Former Clinton Aide Stephanopoulos to Former Clinton Official Reich: What More Can Government Do for Economy?

Former Clinton operative turned journalist George Stephanopoulos interviewed former Clinton Labor Secretary Robert Reich on Friday's Good Morning America and wondered what more the government can do to bring down unemployment.

After business reporter Suzy Welch highlighted the plight of states with high unemployment having to layoff teachers, Stephanopoulos advocated, "Suzy, that would mean more stimulus, more aid to state and local governments. Can you buy that?"

Talking to his former colleague, Reich, the anchor wondered, "So, the big question is, what more, if anything, does the government need to do about [unemployment]?"

Since taking over the co-hosting job on Good Morning America last year, Stephanopoulos has been quite chummy with his ex-coworkers from the Democratic White House. On January 4, James Carville appeared in a segment to tout the new anchor's intelligence: "I once said, 'If you converted his IQ to Fahrenheit, you could boil water."

Carville appeared again on the March 1 GMA and both men agreed that passing health care was the only option for their fellow Democrats.

Stephanopoulos spun, "...The Democrats in the White House who are pushing for this strategy, pushing for passage, say that once this does pass, the country will get it. Democrats will be unified. They'll get a huge benefit."

A transcript of the April 2 segment, which aired at 7:04am EDT, follows:

GEORGE STEPHANOPOULOS: We're now joined for more on this by former Labor Secretary Robert Reich. He's now the professor at U Cal Berkeley, along with the former editor of the Harvard Business Review, co-author of Winning. And our new GMA contributor on business and economic issues, Suzy Welch. Welcome to you both. And, Bob, let me begin with you. Is this the turning point?

ROBERT REICH (Former Secretary of Labor): We hope so, George. Certainly, the job numbers have been getting a little better over the past few months or maybe I should say thought as bad as they have been. But the big question mark is, number one, how much are the census hirings, these temporary census hiring workers. How much are they going to distort the workers. But, how much can it be sustained because the good job numbers are in part a result of the stimulus, really at its peak right now, and, secondly, consumers who were spending a little bit more but wages have not increased.

STEPHANOPOULOS: Those are the big questions, Suzy. You know, those census hirings going to continue through the spring. But we also have this issue where businesses, productivity has gone up. Business has found a way to do more and make more with fewer workers.

SUZY WELCH (Business journalist): Right. And what we're seeing is this is a recovery that is being led by corporate profit, not like previous recoveries. And I do think we've seen the bottom not that we'll shoot straight up. But I do think we've seen the bottom. All the indicators show positive signs. And yet the question is, is it a boom or a boomlet? Profits have been coming into the system, but that's because of these deep, deep cuts that companies have made.

STEPHANOPOULOS: That's right. And, Bob, echoing your point, Treasury Secretary Tim Geithner said unemployment will be unacceptably high for a long period of time. So, the big question is, what more, if anything, does the government need to do about it?

WELCH: Well, the government certainly can help small businesses, George, in terms of getting credit to them. Although small businesses are getting a little bit more credit than they had before. They can borrow a little bit more easily than before. They are the engines of job growth. They are still having a difficult time getting the- borrowing the money they need. The second thing the government can do is make it a little bit easier for state and local governments to get by. Remember, state and local governments are restricted in terms of their deficits. And as a result, they are continuing to shed jobs by, you know, millions including teachers and firefighter and everyone else and raise taxes. This is a drag on the economy.

STEPHANOPOULOS: Suzy, that would mean more stimulus, more aid to state and local governments. Can you buy that?

WELCH: Well, you know, George, you have to remember that small business has been through a car wreck. They feel as if they just, you know, had the wind kicked out of them. Recession came faster, hit harder and really hit small business. So, what they're worried about is are taxes going to go up? Is there health care costs going to go up? Will they have to pay more for energy? And if you keep stimulating the public sector, others will say what about the real economy? Where is the stimulus for us?

STEPHANOPOULOS: The other thing they have to worry about, Bob, is interest rates. One of the- the recovery has been fueled by very low interest rates for a very long time right now and the question is, how long can the Fed go keeping interest rates these low [sic]?

REICH: Well, the Fed has signaled that it's going to keep rates low for a very long time but the tricky bit here is the possibility of inflation. The Fed does not want to keep interest rates so low that it creates, somewhere down the line some sort of a bubble, or it creates the expectation of inflation and so it's a very delicate balancing act.

STEPHANOPOULOS: Very delicate. Susy, we only have 30 seconds left. What should Americans expect going forward? Are we going- Even if we start to recover are we going to have higher unemployment than we've been used to?

WELCH: We're going to certainly have higher unemployment than anyone would like and probably than we've been used to because companies are going to be very slow- They're going to be cautiously optimistic, with the emphasis on cautious in bringing people back in. They don't want to go through what they went through before and don't want to let people go and been able to bring in profits with fewer people. And, so I think we will not see rapid job growth in the way that anybody would want so we're with these numbers for awhile now.