And then the fiscal stimulus started under George Bush - President Obama essentially doubled it when he came in. And I think all of these things contributed. People don't know. There's a lot of debate. Certainly, what the Federal Reserve did, everybody agrees was great.
CORNISH: Talk a little bit more about the Federal Reserve. I mean, do they essentially deserve most of the credit? And they're not exactly controlled by the president, right - by the executive office?
ROGOFF: So what the Federal Reserve did the most was take out the panic. It did things like simply put money into the system so that people knew they'd be able to get their money out. It did things that were just incredibly out-of-the-box, but so too did the government. And the truth of the matter is when you face a crisis like this, you throw the kitchen sink at it. You're never quite sure what worked, but thankfully we didn't have another Great Depression.
CORNISH: You're at the World Economic Forum in Davos, Switzerland, talking to economists from around the world. What are they saying, I mean especially economists, say, from Europe which isn't recovering in the same way?
ROGOFF: I think actually everyone everywhere in the world is looking at the United States and wondering how it's managed to do so well, wondering how they could do things better. And that may seem very strange being in the United States where we wish it was a lot better, but Europe is in much worse shape in large part because they don't really have a central government over the Eurozone. Imagine if Texas and Massachusetts had to agree on every policy the way, say, Germany and France do.
And even the European Central Bank - that's the equivalent of Ben Bernanke and the Federal Reserve - they don't really have the same remit that the Federal Reserve does. And so they've been trying to struggle with that. But even you can go to Asia, other places, and everyone admires how the U.S. economy has managed to take this huge punch and manage to come back and now is really something of the envy of the world.
CORNISH: That's Kenneth Rogoff, professor of economics at Harvard University and former chief economist of the IMF. Thank you so much for speaking with us.
ROGOFF: My pleasure. Transcript provided by NPR, Copyright NPR.