Goolsbee at NABE
This morning, Austan Goolsbee, the Chairman of the Council of Economic Advisors, addressed the members of the National Association for Business Economics at their annual policy conference in Arlington, Virginia. Dr. Goolsbee discussed the dramatic steps taken by policymakers to tackle the economic crisis. He referred to these actions as "phase one" where the goal was to stabilize economic growth, stop the erosion of employment losses, and restore confidence. On that score, he noted the progress made to date, stressing the renewed optimism in the economy (including higher projections for growth in 2011 and 2012 than were forecast even a few months ago). The one exception to this, he added, was that "small business has tended to lag in this cycle" and that is why new policies have been directed toward them.
We are now transitioning into "phase two" of the recovery process, where the focus will be on economic growth, he said. To him, the most pressing problem is for the country to get on a sustainable growth path. While others focus on the challenges of the fiscal deficit (which he also agreed was a problem and needed a long-term fix), the other way for us to pass on a standard of living to our kids which is lower for them than for us is to not invest in the future. He stressed the essential elements for growth from the Solow model: investments in physical capital, human capital, and productive capital (or innovation). Therefore, the areas that we should be focusing our attention to for sustainable long-term growth are increasing our overall business investment, lifting the number of exports, and greater small business expansion and entrepreneurship. On the latter point, he particularly emphasized the new Startup America initiative as an example of finding public-private partnerships to help address these issues.
With all of that said, the country is still just transitioning to "phase two." It is not fully recovered yet, and there are uncertainties ahead which could alter our progress (e.g., oil shocks, etc.). Nonetheless, he felt that the economy would return to its long-run growth trajectory, especially if we make smart investments moving forward. From my perspective, I was happy to see that an emphasis on entrepreneurship is seen as a crucial component for policymakers to focus on for sustainable economic growth.