A 40 Percent Chance of Economic Doom
An interview with economist Mark Zandi: why he’ll argue for the motion, “Congress should pass Obama’s jobs plan—piece by piece,” at the Oct. 25 Slate/Intelligence Squared U.S. debate.
MZ: He’s proposing work share, which has been very popular in Germany, and is credited with helping Germany navigate through their recession in a very graceful way. The Georgia Works program has also been thought of quite highly by people from all kinds of political spectrums. That’s another part of the proposed U.I. reform.
Slate: Say Congress doesn’t pass a single component of the Jobs Act. Is the worst-case scenario that we fall back into a recession? Is there anything worse that could happen?
MZ: There are different flavors of recession. You can get into some pretty dark scenarios pretty quickly. A lot depends on other variables like, for example, what happens in Europe over the course of the next few weeks. If the Europeans don’t take a few steps in the next few weeks, their economy is going to suffer a very severe recession and that’s going to drag us down as well. It’s important to point out that if you go into recession, the cost to taxpayers will be enormous because tax revenues will start falling again. They’re rising pretty strongly right now. Government spending will increase because more people will be unemployed and they’ll get unemployment insurance benefits like food stamps, Medicaid, and a whole range of other income support programs. It’s very important just from a purely fiscal perspective that we not go back into recession.
Slate: Some Republicans argue that the Jobs Act is problematic because it will make government bigger. But based on what you’re saying, it seems like if we don’t pass the act, government spending would increase even more as a result of the recession.
MZ: I don’t buy the argument that it makes government bigger. All of the proposals are temporary. All of the temporary proposals are being paid for. So it’s not adding to the deficit, or the debt, or to the size of government. But if you go into recession, then yeah, the deficit will be a lot larger, and government measured by spending will be bigger.
Slate: Let’s step back from the Jobs Plan. What originally attracted you to economics?
MZ: In the fourth grade, my history teacher gave us a project: Why was the auto industry located in Detroit, Michigan? I didn’t know I was going to be an economist [at the time], but I knew I was going to do something that was involved in answering questions like that one because I thought that was a fascinating question.
Slate: So why is the auto industry located in Detroit, Michigan?
MZ: There’s a lot of iron ore that’s located nearby with coal, so you needed that to produce steel which is key to the auto industry. And it’s centrally located, so you can distribute the vehicles to the Northeast, which at that time was the key source of demand. You also had Chicago, and it was cheaper than producing in the Northeast and Chicago. I’m trying to think of other reasons; those are the key ones.
Slate: That’s pretty good. I don’t think I remember most of my fourth-grade projects.
MZ: I remember that very vividly. It was a group project, and there were four of us. I know I had an A on my part of the project. But [then the teacher] asked a question of another member of the team, so I answered it, and I got an A+. That sealed the deal for me. I was going to be an economist.
Slate: There’s always a slacker in those group projects.
MZ: You know, that person probably turned out to be a professional football player or something. We all have our talents (laughs).
Slate: Just one other question. I know you debated in an Intelligence Squared debate a couple of years ago. Did you win?
MZ: Absolutely! Are you kidding me? We won. I’m in this to win.