Christiane Amanpour talked to former Google CEO (and current executive chairman) Eric Schmidt today about why businesses are in the doldrums:
AMANPOUR: Everybody says that confidence is the name of the game, that the economy and consumers are not going to start buying, businesses are not going to start hiring again, unless they feel a period of confidence and stability, producing the kind of confidence that’s necessary for a hiring binge.
SCHMIDT: The economy is today stuck behind the power curve. It needs a lot of encouragement. It needs not just something like the jobs bill, but also significant government stimulation in terms of buying power and investment. Otherwise we’re set up for years of extraordinarily low growth in the economy and no real solution to the jobless problem.
But you say significant stimulus. Obviously this is a political environment where the only real conversation is about cutting. Do you see any expectation or possibility of a climate for more stimulus?
Well that’s a political question. But the current strategy is ludicrous. You have a situtation where the private sector sees essentially no growth in demand. The classic solution is to have the government step in, and with short-term initiatives help stimulate that demand. If they do it right, they’ll invest in income and growth producing things, like highways and bridges and schools.
….So this is a pretty dark picture that you’re painting. Add to that no confidence from consumers, and businesses sitting on something like 2 trillion worth of profits, which they’re not going to spend apparently. Does the president have a material problem with the business community?
The real problem is not the business community. The real problem is: the Democrats and the Republicans fight for one point or another in a political sphere, while the rest of us are waiting for the government to do something concrete and predictable. What business needs is predictable, long-term plans. We need to know: Where is government spending going to be, what are the government programs going to be? And off we go.
Business can create enormous numbers of new jobs in America. All we need to see is more demand. What’s happening right now is: Businesses are very well-run, they have a lot of cash. They’re waiting for more demand. At the moment, business efficiency allows them to grow at 1 or 2 percent, which is what we’re seeing today. They don’t have to hire more people. And until we solve the problem, people are going to sit idle. And it’s a real tragedy.
Why don’t more CEOs talk like this? Schmidt is right: American companies need more demand. That’s the uncertainty that’s dominating their lives right now: economic uncertainty, not the ludicrous specter of regulatory uncertainty that Republican politicians and Fox News keep pretending is our big problem right now.
In the short term, that means doing something. We can argue forever about the relative merits of NGDP targeting vs. higher inflation vs. more stimulus vs. increasing the monetary base, but to a significant extent, these are all different names for the same thing. Eventually they won’t be, but right now we should basically be doing all of the above. That would help the business community. If America’s CEOs would wake up for a minute and start demanding that the GOP do something about this instead of baying mindlessly about austerity and spending cuts, we might actually get the economy moving again.