Addressing a generous mix of faculty and students, Stanford University professor Michael Boskin spoke Tuesday about the dangers of the current budget deficit.
Boskin, Friedman professor of economics and senior Fellow at the Hoover Institution, spoke at the sixth annual John W. Pope lecture, stressing the importance of sensible policy responses to improve the current economic condition.
According to the College of Management website, the John W. Pope lecture series is an annual lecture series organized jointly by the Department of Political Science, School of Public and International Affairs in the College of Humanities and Social Sciences and the Department of Economics in the Poole College of Management for discussions on topics of “political and economic interest”. The series is supported by a grant from the John W. Pope Foundation, which funds research activities on campus.
While Boskin began his lecture with a description of both the state of the economy and its origins, his message quickly shifted to address how to improve the economy by undertaking various financial measures.
Discussing the current economic condition, Boskin said the potential range for growth even at full employment is at most two to three percent.
“Comparing the present recovery with that from the previous two recessions, the current improvement is a half-speed recovery from previous recessions,” Boskin said. “The previous recessions, were of a much milder nature than the current.”
Boskin said he could show how the previous quarter century coincided with a similar period of growth for the rest of the world.
“From 1982 to 2007, the U.S. was in a recession for about five percent of the time—a period which coincided with a period of high world GDP growth,” Boskin said. “This was the period when the U.S. economy witnessed a period of tremendous growth and occupied a huge share of the global economy.”
In recent times, however, Boskin said this influence has declined considerably. Throwing light on the emergence of markets and countries across the world, Boskin said it is important now for the U.S. economy for the emerging markets to remain strong.
“The developing world has become 40% of the world’s consumption. Countries like Brazil, China and India have much larger reinforced internal markets than before,” said Boskin. “Emerging countries going down isn’t good for us anymore.”
Discussing ways to improve the current economic situation, Boskin said “sensible policy responses” are essential in such conditions.
Regarding monetary measures, Boskin said the Federal Reserve needs to reduce rates to combat the recession, but it should also raise them more quickly during the expansion.
Boskin also stressed the need to replenish military equipment—spending he said would be done anyway. Extending unemployment benefits, cutting payroll taxes and predictable withdrawing of liquidity to timely rein in inflation were also some of the steps proposed to improve the economy.
Another measure Boskin argued for was for regulators to have a greater role.
“We need regulators that regulate,” Boskin said. “We should also consider reforming our Too Big To Fail policy.”
For many students, including Aaron Olive, an undeclared freshman in the College of Management, this was their first lecture series at the University, and an experience they feel they benefited from greatly.
“This was the first time I attended a lecture series such as this, and it was really very interesting to hear Boskin speak on issues of importance to us and see how they apply to our future,” Olive said. “It’s important to stay informed and read the news to be regularly updated of such issues as they have an impact on us.”
