While some on the left side of the aisle in Congress are getting all starry-eyed about prospects of more federal stimulus spending, the first round of stimulus under President Barack Obama may have done even less to help the ailing economy than supporters claim.
On MSNBC's July 9 broadcast of "The Daily Rundown," co-hosts Chuck Todd and Savannah Guthrie interviewed CNBC "Closing Bell" anchor Maria Bartiromo from the Aspen Ideas Festival in Aspen, Colo. And Bartiromo offered her views why the economy didn't spiral out of control any more than it did. She said according to some on Wall Street, it wasn't Obama's $787-billion "stimulus" that included a huge bulk of state government bailout spending, but instead action by the Federal Reserve to put more liquidity in the economy.
"Look, there's no doubt about it - we were close to going off a cliff the weekend at Lehman Brothers declared bankruptcy, Merrill [Lynch] was sold and AIG acquired by government," Bartiromo said. "You know, I mean I think we were very close and the economy needed stimulus in a big way. It's arguable whether that stimulus that helped the economy was really because of the stimulus plan or really because of the Federal Reserve. I think most people on Wall Street will believe and will tell you that it was really the Fed action in terms of giving greater access to the banks to overnight lending that really, really got us out."
"But you know - it doesn't matter," she continued. "I mean, here we are and we are still in a very weak situation in the U.S. economy and the recovery is quite fragile and I think at this moment in time, many people are worried that in fact it may not necessarily officially be a double-dip recession that we're headed toward but we are looking at another leg down."
Guthrie asked why that if corporate earnings look strong, as they're expected to, aren't these corporations doing more to hire and lower the overall unemployment rate in the United States. According to the "Closing Bell" host, business is looking overseas because of the uncertainty the Obama administration has put into the economy with taxes and health care.
"I think right now you have hit on the one very bullish part of the economy and that is the corporate sector," Bartiromo said. "We're heading into a new quarter where we will get quarterly earnings and probably will be a better than expected. And the reason is because corporations have cut to the bone. They have cut employees. They have cut R&D spending. They've cut anything they can. They cut all the fat out so we are talking about enormous cash levels. What they're doing with the cash is another question. They're sitting on it. They're not investing in the U.S. economy. They're actually following the growth overseas. PepsiCo [is] building 13 plants in China. GE building more places, businesses in India. You are seeing businesses follow the growth outside of the United States. But absolutely - that is the positive. The reason that they're not hiring right now is because there is a tremendous amount of uncertainty. And that has everything to do with the policies coming out of this administration. Higher taxes in 2011, higher expenses as a result of health care costs. That's why they're not hiring."
So what can be done to encourage more hiring with all this cash on the books by major businesses? According to the "Closing Bell" host, business needs more incentives to hire and she rattled off some for MSNBC viewers.
"One they could do soon is not allow the Bush tax cuts to expire in 2011," she said. "Giving some - the end of the 2010, giving some confidence that they won't have that added expense. A lot of people are worried about that. Now, Tim Geithner had an important interview with Larry Kudlow last week and Geithner said that he is prepared to keep capital gains and dividends taxes at 20 percent. This was very, very positive and I think that is part of the reason the market has been rallying the last three days because there was an expectation that capital gains taxes would go all the way up to 39.6 percent. If, in fact, the administration keeps it at 20 percent, I think that's very positive."