The Economy: ABC7 talks with top economists


Robert Reich is a former U.S. secretary of labor and professor at UC Berkeley's Goldman School of Public Policy.

Sean Randolph is president and CEO of the Bay Area Economic Institute, a public-private partnership of business, labor and government.

David Henderson is a fellow at the Hoover Institution at Stanford University and was on president's council of economic advisers under Ronald Reagan.

Christopher Thornburg is chief economist for the California state controller and owner of a private economic research firm in Los Angeles.

Scott Anderson is senior economist with Wells Fargo, the nation's second largest bank and an advisor to the Federal Reserve.

ABC7 asked this panel of economists to weigh in on the state of the U.S. economy and offer advice on how it could be fixed.

The U.S. economy bottomed out in mid-2009; since then, it has been a slow crawl to recovery.

ABC7's panel of economists all agree that the root of the problem is jobs and most believe the government needs to step in to create them.

Reich thinks the Great Depression should be used as a roadmap to recovery.

"We need a new WPA or a Civilian Conservation Corp. modeled after what we did in the 1930s to get people to work, who were long term unemployed," Reich said.

Henderson, on the other hand, says they way to fix the economy is to reduce unemployment benefits.

"Don't extend unemployment benefits because that gives people an incentive to be pickier about a job and the estimates are that the unemployment rate could be as much as a percentage point lower which is one and half million jobs more," Henderson said.

Henderson says business owners would be more likely to hire if the federal minimum wage dropped from $7.25 to $6.25.

"I say one quick fix is to cut the minimum wage; that would make it easier for young unskilled teenagers to get jobs and their unemployment rate is close to an all time high," Henderson said.

Local governments can do more as well. The Bay Area is home to a burgeoning green economy.

"For example, solar power -- a big part of installing a solar system actually relates to the bureaucratic costs of inconsistent standards across different cities to actually get the stuff on your roof," Randolph said.

Randolph believes unified regulations for things such as solar panels would eliminate that bureaucracy, putting more people to work.

"If we had single standard and a unified permitting process in the Bay Area for solar or renewable installations they could be much more affordable," Randolph said.

That combined with an investment in infrastructure like roads and schools could benefit the work force.

"Domestically we need to continue a need to maintain government spending on education and infrastructure over the near term because the private sector isn't in a position to support aggregate demand," Anderson said.

But, local and state governments have struggled to balance their budgets. In fact, the number of jobs created to work on public projects has fallen.

"Over the past year and a half spending on public infrastructure has fallen, not gone up, because the paltry amount of money that the federal government has lobbed in infrastructure has been more than offset by the declines in state and local spending because of their own budget problems," Thornburg said.

"It's cheap for the government to borrow these days; in fact the long term Treasury bill is still at a 2 percent yield, I mean that's unbelievably cheap borrowing costs," Reich said.

"Take that money and spend it on infrastructure and spend it on domestic investment and make sure that money get's spent now," Thornburg said.

The economists had much more to say and ABC7 will be taking a deeper look with them in the coming weeks.

Written and produced by Ken Miguel

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