In his 1981 inaugural address, former President Ronald Reagan said, “Government is not the solution to our problems; government is the problem.” Nearly 29 years later, that still holds true according to CNBC “Mad Money” host Jim Cramer and former Federal Reserve Chairman Alan Greenspan.
Both Cramer and Greenspan were guests on NBC’s Dec. 13 “Meet the Press” and although neither was making a vain effort to be nostalgic, but instead explained that Congress’ deliberations over an “agenda” was creating uncertainty for business.
“I think the priority ought to be get rid of the agenda,” Cramer said. “I hear the agenda over and over again from business people. In other words, Congress is stalled on health care. I favor universal health care, everyone does in this country. But Washington is killing job growth, not – and then trying to stimulate it small scale? How much does it cost to bring a new employee in? We don't know. We don't know what the health care will be. We don’t know what the tax scheme will be.”
Cramer compared the current economic situation in the
Greenspan agreed with Cramer’s assertion and explained there is reluctance for private-sector investments to be made because they operate on a long-term basis (emphasis added).
“That’s the key problem – that is, investment occurs when you have a stable economy and when you can foresee what’s going on in the future,” Greenspan said. “Because, remember, you make a risky investment which may have 10 years or 15 years life to it, and unless you have some semblance of a notion as to what is out there you're going to be reluctant to invest. And that is key. I mean, I agree with Jim in this respect. I think it’s very critical that we get the uncertainties out of the system.”
Host David Gregory asked Greenspan if the U.S. economy’s lackluster recovery as far as unemployment was concerned warranted another stimulus. Greenspan disagreed and pointed to other indicators the economy was improving, including the stock market. He explained there was a fallacy in discounting the stock market recovery because it has real tangible benefits.
“No. I think what is missing in this whole discussion is that the – what I presume to be the major source of the recovery, and that is the remarkable increase in the amount of stock market wealth that has occurred in the last six to nine months,” Greenspan said. “People think stock prices are just paper profits. They are not. They create real purchasing power and, most importantly, they create a fluidity into the financial system which is the reason why even though banks are not lending freely at this particular stage, they are solvent and the problems that we had six to nine months ago have disappeared, because essentially $5 trillion worth of increased equity is pouring into the economy. And you can see it in the retail sales figures. 401(k)s, for example, have increased by half a trillion dollars.”
Greenspan also predicted that by this time next year, unemployment figures will have improved and jobs created by the upcoming 2010 Census would be a shot in the arm for the economy.