(Updates with Ron Paul comment in 19th paragraph.)
June 5 (Bloomberg) -- Austan Goolsbee, President Barack Obama’s chief economist, said the government is seeking to help private businesses spur job growth through tax incentives and investment subsidies.
“We want to leverage the private sector money,” Goolsbee, chairman of the Council of Economic Advisers, said in an interview today on CNN’s “State of the Union” program. “Corporations have become profitable again,” he said. “What we need to do now is get the private sector stood up.”
Employers added 54,000 jobs in May, the smallest increase in eight months, the Labor Department reported in Washington. The unemployment rate rose 0.1 percent to 9.1 percent.
Economists expected the numbers to show employers added 165,000 jobs in May, according to the median forecast in a Bloomberg survey.
“Don’t make too much of any one jobs report because they’re highly variable,” Goolsbee said on ABC’s “This Week.”
He said on CNN that though the country still faces economic “headwinds,” the president’s plan has helped create more than 2 million private-sector jobs over the past 15 months. The administration is aiming to make it easier and cheaper to create private sector jobs through payroll tax cuts and investment subsidies, Goolsbee said.
The debate over raising the government’s $14.3 trillion debt ceiling “is going to be resolved because it has to be,” he said on ABC.
“It would be extremely dangerous to get right up to the edge,” Goolsbee said. “You’ve seen some people even saying, well, it’d be OK if we defaulted for a short period. That’s not true; we shouldn’t do that. We should resolve this over the next month.”
Congressional Republicans are insisting on major spending cuts in exchange for their agreement to raise the debt limit before an Aug. 2 deadline.
Alice M. Rivlin, the White House budget director under Democratic President Bill Clinton, said on CNN the U.S. needs a long-range plan to reduce spending, including restructuring Medicare and Medicaid to slow their growth.
“There are different ways of doing that,” she said. House Republicans have proposed privatizing Medicare.
‘Very Bad Thing’
She said large short-term spending cuts would endanger the economic recovery and would be a “very bad thing to do.”
Douglas Holtz-Eakin, who was chief economic adviser to 2008 Republican presidential nominee Senator John McCain of Arizona, said on CNN he wasn’t so concerned about near-term spending cuts.
“I don’t think I’ve ever seen a Congress cut so aggressively that it endangers the economy,” he said. “I live for that moment.”
Moody’s Investors Service Inc. said on June 2 that it will put the U.S. government’s Aaa credit rating on U.S. Treasury bonds under review for a downgrade unless there’s progress on increasing the debt limit by mid-July.
A lower credit rating would immediately raise the cost of debt on new issuances. In turn, higher interest rates would make it even more difficult for lawmakers to reduce the annual federal deficit, which keeps adding to the public debt.
Rivlin said it would be “unacceptable” for the U.S. to default on its debt. “Moody’s is right to be worried,” she said.
Interest Rate Increase
If that were to occur, Holtz-Eakin said, “every interest rate in this economy -- your credit card rates, your auto loans, your mortgages, your student loans, everything you touch -- is going to get more expensive, not just for a day or two, permanently.
“We will have been labeled a bad borrower,” he said. “It will cost the nation as a whole.”
Republican presidential candidate Ron Paul said the dispute over raising the debt ceiling is “100 percent gamesmanship.”
“It’s who’s going to get the blame and who’s going to get the power and who’s going to get the political benefits and who won’t have to have their budget cut,” said Paul in an interview on CNN’s “State of the Union” today.
In the end, House Republicans will agree to raise the debt limit, the Texas congressman predicted.
“It will come down to the wire and they’ll pass it because they will beat the drums of fear,” said Paul. “That’s how we get things done in Washington.”
House Minority Leader Nancy Pelosi, a California Democrat, defended Obama’s efforts to improve the fragile economy and said that House Republicans need to do more to help the economy recover further, in an interview on CBS’s “Face the Nation.”
“He pulled us from the brink of the financial crisis,” she said. Republicans, who hold the majority in the House, need to do more, she added.
“They set the agenda,” Pelosi said. “Every day that they’re there, another day goes by and there isn’t a jobs agenda or a jobs bill that has come to the floor.”
--With assistance from Mike Dorning and Lisa Lerer in Washington. Editors: Laurie Asseo, Ann Hughey.
To contact the reporter on this story: Kelly Riddell in Washington at Kriddell1@bloomberg.net
To contact the editor responsible for this story: Mark Silva at firstname.lastname@example.org