In a freewheeling conversation with The Fiscal Times, former ‘car czar’ Steven Rattner says that our leaders – including President Obama – haven’t been straight enough with the American people about what’s needed to get deficit spending under control.
Rattner is the mild-mannered, tough-minded journalist-turned-banker-turned-auto task force leader who oversaw the administration’s auto industry rescue. He left abruptly to deal with charges that he was involved in a pay-to-play scheme that resulted in his private equity firm landing an investment from the New York state pension fund.
Covering everything from the inheritance tax to Obama’s leadership style (but not the potential settlement he’s currently negotiating with the SEC or the New York attorney general), Rattner let loose.
TFT (The Fiscal Times): Why do so many Americans still feel that the bailouts of the auto industry and the financial system were wrong?
Steven Rattner (SR): I’ve been trying to push back on that, as a proud alumnus of this administration. First of all, you’re trying to prove a counterfactual, that if we hadn’t done these things, a disaster would have occurred. That’s a very theoretical conversation and not one that many people can relate to. Secondly, we’re in the middle of the election cycle, when people say wild things that may resonate with some sectors of the public. Republicans and some Democrats are running around talking about how the bailouts were terrible, that TARP was terrible. And that is just completely and utterly wrong.
TFT: Why are they wrong?
SR: Because TARP is the most important piece of economic legislation to come along in this country in the last 70 years. Without TARP, our financial system would have collapsed along with our auto sector. And if those two things had occurred, the entire economy would have collapsed. Without TARP, the administration would have had to go to Congress, and as we all know, Congress is completely dysfunctional. I don’t believe it would have gotten its act together in time to prevent a very substantial amount of damage.
TFT: But in a very tough economy, the idea that huge amounts of federal cash went to big institutions grates on people.
SR: I agree with you. The American people are hurting. We have 9.6 percent unemployment, maybe 15 percent real unemployment. Wages have not gone up appreciably from 10 years ago, and people are worried. If you were to ask the famous question, are you better off than you were X number of years ago, very, very few people would say yes.
TFT: And we haven’t even discussed taxes yet. That’s another big concern on the minds of voters, as we approach the midterms.
SR: Taxes are part of life. The size of the budget deficit, which is unsustainable, can only be dealt with in some combination of raising taxes or cutting spending. Not to be overly simplistic, but there is no other way. People say they don’t want to pay more taxes, but in the same breath they say they don’t want to cut Social Security and Medicare. Yet without cutting those programs and without raising taxes, it is mathematically impossible to bring the budget deficit down to any reasonable number.
with the American people about what it will take. Nobody
wants to lose an election, nobody wants to be unpopular,
so nobody wants to stand up and tell it is like it is.’
TFT: So how can it be dealt with in a way that’s palatable to a big segment of the public – or can it?
SR: It can be dealt with by convincing a big segment of the public that it’s necessary. The U.K. announced a dramatic series of spending cuts, and the public seems to get it. They seem to understand that you can’t run a government with a huge budget deficit any more than you can run a company or a household that way. It could get worse because the cuts haven’t taken affect yet. But people have to come to grips with the reality. I would pretty much fault all of our leaders in this country for not being straight with the American people about what it will take. Nobody wants to lose an election, nobody wants to be unpopular, and as a result, nobody wants to stand up and tell it is like it is.
TFT: What about President Obama and his administration – have they stood up and ‘told it like it is’?
SR: I’m not sure they really have, in terms of what has to happen. It’s the problem again of trying to prove a counterfactual. The president is trying to convince everybody that but for what he did, the economy and the financial system would be in much worse shape. And that is a totally true statement.
TFT: Why are the president’s ratings so low?
SR: When you have this level of unemployment and economic malaise, people hold the president responsible. They say, ‘You’re the CEO, you’re the commander in chief. You should be able to figure out how to get stuff done, and you can’t just blame Congress for it.’