Today on CNN’s State of the Union with Candy Crowley, Steven Forbes, Chairman and Editor-in-Chief of Forbes Media, and Austan Goolsbee, Robert P. Gwinn Professor of Economics at the University of Chicago and former chairman of the Council of Economic Advisers under President Obama, spoke to CNN about income disparity in the U.S., raising the minimum wage, and the economic recovery.
In a discussion, Forbes said to Crowley that the unemployed “are the ones that are hurt when you substantially raise the minimum wage.”
A transcript and a video of the discussion are available after the jump.
THIS IS A RUSH FDCH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CROWLEY: Joining me now, Steve Forbes, he is chairman and editor-in-chief of Forbes Media, and Austan Goolsbee, professor of economics at the University of Chicago and former chairman of the Council of Economic Advisers under President Obama. Gentlemen, thank you both.
Steve, I want to come to you first and read you a couple of tweets in defense of billionaires by billionaires. This comes off the whole discussion about income disparity and the upper 1 percent versus everybody else. The first comes from venture capitalist Tom Perkins, who says of an idea he has. “You don’t get to vote unless you pay a dollar of taxes. You pay a million dollars in taxes, you get a million votes.” Then real estate billionaire Sam Zell said, “the one percent,” meaning the top 1 percent, “work harder.” And finally from Bud Konheim, who is a fashion — co-founder and CEO of a fashion outlet — “we’ve got a country that the poverty level is wealth in 99 percent of the rest of the world. So we’re talking about woe is me, woe is us, woe is this.”
In defense of billionaires, I don’t think they are doing you any good in this fight.
FORBES: I think instead of just focusing on a few individuals who have opinions that you might find fun at a bar on Saturday night, or not, the real problem in the economy today is the lack of upward mobility. Median incomes today are lower than they were five years ago. This is the worst recovery in American history from a sharp economic downturn, and, unfortunately, government policies, including those of the Federal Reserve, have made this situation worse, not better.
CROWLEY: And Austan, you know, as you know, the income disparity is all the rage now, particularly in Democratic circles as they push a number of initiatives, and I think Steve sort of hits the points that Republicans are making, which it’s not about income disparity, it’s about opportunity disparity. Has this been poorly packaged?
GOOLSBEE: Well, I don’t know if it’s an issue to be packaged. I think I agree with Steve that the most important thing is that we get the growth rate of the economy up. Fundamentally, I think what has happened, the reason the recovery now we’re getting a little bit of momentum, but the reason it’s been so slow is we had a bubble. The main drivers of growth of the 2000s were fundamentally not sustainable and false, and if the economy can’t go back to doing what it was doing before the recession began, if it has to shift industries and shift geographies, that takes a long time. But, you know, the sympathy for guys who believe that they are victims of the Holocaust because their valet did not get their car fast enough, I mean, that’s kind of goofiness.
CROWLEY: And certainly at the side of the debate about the economy, I think you heard in our open that there is some debate about what kind of recovery this is. Have the basics of what fuels the U.S. economy changed since recovery began or since the recession, Steve?
FORBES: Well, in any vibrant economy, you’re always going to get a change of new industries, new companies coming along. Remember in the 1970s, I’m old enough to remember back then, Microsoft, Apple, Amgen, FedEx and other companies were tiny babies then and became the giants they are today. So you’re always getting that kind of shift, but what’s remarkable about this recovery is that we haven’t had a sharp upturn. We saw in the 1970s, a terrible decade, but after we got things straightened out in the early ’80s, by golly, the economy took off. So you get a sharp downturn, you always get a sharp upturn, and we’re not getting that this time. And the Federal Reserve has been practicing trickle-down economics. They messed up the credit markets, which hurt credit accession for small and new businesses, which are the job creators, and try to prop up the stock market, which guess what, helps upper-income people. And yet the Democrats gave a bye to Ben Bernanke and put in Janet Yellen as the successor to Ben Bernanke, practicing a policy that hurt credit markets and hurt job creators, the new businesses.
CROWLEY: And Austan, it is true, is it not — Wall Street– I’m sorry, Main Street, if you ask the general public, are we headed in the right direction? Does it feel like it’s getting better? By and large they say no. What we see every day, and I know Wall Street has not been doing that well I think in January, but nonetheless, there seems to be this recovery, if you will, for the upper income, and no recovery in the middle incomes.
GOOLSBEE: Well, I think as a factual matter, that has been true, and that did not begin now, you know. Through the 2000s, the median family income fell $2,000. We then had the worst recession of our lifetimes, and now we’ve had a modest recovery since then. And I think that does characterize it, but if you look at the surveys where they asked small business people what is the biggest barrier to your growth, by far the overwhelming barrier is that people are not buying their services and their products.
GOOLSBEE: So it absolutely is not government policy that’s interfering with that. It’s that the U.S. with 2, 2.5 percent growth, which is not enough, is among the fastest growing countries of the advanced world. I mean, this is a major worldwide problem that we’re confronting.
CROWLEY: So it isn’t great, and I want to — there’s a couple of issues that are out there, certainly that the Obama administration is pushing. I want to get both of you to ring in on whether these initiatives will help or hurt the economy going forward, which I think we all can say can’t take any huge blows. And the first is on the subject of raising the minimum wage. When the president signed his executive order raising minimum wage for federal contract workers, here’s something he said.
(BEGIN VIDEO CLIP)
OBAMA: Owners of small and large businesses are recognizing that fair wages and higher profits go hand in hand. It’s good for the bottom line.
(END VIDEO CLIP)
CROWLEY: Increasing the minimum wage, good for the bottom lines, Steve?
FORBES: Well, Janet Yellen let the cat out of the bag on that one when she was asked in recent testimony about raising the minimum wage. She said those who keep their jobs, yes, that’s very nice, but she acknowledged that it will be a job killer. It will destroy jobs.
Remember, in terms of minimum wage, they are often with businesses with small margins, and two-thirds of the people who start out in minimum wage are above the minimum wage within a year when they get skills. And most minimum wage workers, thankfully, are part of households where they are part of an earning capacity where they are not the sole breadwinner. But artificially trying to raise wages when you have an economy that’s being hurt by the tax code, hurt by the Federal Reserve, hurt by this crazy health care thing we call Obamacare, that is just going to make the problem worse for those who need help the most, those who have no skills or are trying to break into the workforce. Those are the ones that are hurt when you substantially raise the minimum wage.
CROWLEY: Austan, is this — is minimum wage an economic issue, or is it a political issue in Washington?
GOOLSBEE: I think certainly in Washington, it’s a political issue, but everything is a political issue in Washington. I would say —
CROWLEY: You bet.
GOOLSBEE: — when I saw the president in the State of the Union, he was calling for minimum wage, raising the earned income tax credit, investing in skills and education for low-skilled people, early education, community college. He’s identified the issue of ordinary Americans’ incomes being tied to an economic system where we want to get growth, and I think just snarking on any one policy saying, no, no, let’s not do this one, let’s not do that one, the overall broad issue is quite fundamental. That people don’t get rich if they don’t have customers, and if customers don’t have income, they can’t spend, and if we don’t invest in the skilled base of our workforce, we’re going to fall behind other countries and other locations that are doing that. So I hope we can together kind of address those issues because there’s nothing more important than that.
CROWLEY: Doesn’t sound like a ringing endorsement for increasing the minimum wage, but let me move you on to Obamacare. One of the things we heard over and over again while the economy has struggled is part of the problem with businesses not hiring, and, you know, people not buying is this uncertainty that is out there. Now we have the president delaying some more deadlines for businesses to get into the Obamacare system or have their employees get into the Obamacare system or provide it themselves. So it seems to me that that is, again, more uncertainty, so what is the overall effect of these delays as businesses look into whether they should hire up or lay off, Steve?
FORBES: Well, delay of a year or two when the president does it by decree, nothing was written in the law that allowed him to do this, that just raises the uncertainty. You don’t know what the rules of the game are. You know the way this thing has been playing out, it’s done more harm than good. 6 million individuals have lost their policies, and the uncertainty that creates when you know that small businesses, when they get hit with Obamacare, there’s going to be another surge of people looking for new policies. So, again, that kind of uncertainty, that kind of expense slows job creation down. And the fact you may get a reprieve for a year or two, very nice, but you’re not going to make long-term commitments when you know the results can be changed overnight.
CROWLEY: Last word, Austan. Is it a — I’m sure you’re not going to tell me that Obamacare is a drag on the economy, but has it been so far?
GOOLSBEE: I think that argument that this is uncertainty and uncertainty is why business is not investing or not hiring has been utterly disproven in the data. On the health side, the fact that more than 100 million people no longer have a dollar cap on their insurance over their lifetimes and don’t have to be nervous about getting sick and don’t have to be nervous about starting their own businesses, that they would lose their health insurance, all of those are for the good. I think we’re in this transition period as it comes in, but thus far the data do not show that the firms that have been most affected by Obamacare are growing slower or hiring any less than the firms that have been less affected. The evidence is not there for that, and I think the overall net positive of health care on the economy is going to come from the ability to generate entrepreneurs.
CROWLEY: So Obamacare, as we would say in this business, TBD, the effect of a to be determined as we see it carry out over the next several years.
GOOLSBEE: Yes, I think that’s fair.
CROWLEY: Steve Forbes, Austan Goolsbee, thank you both for joining me.
FORBES: Thank you.
GOOLSBEE: Thank you.
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