The supply of paper money has doubled under Fed chairman Ben Bernanke’s watch. During the first three years of the Obama administration, Uncle Sam has borrowed $4 trillion. And the government even footed the bill for a “cash for clunkers” program aimed at jump-starting an anemic automotive industry.
Yet unemployment in America continues to hover around 9 percent and yields on the benchmark 10-year Treasury have sunk below 200 basis points. Both of which have prompted utter astonishment from devotees of the economist John Maynard Keynes who insist that big government spending is the sure-fire way to cure what ails the economy, or at least from those who don’t think the government has done enough.
At a recent debate hosted by Thompson Reuters and moderated by the venerable Harold Evans, teams representing Keynes and his arch-nemesis Friedrich von Hayek squared off over the merits of government spending during a global economic meltdown. The most fascinating comments came from Steven Rattner, who presided over the Obama administration’s automotive industry bailout as auto czar and currently runs Willett Advisors LLC, the investment arm of New York City mayor Michael Bloomberg’s personal and philanthropic assets. If ever there were a public figure with extensive experience in both the public and private sectors, it’s Rattner.
In fact, Rattner began his remarks by reminding the crowd that he spent most of his career on Wall Street before serving the Obama White House. “I can say that I have more faith in the private sector than in the government to solve most problems,” he said, “but sometimes government is needed.”
During the auto industry rescue program, the Obama administration arranged for additional capital for the companies to survive after the initial capital had been arranged for by the Bush administration, according to Rattner. “In March of 2009, there was no alternative. There was no private capital willing to come into that space. Not only was intervening correct but so was the nature of the intervention. The old management was dismissed and we kept our footprint as light as possible,” he said.
Even though he has more faith in the private sector to build and preserve capital, Rattner said the United States “would be in far worse shape than we are today” had government not chosen to intervene from time to time. Score one for Keynes...
