On Bloomberg TV, 4:12 PM EST, March 7 2008. I need to look for the tape...
Lindsey: We have headlines coming out of washington by way of california, hank paulson commenting at a press conference in the golden state, saying that u.s. capital markets are under stress right now, clearly the jobs numbers are not welcome. Let' s talk more about this theme, is the u.s. economy in a recession? Where do we go from here? Brad DeLong, a graduate professor of economics from UC-Berkeley, joining us from the economic conference in California, great to have you on the show, thank you for joining us. I know you were expecting to talk about free trade, [but] I have to ask you about the economy. Are we in a recession?
DeLong: Probably. If we are not in a recession we are teetering on the edge. The uestion is: will there be a big recession or a small recession, or only a near-recession that feels like a recession to an awful lot of people. Those thousands of jobs that were not there that we thought would be.
Lindsey: That is an excellent point, when people talk about the weather being 30 degrees but it feels like 10 degrees, is that like what you are talking about? even though we are not technically in a recession -- we cannot even know until we look backwards. even if it -- so, and so facto, we are in one if it feels like one?
DeLong: As far as policy and attitudes are concerned.
Lindsey: When do we know? I know that officially you have to back the date, say it's a technically we are not in one, when will we really -- so you could say technically be are not in one, so when do we know
DeLong: The person to ask is [Jim Poterba] in the next room, but he is not out here. He is President of the National Bureau of Economic Research, [which] will probably wait months or even a year [before announcing] to see if the recession begins.
Lindsey: At the conference, what is the mood? what are you in your colleagues talking about?
DeLong: That we might as well be in a recession and we should treat it as long as far as economic policy is concerned. hank paulson will be here this evening reassuring everybody, larry summers was here this morning scaring everyone.
Lindsey: Larry has been negative for a while, to give him credit it looks like he might be right. so, maybe the economy is under the weather. what is the medicine? is the fed doing enough? is the dosage big enough?
DeLong: I would say that after this morning's numbers the fed thinks they did not do enough last month. If you want to think about it, something like 1/1 hundredth of the great depression arrived on our doorstep this morning. What the federal reserve is doing is cutting interest rates, but their problem is they are starting to run out of room. The short-term treasury bill rates are down [to] 1.5% and they cannot be cut below zero. They only have 1.5% worth of cutting to do -- less if they want to maintain the treasury bill market as we know it. That means it is getting to be time for a fiscal policy, for the government to stop worrying about balancing its budget for a while and start spending more money, and also for regulatory policy--trying to reassure and stabilize financial markets.
Lindsey: I have to leave you there, Brad. Thank you very much for joining us...