Paulson Warns of Limits to Propping Up Economy
By Zachary A. Goldfarb
Treasury Secretary Henry M. Paulson Jr. said today that there are limits to what the government can do to contain the unfolding economic downturn, but he defended the steps taken to stimulate the economy and stabilize the financial markets.
"When there are excesses, excesses we've seen in the housing market, a correction there is inevitable. You're going to see a correction. Can we outlaw the forces of gravity? You know, how much can government do?" Paulson said on "Fox News Sunday. "But this administration has been focused on this."
Paulson stood by the decision last week by the Federal Reserve to help bail out investment bank Bear Stearns. "I think we made the right decision. I think the Federal Reserve made the right decision here," Paulson said.
Paulson added that the financial markets remain strong but that the government "is prepared to do what it takes to maintain the stability of our financial system."
The treasury secretary appeared on three Sunday talk shows after another brutal week for the stock market and a growing consensus among economists that the nation is in a recession. The Bush administration has taken steps to prop up the economy, but President Bush has warned against the government intervening too much in the private economy.
Critics say the administration has done too little, too late, and some have asked why the government is spending billions to prop up banks instead of to do more to help Americans whose homes are going into foreclosure. Paulson responded to such views by saying the administration is "at the right spot" in offering assistance to these homeowners. On ABC's "This Week," he cited statistics indicating that 92 percent of homeowners are making their mortgage payments on time each month.
House Speaker Nancy Pelosi (D) disagreed with Paulson, saying "I think that much of what the administration has done has been too late."
The debate over the state of the U.S. economy spilled into discussions among advisers to the presidential candidates.
On CNN's "Late Edition," Gene Sperling, of the Clinton campaign, and Douglas Holtz-Eakin, of the McCain campaign, agreed the economy was facing serious threats.
Sterling said the economy probably is in recession. Holtz-Eakin would not go that far, but acknowledged, "it's really tough out there."
Holtz-Eakin criticized the plans of the Democratic contenders: "We need more capital into our banking systems, so that these firms have a good foundation. At exactly that moment when we put capital in, if you do the right thing economically, Senators Clinton and Obama would say thank you by hitting them as hard as they can with the tax code."
Trying to knock down arguments that Clinton was a tax raiser, Sperling argued that Clinton is not in favor of tax rates going up during a recession. But he added that the Bush tax cuts should be allowed to expire in 2011. "So the only real difference between Senator Clinton and Senator McCain is a big one. It is, after 2011 and beyond, should we spend another $100 billion just for tax cuts for the well off?" he said.
Amid the economic discussions, some guests were quizzed about potential risk to the Democratic Party as its presidential nomination campaign drags onto into the spring and possible summer.
Pelosi said she thinks "the tone could be improved. I definitely do." Clinton and Obama's "people are going at each other," she added. "And I think that that's wearing out. I mean, I don't think people are interested in that."
Pelosi predicted, however, "Before we go to the convention, we will have a nominee. We're going to that convention unified."
She repeated her warning that if superdelegates at the convention overturn what happened in the state-by-state elections, "it would be harmful to the Democratic Party."
Please email us to report offensive comments.
Posted by: George | March 16, 2008 6:24 PM
Posted by: Bob22003 | March 16, 2008 6:37 PM
Posted by: RMA | March 16, 2008 6:53 PM
Posted by: Annette Keller | March 16, 2008 7:07 PM
Posted by: Rubber Ducky | March 16, 2008 7:09 PM
Posted by: Annette Keller | March 16, 2008 7:18 PM
Posted by: Annette Keller | March 16, 2008 7:22 PM
Posted by: RMA | March 16, 2008 7:51 PM
Posted by: Mainegirl | March 16, 2008 8:10 PM
Posted by: Anonymous | March 16, 2008 8:11 PM
Posted by: Anonymous | March 16, 2008 8:12 PM
Posted by: kubrickstan | March 16, 2008 8:18 PM
Posted by: Paul Nolan | March 16, 2008 8:36 PM
Posted by: David | March 16, 2008 9:14 PM
Posted by: Jackie | March 16, 2008 10:19 PM
Posted by: whiteagle38 | March 16, 2008 10:21 PM
Posted by: whiteagle38 | March 16, 2008 10:41 PM
Posted by: Chris | March 16, 2008 10:45 PM
Posted by: AgentG | March 16, 2008 11:27 PM
Posted by: an atheist | March 16, 2008 11:32 PM
Posted by: hamaser | March 17, 2008 1:06 AM
Posted by: Bob Miller | March 17, 2008 6:58 AM
Posted by: groetzinger | March 17, 2008 9:34 AM
Posted by: Janhalt | March 17, 2008 11:50 AM
Posted by: Shira | March 17, 2008 2:20 PM
Posted by: cyril, from nebraska | March 18, 2008 5:37 AM
Posted by: Nancy | March 20, 2008 1:17 PM
Posted by: Katy | March 23, 2008 4:57 PM
Posted by: Roger | March 23, 2008 5:10 PM
Posted by: Richard Pollak Alvin Texas 77511 | March 31, 2008 11:25 AM
Posted by: Herb Gura | April 5, 2008 10:27 PM
The comments to this entry are closed.