Professor Richard Grossman, the Chair of the University’s Economics Department, recently spoke to three different NewsLink radio stations in Georgia, New York and Kentucky as part of the network’s series on the Bush presidency. For the series, stations devoted entire days to certain key issues, from national security to terrorism and the economy.

“The network wasn’t happy because I kept saying bad things about the Bush administration,” Grossman said. “Now I can’t blame the president for everything, but he ran the show for eight years—you can’t say he had nothing to do with it.”

On air, Grossman spoke about the many failures of the Bush administration.

“The budget is in awful shape,” Grossman said. “Environmental policy is in awful shape. Our energy policy—I’m not sure if we even have one. The financial mess is just that—a mess.

Grossman targeted Alan Greenspan as a major factor in the failing economy.

“The Chair of the Federal Reserve is a very important post, not just because of what he does, but because a lot of people look to the Fed,” Grossman said. “So, when Greenspan endorsed tax cuts, it carried a lot of weight. He shouldn’t have done that; he added credibility when the Bush tax cut policy was not credible.”

Grossman added that Greenspan’s partisanship negatively affected his work as Chair of the Federal Reserve.

“My disappointment in Alan Greenspan stems from the fact that when a Democrat was president, he was very much in favor of fiscal responsibility and strongly believed that the government should not run a deficit,” Grossman said. “But when a Republican was President, he wanted to promote large tax cuts; we do better when the Chair of the Fed is not a partisan person. Good monetary policy is good monetary policy no matter who is running the country.”

While the nation’s consumer market has skyrocketed and taken to overspending in recent years, Grossman believes that the government still has a responsibility to maintain sound policy.

“On consumer behavior, we borrow a lot and the banks let us, whether or not we are credit worthy,” he said. “There is always an incentive to act irresponsibly, and the government isn’t going to stop the wanting. But, in some ways it is up to the government to make the environment less friendly towards that behavior—greater regulation, more efficient regulation can slow these things down.”

According to Grossman, for economists like him, pressure to predict the outcome of the economic crisis is only increasing.

“Part of being a good economist is knowing when to predict and when not to,” Grossman said. “I try not to overdo it, but I get asked to predict a lot. I work on financial history, like banking crises that happened a long time ago; these things become popular when things go wrong in the economy.”

Grossman suggests, however, that the current economic situation might not be as permanent as many expect.

“I don’t think it will last five years. We’re not going to have a total economic breakdown,” he said. “We’re not going into an infinite negative tailspin, but I do see the economy slowing for a good chunk of 2009, maybe all of it…2010 might be better. The economy will slow before it speeds up again, but it will pick up eventually.”

Grossman also predicts that unemployment will rise before it gets better—a nine to ten percent increase is possible this year—though he is sure it will never rival Great Depression levels.

“The Great Depression is a completely different ballgame,” he said. “There was a wholesale breakdown of institutions. They didn’t have the institutions that we have now, like unemployment insurance, deposit insurance, and social security. In the past, the government didn’t recognize how bad things could get, and they didn’t realize they had an obligation.”

While he acknowledged that the Bush administration took action, Grossman believes that their plan was condemned from the start.
“There needed to be more transparency,” he said. “The Bush administration did an awful job.”

Grossman added that the Bush administration failed because they did nothing when action was required.

“I can only use ‘irresponsible’ so many times,” he said. “There was fiscal irresponsibility and regulatory neglect. Bush left untended what needed tending—that’s the bottom line. The idea that the government doesn’t need to intervene is wrong; the government does, partly because Bush did such a bad job.”

Grossman said that it is because the past administration did not intervene, government is playing a much bigger role today.
“If the government had intervened more wisely in the past, we wouldn’t have to do so much wholesale intervention now,” Grossman said.
Turning towards the future, Grossman believes bi-partisanship is possible.

“It would be nice to have bipartisan[ship], but we have to do something fast,” Grossman said. “Fortunately, we have a President and a Congress of the same party, so I hope this means that they will be in agreement.”