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Part of our business alerted -- growing threat of 31 points today posting its biggest gain since April 1 after the Federal Reserve.
-- interest rates unchanged -- says inflation remains a significant worry.
My next guest says that the Fed is in the right place today especially in the face of -- -- stagflation.
Slowing economy with inflationary pressures.
Gene Sperling as the former national economic advisor.
For President Bill Clinton and the senior fellow at the Center for American Progress he joins us now on the phone hygiene could you -- -- me.
What do you make of of this environment of that is kind of between a rock and a hard place -- what what do you do.
Yet now it is very difficult I mean it.
It may not be like stagflation and that ugly it's warm.
It's the least that many -- -- -- stagflation.
You are dealing with simultaneously.
And in you know -- inflationary environment and yet you've got a very tenuous economy almost a perfect storm.
Of higher energy prices stagnant wages.
You know falling house prices hitting consumers at the same time.
So you know it in the sense.
Sometimes polite thing to do I think -- they hit the pause button.
And I think that the bad but the encrypting is that the bad.
Went from collapse.
The other there of their last session where -- day.
Said that they thought maybe the risk of -- downturn we're starting to diminished now they've kind of gone too were very worried on both sides.
And I think in this case probably.
-- hitting the pause button was that the best of bad.
You know what Paul Volcker was chairman of the Federal Reserve he had a choice -- As you know dealing with runaway inflation which was really had a hand and a slowing economy which was a very big problem.
And he decided to address.
Inflation and as you know great student of economic history -- -- his rate increases were stunning at the time one -- Percentage point at a time often times.
That was where he cut his battle.
It is this the Fed seems to be saying the greater evil.
Is a slow down and we'll address inflation later -- to their detriment.
You know again -- I think that that -- with bad choices they're probably the best play and let me just say.
I don't I am not philosophically against the idea -- can ever make a preemptive.
To either stop inflation in its tracks if you really think it's coming.
The reason one or what do think it's so different from right now it is just very little signs that workers have the kind of bargaining power.
You know -- -- what we're seeing is really several years as stagflation you've seen.
Workers happening to compete.
You know globally.
So this idea.
And certainly of course you know bargaining rights have not been strengthened over the last decade.
So the idea that somehow you've got inflation and workers can just walk into their plot does -- day you better get your -- and you're gonna get that cycle.
Just seems that more of an outdated notion right now.
Still wage inflation is picking up a little -- Iraq animated it's it's -- decidedly Tamer than you might think -- is -- but it is still there let me ask you -- in this environment.
And and let's say the economy continues to slow or worse.
Would you advise its raising taxes on on anyone.
In in that -- Well I I think that.
What you want to do if you want to have a fiscally responsible.
Proposal in the long term.
Anyone have a cumulative proposal.
In the short term -- I think.
You know right now and and but you know I support.
You know having more spin -- -- policy.
In the you know current political environment and disclosures steak guy he obviously Democrat and now and then and helping out the Obama economic team -- I think the idea that in the short term.
You're offering you know 5075.
Billion dollars of tax cut.
If -- paid for over a long period of time.
In the -- short term when you're hurting you've got a net tax cut so -- stimulant that.
In the long term if that's part of returning to fiscal discipline in the economy's doing okay -- I think -- -- solid.
-- -- -- Last tax relief you alluded to gene does not take into account -- -- tax hikes that a Barack Obama what happened capital gains and dividends and the upper income the folks.
Well -- what would you are just that don't -- would you be slow to.
-- those taxes in a slowing economy.
Well look let's just be very clear.
With Senator Obama has called for is on everybody under 250000.
And that -- Cot I realize that potential benefits even know where would you counsel -- would you be -- that in this capital gains and dividend he's -- not keeping.
The tax cuts where you are so all you're really talking about all he's talking about -- he's saying.
When the tax -- on the top two rate expires we go to 2011.
He would let them expire those marginal rates so that money to be used to do health care and respect.
In a fiscally responsible way.
I'm assuming I think most of us are hoping that the economy is at full strength as we go to 2011 my god if he -- -- you know when he's not.
All I wanna know do you would you yeah later today on that it it is not if it is worse than today.
Well you know I think you have to look at every economic situation -- and I think -- -- doing a long term plan -- fiscal responsibility if you're in a recession and you got to stimulate the economy and and and you have to have that flexibility.
Jeanne thank you very much Gene -- Thank you.
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