Jack Lew: Sequesters Costs 750,000 Jobs

Jack Lew: Sequesters Costs 750,000 Jobs

Jack Lew, United States Treasury Secretary spoke with FOX Business Network’s (FBN) Peter Barnes about his new role and his plans for managing the government’s finances. Jack Lew spoke about the sequester, saying, “Nobody thinks the sequester was the right solution; it was designed to be something that everyone would hate. Give it some time.”

Jack Lew also discussed why the path to a grand bargain budget deal has been so complicated, saying, “Everyone knows that we need to get there.  They just don’t how to get there…No one thought that, at the end of this round of conversations, we would be here.  If this was easy, we would have gotten it done in 2011 or we would have gotten it done in 2012. You don’t stop just because it’s hard.”

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He went on to talk about whether President Obama has given up on trying to balance the budget, saying, “My own view having been through the budget battles of the ‘80s, ‘90s and up until now, is if we can do the $4 trillion of deficit reduction that’s broadly understood to be needed to stabilize the deficit and the debt as a percentage of GDP, we then continue to work towards further fiscal policy in the future…There were deficit reduction efforts in the ‘80s, ‘90s, 1990, 1993, 1997. It took a lot of bites at the apple to get the job done. We need to take the next step.”

Jack Lew on how sequester is hurting the economy:

“First, the economic data that we’re seeing now is obviously from an earlier period so it doesn’t reflect the impact of sequester yet. I think we have to remember the sequester is different than either a government shutdown or the potential of default. It is not an on/off switch. Instead of being a cliff, it is more of a step stair to a bad place. We know that if the sequester remains in place the amount of spending that will be taken out of the economy will reduce GDP by about 0.5% from where it would have been and cost about 750,000 jobs from what we would have had. Now I would put an awful lot of energy into creating 0.5% of GDP growth and creating 750,000 jobs. I think there should be bipartisan interest in making sure that we don’t have that effect. Secondly the actual policy effects are real. They’re real in the defense world where it is not good for our strategic position in the world, that’s why you see senators like Lindsey Graham and John McCain interested in an alternative. It’s not good from a domestic perspective. A lot of the things you see around here are because we do the kind of research and development that keeps us at the cutting edge. We need to keep research and development going, we need to keep educating workers so that when there are 700 jobs they have the skills to fill them so we know there is a better way to get our fiscal house in order. Nobody thinks the sequester was the right solution; it was designed to be something that everyone would hate. Give it some time; I think we’re in an environment now where there is a constructive conversation going on. Every week we will see more and more of the impact of sequester and I continue to live my life as an optimist. I think that we come together from both sides wanting to do the best thing for the American people and that would be to have a balanced approach in the medium and long term to get our fiscal house in order and to have the kind of economic growth that will come from replacing the sequester.”


Jack Lew on whether the U.S. will get its triple-A credit rating back and whether Fitch and Moody’s will take away their negative outlook on U.S. debt:

“I am not going to comment on what rating agencies might or might not do. What we have to focus on is what are the economic challenges we face and why. We need to do a number of things. We need to take steps to have an economy where we are investing, creating jobs and improving the future for American workers. The truth of the matter is we know we need to do entitlement reform and tax reform. We need it for competitiveness and we know it on a bipartisan basis. It’s time to do it and it’s time to unleash the investment that I think will follow from a certainty that we’ve dealt with the challenge that everyone knows we need to address.”


On whether the President will incorporate some additional entitlement reforms in his next budget:

“I’m not going to speak to what’s going to be in the president’s budget, next month.  But, I think it’s actually quite interesting that in these conversations, as the president has gone through in detail what he is prepared to do, what he was prepared to do, what was in his offers that he made when he was in negotiations, there’s been a pretty broad acknowledgement that he’s willing to do tough things like chained CPI.  I’m not speaking to what’s going to be in the budget one way or the other.  If there’s going to be a meeting of the minds, a meeting of the minds is going to come from recognizing that we each have to do hard things.  We’re going to need to do some hard things on the entitlement side and Republicans are going to have to do some hard things on the revenue side. We’re going to need health care reform and tax reform and a balanced approach to finishing the job. You know, we’re more than halfway there.  We’ve done $2.5 trillion of deficit reduction.  First we did spending cuts, $1.5 trillion of spending cuts.  Then we did some revenue, but not all the revenue. We’ve got some more work to do in the entitlement area and in the revenue area.  And I actually think that we’ve been through this so many times that there is no mystery as to where the solution is.  The problem is the process we need to get there.