Newly elected members of Congress hear dismal economic forecast at Harvard conference

By JEREMY P. JACOBS, PolitickerMA.com Reporter
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Newly elected members of Congress listen to panelists discuss the current economic crisis
CAMBRIDGE - Forty newly elected members of Congress gathered Thursday morning to hear some of Massachusetts' finest economists discuss the current crisis and possible remedies.
And one thing became clear very quickly: No one knows a surefire way out of the mess.
The forum took place at the Institute of Politics at Harvard University's Kennedy School of Government as part of its four-day conference this week for recently elected members of Congress. It featured panelists with economic expertise from the Kennedy School, Harvard's economics department and Harvard's law school.
Jeffrey Frankel, an economics professor at the Kennedy School and former member of President Bill Clinton's council of economic advisors, summed up the tone of the meeting in his opening remarks.
"No one thoroughly understands the economic crisis," Frankel said.
As the representative-elects listened intently, Frankel discussed what he viewed as the causes for the current crisis, tracing it back to the subprime mortgage crisis that hit in the summer of 2007. On Monday, the NBER Business Cycle Dating Committee, of which Frankel is a member, announced that the recession began in December of 2007 and has not ended. That makes it longer than the country's previous two recessions.
"Everyone expects the recession to continue at least into the middle of 2009," Frankel said.
Gregory Mankiw, an economics professor at Harvard University, said that the current downturn is "one of those areas where economists do not see through a single lens" and that "it is very hard for anyone in your shoes to figure out what is the right thing to do."
Mankiw said the root of the problem was many financial institutions betting that housing prices nationwide would not drop by 20 percent, which they haven't since the 1930s. When those prices did drop 20 percent, it shook the foundation of those institutions investments.
Mankiw said that economists are looking at three areas for ways to fix the current problem: monetary policy, fiscal policy and fixing the financial system. On fiscal policy, which Congress controls, Mankiw said the tension is between cutting taxes and increasing government spending to create jobs and, therefore, increase consumer spending. Most textbooks, Mankiw said, agree that an influx of government spending most effectively accomplishes that goal. But, he added, not all economists agree on that point.
"I don't think the economics community has a very clear answer on that question," he said.
Elizabeth Warren, a professor at Harvard Law School and a member of the newly appointed committee charged with overseeing the Wall Street bailout package, pointed to demographical factors for the economic problems. Fully employed males, she said, make less money now than they did in the 1970s when adjusted for inflation. However, spending on housing, healthcare, child care, transportation and taxes has increased, Warren said, which has lead to more debt and less saving. Warren also prescribed establishing a Consumer Product Safety Commission to monitor financial consumer products.
"Every can of soda, every candy, everything we touch," she said, "is regulated for safety at some level...and yet financial products are not governed by that; they are governed by contracts."
The newly-elected members of Congress listened silently throughout the panelist opened remarks and then posed a few questions before session adjourned.
The new members that are attending the conference include the following, listed alphabetically by state:
Parker Griffith (AL-5, D)
Ann Kirpatrick (AZ-01, D)
Jackie Speier (CA-12, D)
Laura Richardson (CA-37, D)
Jared Polis (CO-02, D)
Mike Coffman (CO-06, R)
Jim Himes (CT-04, D)
Alan Grayson (FL-8, D)
Bill Posey (FL-15, R)
Tom Rooney (FL-16, R)
Suzanne Kosmas (FL-24, D)
Debbie Halvorson (IL-11, D)
Bill Foster (IL-14, D)
Aaron Schock (IL-18, R)
Steve Scalise (LA-01, R)
Niki Tsongas (MA-05, D)
Frank Kratovil (MD-01, D)
Chellie Pingree (ME-01, D)
Mark Schauer (MI-07, D)
Gary Peters (MI-09, D)
Erik Paulsen (MN-03, R)
Larry Kissell (NC-08, D)
John Adler (NJ-03, D)
Leonard Lance (NJ-07, R)
Martin Heinrich (NM-01, D)
Harry Teague (NM-02, D)
Ben Lujan (NM-03, D)
Paul Tonko (NY-21, D)
Dan Maffei (NY-25, D)
Chris Lee (NY-26, R)
Steve Driehaus (OH-1, D)
Marcia Fudge (OH-11, D)
John Boccieri (OH-16, D)
Kathy Dahlkemper (PA-03, D)
Pedro Pierluisi (PR-AL, D)
Jason Chaffetz (UT-03, R)
Glenn Nye (VA-2, D)
Tom Perriello (VA-05, D)
Gerry Connolly (VA-11, D)
Cynthia Lummis (WY-AL, R)
Jeremy P. Jacobs is a PolitickerMA.com Reporter and can be reached via email at jeremy.jacobs@politickerma.com.