Your view of QE2 to boost the economy?
With unemployment still high, the Fed felt it had to act. But the margin of error is slim. My big worry is that the market might perceive the Fed as captured by fiscal authorities, causing contraction — the opposite of what’s intended.
How so — and how likely is this?
The Fed plans to buy the same dollar amount of bonds into June 20‘11 that Treasury plans to issue. If Congress and the White House think the Fed will finance spending, legislators have no incentive for deficit reduction. Investors, seeing costs, then sell stocks and bonds.
Your take, then, on the Bowles-Simpson proposal?
It focuses on shared sacrifice and long-term investments in infrastructure and R&D. But I’d like more about how they’ll promote investment. As of now, the plan seems a massive cut list without prioritizing programs.
What is your clients’ reaction to it?
They see it as a positive step. But they think higher taxes and drastic spending cuts will hurt the ability of many businesses to operate efficiently and profitably until a clear and executable fiscal plan is laid out.
The business community has a big stake in early childhood ed, you say. Why?
A modern economy is like a jet plane — a mix of basic materials and technology. Its power is human capital. To get our economy soaring again, we need tanks full of educated, team-oriented, ready-for-work young adults to help us compete globally.