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Wednesday, March 26, 2008

Will the real economist in the room please stand up?

Posted by on 03.26.08 at 06:23 PM

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“I’m not an economist,” 31st Ward alderman Ray Suarez admitted this morning to all who might still have been wondering. Suarez looked alternately lost and impatient during testimony before the City Council’s housing committee by the actual economist in the room, William Strauss of the Federal Reserve Bank of Chicago—but in fairness, he wasn’t the only one. The committee was gathered to discuss a resolution, already signed by 40 aldermen, calling on Congress to pass legislation helping home owners at risk of foreclosure; Strauss was one of several experts asked to address what many American economists and noneconomists have been claiming for months: the country is experiencing an economic downturn.

But after Strauss offered a detailed analysis of the steel industry, midwestern manufacturing, and other examples of the “sluggish” economy, our aldermen, always curious, followed up with their own wide-ranging questions about government spending, mortgage lending, the Iraq war, and just about everything else except who’s going to win the Series this year. Here’s a sampling:

Suarez: Our country is spending $90 billion toward the Iraq war. How does that affect our economy?
Strauss: Well, there’s a couple of ways to look at that. That $90 billion is clearly government spending that is supporting goods produced in the United States. But the issue about whether or not the $90 billion should be spent is something I’m not prepared to comment on.
Suarez: I just need for you to comment today on whether this $90 billion could be used to motivate other positive programs in our country.
Strauss: Well, clearly, additional spending by the government tends to create positive contributions to GDP [Gross Domestic Product]. If there’s not an offset with regards to taxation, then that will create additional federal deficits, adding to the federal debt, and that could ultimately be a drag on the economy.

Third Ward alderman Pat Dowell: Do you consider a point when maybe, considering the rising price of food and gas, this might have an impact on society in terms of creating social unrest?
Strauss: I don’t know about social unrest. I don’t think we’re at those kind of levels.

Second Ward alderman Robert Fioretti: We’ve had 27,000 casualties in the war now, and as of last year two-thirds of them were head injuries. So that means health care for all those individuals. And what would that do for our economy?
Strauss: Well, I’m not an expert on the costs of the war.

Tenth Ward alderman John Pope: You are in City Hall here. With the election coming up in November, what kind of impact do you think that will have on policy or the general activity of the country?
Strauss: I have absolutely no idea.

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