KUDLOW: Thank you, sir. Let me begin. I want to talk about the economy and business and perhaps we'll get to the foreign policy troubles in the back end. Despite a torrent of conservative criticism over President Obama's economic policies, there are, nonetheless, unmistakable signs of economic recovery. In fact, in the news this morning, we had home sales rising. We've had leading indicators rising, we've had better credit spreads. The stock market is up about 35 percent from its lows in early March. Let me ask you, sir, is there an economic recovery out there in your view?
Mr. CHENEY: Well, that's true. It never stopped me before. No, I've always been impressed with the tremendous resilience of the American economy. I think over the years, over the decades, it's demonstrated this tremendous ability to take severe body blows, if you will, and bounce back. And I think what we're seeing here at some point the recession's going to end, at some point we're going to enter into recovery, and I think I see, as you do, some signs out there that are positive. I follow the stock market, home sales and unemployment numbers and so forth, and they all seem to indicate that we're--if we aren't at the bottom, we're getting close.
KUDLOW: All right. Will President Obama, therefore, get credit? Again, with the barrage of criticism coming from conservatives and so forth, if there is an economic recovery, isn't he going to get a lot of credit for it? Isn't that going to be a very powerful political plus for him? Regardless of causality, nonetheless, that's the way this game works, does it not?
Mr. CHENEY: Well, I think that's the way it's worked in the past, to some extent, but I--the thing I'm concerned about and the thing that I think ultimately is the most important set of issues or concerns, if you will, in terms of how this economy's being managed is what the long-term consequences are of the policies that have been put in place by the Obama administration. And we have short-term swings in the economy. I have, you know, if the economy turns up now, we come out of the recession, that's fine, it's all to the good. I hope that happens and, if he had something to do with it, he deserves some of the political credit for it. The problem--the big problem I have, though, is that I think the recession we've been through is being used by the administration in ways that fundamentally change the relationship between government and the private sector. That's what worries me most.
KUDLOW: You know, this business of unprecedented interference in the private sector, as you've just described, I mean, we can walk through the issues. Basically, the government's going to own General Motors. Some people call it Government Motors, that's a big story on the front pages today. They're going to take 70 percent of the new General Motors. The government already owns AIG. The government owns Fannie Mae. The government owns Freddie Mac. There's a lot of discussion about the government interfering, intervening in the tax-free municipal bond market to help states run money. Mr. Obama himself told C-SPAN over the weekend, in an interview, that the US was out of money because of the unprecedented spending and borrowing. Now, is that what you're referring to? And I want to be direct here, some conservatives say Mr. Obama is a socialist or a socialist-light, and he's running socialist type policies. Do you agree with that criticism?
Mr. CHENEY: Well, I agree with the criticism without using the labels. I don't want to get into trying to label President Obama. He's our president. At this point, he's the only one we've got. He won the election, and he obviously is entitled to pursue those policies that he wants to pursue. My concern is that we entered this period with a big, big problem, with the whole area of entitlements, Social Security, Medicare, the expectation that we were going to run out of money not too far down the road in terms of keeping those basic commitments. Nobody even talks about that anymore. And what we've been seeing, though, and what's been advocated by the president and what looks to be in store if he's successful is that we're seeing a vast expansion, not only the power of the federal government over the private sector, but also in terms of spending. Massive, massive amounts of new spending and presumably new taxes to pay for it that I think will do fundamental, long-term damage to the country. And I do think it's a more liberal agenda, if you will, than any in recent memory.
KUDLOW: But, in truth, isn't it fair to say that many of these policies, central planning policies, command and control interference policies, whether it's socialism-light or European market social kinds of policies, they really began under the Bush-Cheney administration, did they not? I mean, after all, Fannie Mae and Freddie Mac are under government ownership 80 percent. That began under your administration. The first General Motors loan began under your administration. And, of course, the great TARP program to allegedly prop up the banking system, which has turned out to be partly bank ownership, we don't know the last story on that. No one knows when TARP is going to ended. All these things really began under your administration. At what point President Bush, I believe, said we have to--we have to stop--we have to suspend free market capitalism in order to save free market capitalism. What's your take on that? How much blame of this shift to the left do you think the Bush-Cheney administration bears?
Mr. CHENEY: Well, I would--I would bust it up into two segments, Larry. I think there's no question but what the tail end of the Bush administration, Bush-Cheney administration, that we took steps specifically geared to try and free up the financial sector. There was the view reporting from economists, from the Fed, from Treasury and so forth that the credit system of the country had, in effect, frozen up or was close to it, and when you get into that kind of situation, the government is the only area of last resort with respect to trying to deal with those issues. You can't fall back on the private sector and say, `You take care of the nation's banking system.' That's a fundamental function of the government, the Federal Reserve, the Treasury and the FDIC, etc. All of those agencies have a major role to play there.
Mr. CHENEY: If it's not working, then the federal government has to deal with it.
KUDLOW: But did you anticipate the degree of government control over the banks? No question throwing a safety net from Federal Reserve liquidity was appropriate. I don't think any economist left or right disagrees with that. On the other hand, what we've seen now is that this Congress has moved in to declare, for example, compensation and pay limits, repurchase agreements, dividend policies, merger and acquisition policies. You yourself know these things because you were a CEO of a big company once upon a time. Did you anticipate how Congress would move in to take control of the banks when you made these initial loans?
Mr. CHENEY: No, I don't believe we did. I don't recall any debate within the administration. There may have been some over at Treasury or someplace that focused on the extent of which government would try to control these institutions once they provided financing for them. You know, I've got experiences going back to the wage price controls in the Nixon administration where, in effect, we had what I think was a terrible mistake, in that case a Republican administration, where moved in and tried to control the wages, prices and profits of every enterprise in America. It was a huge mistake. We finally got out of it, but it took a long time to do it, and it does a lot of damage. One of the things we see now, you mentioned it, is the fact that government, in some cases Congress, in some cases the Obama administration, telling General Motors they've got to fire Rick Wagoner, making decisions that traditionally and historically have been made by the private sector.
I watched this interview. I kept thinking, what were you guys doing for the past eight years? He makes many good points, the execution of which utterly failed during Bush/Cheney.
He is right - the key is China regarding NK. We now need to take this pithy observation and execute. We need to show China - or make conditions for China - such that a Pyongyang collapse would not be a bad for China. Ironically, NK keeps trying to fail and Seoul and Beijing keep propping it up.
The fact is, China has the most to lose with a nuclear NK. China does not want a nuclear Japan, which they will have if NK program is not arrested.
4 comments:
KUDLOW: Thank you, sir. Let me begin. I want to talk about the economy and business and perhaps we'll get to the foreign policy troubles in the back end. Despite a torrent of conservative criticism over President Obama's economic policies, there are, nonetheless, unmistakable signs of economic recovery. In fact, in the news this morning, we had home sales rising. We've had leading indicators rising, we've had better credit spreads. The stock market is up about 35 percent from its lows in early March. Let me ask you, sir, is there an economic recovery out there in your view?
Mr. CHENEY: Well, that's true. It never stopped me before. No, I've always been impressed with the tremendous resilience of the American economy. I think over the years, over the decades, it's demonstrated this tremendous ability to take severe body blows, if you will, and bounce back. And I think what we're seeing here at some point the recession's going to end, at some point we're going to enter into recovery, and I think I see, as you do, some signs out there that are positive. I follow the stock market, home sales and unemployment numbers and so forth, and they all seem to indicate that we're--if we aren't at the bottom, we're getting close.
KUDLOW: All right. Will President Obama, therefore, get credit? Again, with the barrage of criticism coming from conservatives and so forth, if there is an economic recovery, isn't he going to get a lot of credit for it? Isn't that going to be a very powerful political plus for him? Regardless of causality, nonetheless, that's the way this game works, does it not?
Mr. CHENEY: Well, I think that's the way it's worked in the past, to some extent, but I--the thing I'm concerned about and the thing that I think ultimately is the most important set of issues or concerns, if you will, in terms of how this economy's being managed is what the long-term consequences are of the policies that have been put in place by the Obama administration. And we have short-term swings in the economy. I have, you know, if the economy turns up now, we come out of the recession, that's fine, it's all to the good. I hope that happens and, if he had something to do with it, he deserves some of the political credit for it. The problem--the big problem I have, though, is that I think the recession we've been through is being used by the administration in ways that fundamentally change the relationship between government and the private sector. That's what worries me most.
KUDLOW: You know, this business of unprecedented interference in the private sector, as you've just described, I mean, we can walk through the issues. Basically, the government's going to own General Motors. Some people call it Government Motors, that's a big story on the front pages today. They're going to take 70 percent of the new General Motors. The government already owns AIG. The government owns Fannie Mae. The government owns Freddie Mac. There's a lot of discussion about the government interfering, intervening in the tax-free municipal bond market to help states run money. Mr. Obama himself told C-SPAN over the weekend, in an interview, that the US was out of money because of the unprecedented spending and borrowing. Now, is that what you're referring to? And I want to be direct here, some conservatives say Mr. Obama is a socialist or a socialist-light, and he's running socialist type policies. Do you agree with that criticism?
Mr. CHENEY: Well, I agree with the criticism without using the labels. I don't want to get into trying to label President Obama. He's our president. At this point, he's the only one we've got. He won the election, and he obviously is entitled to pursue those policies that he wants to pursue. My concern is that we entered this period with a big, big problem, with the whole area of entitlements, Social Security, Medicare, the expectation that we were going to run out of money not too far down the road in terms of keeping those basic commitments. Nobody even talks about that anymore. And what we've been seeing, though, and what's been advocated by the president and what looks to be in store if he's successful is that we're seeing a vast expansion, not only the power of the federal government over the private sector, but also in terms of spending. Massive, massive amounts of new spending and presumably new taxes to pay for it that I think will do fundamental, long-term damage to the country. And I do think it's a more liberal agenda, if you will, than any in recent memory.
KUDLOW: But, in truth, isn't it fair to say that many of these policies, central planning policies, command and control interference policies, whether it's socialism-light or European market social kinds of policies, they really began under the Bush-Cheney administration, did they not? I mean, after all, Fannie Mae and Freddie Mac are under government ownership 80 percent. That began under your administration. The first General Motors loan began under your administration. And, of course, the great TARP program to allegedly prop up the banking system, which has turned out to be partly bank ownership, we don't know the last story on that. No one knows when TARP is going to ended. All these things really began under your administration. At what point President Bush, I believe, said we have to--we have to stop--we have to suspend free market capitalism in order to save free market capitalism. What's your take on that? How much blame of this shift to the left do you think the Bush-Cheney administration bears?
Mr. CHENEY: Well, I would--I would bust it up into two segments, Larry. I think there's no question but what the tail end of the Bush administration, Bush-Cheney administration, that we took steps specifically geared to try and free up the financial sector. There was the view reporting from economists, from the Fed, from Treasury and so forth that the credit system of the country had, in effect, frozen up or was close to it, and when you get into that kind of situation, the government is the only area of last resort with respect to trying to deal with those issues. You can't fall back on the private sector and say, `You take care of the nation's banking system.' That's a fundamental function of the government, the Federal Reserve, the Treasury and the FDIC, etc. All of those agencies have a major role to play there.
KUDLOW: But if I may...
Mr. CHENEY: If it's not working, then the federal government has to deal with it.
KUDLOW: But did you anticipate the degree of government control over the banks? No question throwing a safety net from Federal Reserve liquidity was appropriate. I don't think any economist left or right disagrees with that. On the other hand, what we've seen now is that this Congress has moved in to declare, for example, compensation and pay limits, repurchase agreements, dividend policies, merger and acquisition policies. You yourself know these things because you were a CEO of a big company once upon a time. Did you anticipate how Congress would move in to take control of the banks when you made these initial loans?
Mr. CHENEY: No, I don't believe we did. I don't recall any debate within the administration. There may have been some over at Treasury or someplace that focused on the extent of which government would try to control these institutions once they provided financing for them. You know, I've got experiences going back to the wage price controls in the Nixon administration where, in effect, we had what I think was a terrible mistake, in that case a Republican administration, where moved in and tried to control the wages, prices and profits of every enterprise in America. It was a huge mistake. We finally got out of it, but it took a long time to do it, and it does a lot of damage. One of the things we see now, you mentioned it, is the fact that government, in some cases Congress, in some cases the Obama administration, telling General Motors they've got to fire Rick Wagoner, making decisions that traditionally and historically have been made by the private sector.
.
I watched this interview. I kept thinking, what were you guys doing for the past eight years? He makes many good points, the execution of which utterly failed during Bush/Cheney.
He is right - the key is China regarding NK. We now need to take this pithy observation and execute. We need to show China - or make conditions for China - such that a Pyongyang collapse would not be a bad for China. Ironically, NK keeps trying to fail and Seoul and Beijing keep propping it up.
The fact is, China has the most to lose with a nuclear NK. China does not want a nuclear Japan, which they will have if NK program is not arrested.
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