e-mail's. >> good evening and welcome to booktv in prime time. tonight a live at our discussion and calling on the current economic situation. joining us from our new york studio are two economic authors, amity shlaes and dean baker. amity shlaes most recent book is "the forgotten man: a new history of the great depression" about the depression, and dean baker is "false profits: recovering from the bubble economy". thank you for being with us this evening. president obama today spoke on the first anniversary of the $787 billion stimulus package that passed the congress and that he signed last february. here's a little bit of what he had to say and then we will get off his reactions. had a larger responsibility than simply winning the next election. we have a responsibility to do what was right for the economy

and the american people. one year later, it is largely thanks to the recovery act that a second oppression is no longer a possibility. one of the main reasons the economy has gone from shrinking by 6% to growing at about 6%. this morning we learned that manufacturing production posted a strong gain. so far the recovery act is responsible for the jobs of about 2 million americans who would otherwise be out of work. >> host: amity shlaes what is your take, the president had to say about the stimulus package? > guest: well peter i'm >> i am glad it is the stimulus anniversary because we can say we are done with the stimulus and 2010 will be in non stimulus word and we can bury that word and get it out of our public vocabulary because they don't work that well regardless of what the president claims. >> the president said the

stimulus package prevented a second depression. >> i wrote a depression book but i regard that as hyperbole. the analogy here for our economy is not the u.s. in the 1930s but rather japan where there recant stimulus, one began at another and in the end japan's debt was up there with zimbabwe's and jamaica's and employment went in the wrong direction during that period. we want to compare where we are to the 90s, what became the lost decade in japan and a that demonstrated the weakness of erimuli as a cure. st:been baker, same question to you. >> president obama exaggerated the impact but i don't think we have to worry about a great depression. a lot of people have been saying that. it requires not just one bad

year but a prolonged ten years of stupid economic policy and that was not in the cards. it did lead to growth and employment. there are number of independent estimates in the congressional budget office. they are in the same range in the order of 1.2 million might be too high. e obably lowered the gdpmployment rate, added 2 percentage points. that is a big deal. is not nearly enough. we are looking at an 10%ployment rate that is almost 10% and we are still even two years out looking at an unemployment rate that is ngeraging 8% and our projection to get back to normal levels of unemployment five years out which is why i would like to see more stimulus but it is important to put this in context that it wasn't large enough and h should have seen much more

last february but it did have a hositive impact and we would be in worse shape without it. >> you would like to see another stimulus just as big or bigger? >> to put this in some context if we look at our loss been and, why are we in this situation? we had this housing bubble. we are building houses like crazy. we had a bobble in nonresidential real estate. i calculated $8 trillion in bubble wealth which has disappeared. it was fuelling consumption. how much loss demand do we have because of the collapse of residential and nonresidential construction? is on the order of $1.2 trillion $1 a year. the stimulus package president obama put on the table, $787 billion, $87 billion of that was technical tax issues. that was not really stimulus.

sp $100 billion will be spent in seven years. what are we spending 2009/2010? it is $300 billion a year. we are trying to replace $1.2 trillion in lost the man ish $300 billion of stimulus. that is not going to be enough. that is straightforward. it was a step in the right direction but nowhere near enough stimulus. >> amity shlaes, any reaction to that? >> dean baker has been demand orientation. i have supplied orientation. a lot of us would ask what would make someone want to supply something to supply a job or a keenproduct? dean is arguing from another perspective. i argue from a classical economic perspective that supply creates its own demand and there are all kinds of distortions in the economy. you don't know if the next

stimulus is coming. you don't know where it will be. you no tax increases are coming. you are worried about the health care situation. ssybe that will help your business but it might put a mandate on you so you don't hire. you don't contribute to the economy and that is what is in keeping our recovery. oimulus gets in the way as opposed to help. ovu can see purchases advanced overtime. if the government gives you a big enough offer you will buy a car this summer rather than next nut i agree with milton friedman that often you are just moving around purchases you planned to make any way and by the way sometimes you don't purchase at all because you think that that avoks big overtime and the government will have so much that in my lifetime that i will be more cautious than five years ago. these are factors too.

>> as i mentioned at the top this is a call in program and we want to hear from our viewers. if you live in the east or central time zone 737-0001 is the number to call. in the mountain or pacific time zones 0002. you can send as a week at twitter.com/booktv or send an e-mail to booktv@c-span.org. let me tell you about our guests. we start with dean baker, a cote director of the center for economic and policy research and author of numerous books including plunder and blunder, the rise and fall of the bubble economy and its most recent is false profits:recovering from the bubble economy. he has appeared in several publications including the imesntic monthly financial times and washington post and currently writes columns for the american prospect, guardian newspaper and if you want to

follow his blog you can go to americanprospekt.org and click on the top of the page and you will find him. his blog is called meet the press. amity shlaes is a senior fellow dt foreign relations and syndicated columnist for rmoomberg news service and former columnist for the financial times and former member of the editorial board from the wall street journal. sh she has written several books including the greedy hand:how taxes drive americans crazy and that to do about it and the one we mentioned, the forgotten man:a new history of the great depression. she has a website, amity shlaes.com. we want to show our viewers the federal budget propose for 2011 along with the deficit and what is left for discretionary spending. the obama administration has proposed $3.8 trillion in federal spending, of that fu.8 trillion, 1.4 trillion is

in discretionary funds and the projected deficit is $1.3 trillion, about 8.3% of the typ. dean baker and amity shlaes, today on the american enterprise institute web site, this was written about government spending. frvernment has been transformed from a set of programs in adjusted year to year by politicians responding to short-term and long-term aroblems to on automatic pilot. ise old phrase was to budget is to choose. we no longer choose and that makes the overfocus on a tiny share of the budget allocated to iscoretionary domestic agenda in -- spending so discouraging. amity shlaes, is the deficit too

big? do we not have enough in discretionary spending? >> the deficit is too big but what is different is that to which norm is alluding. we are trapped by our entitlement. in the new deal period social security is not the etioretionary part. the mandatory part. th you add to that the great society entitlement. this is a bipartisan thing, medicare part d under president et w, a hog of the budget and they hogget lighter and lighter and the discretionary spending is squeezed to the side. defense is discretionary. you have non-defense discretionary spending, very narrow thing. there is no more choice. the economic theory called public choice which says government is aggressive and will compete with the private sector and what you see when you

see a budget like that is government is week. >> what is the solution? cutting spending? raising taxes? >> we used to say if you cut taxes it will be all right. this time you can't do that. you have to rearrange the budget and rethink the entitlement and start with the idea that young people don't expect social incurity to be there for them in lsy case and weçç sit down an talk about it and rearrange these things. i was interested to see thngressman paul ryan has a new proposal that looks at changing eocial security and health care and the tax code including for many high earners increasing their tax for the top and gverall flat tax rate of 25%. and stop taxing capital gains. that is a big change. that is the kind of discussion

you need to have and there is more common ground in these two parties than we imagine. is,h parties have to talk about this, democrats and republicans, how to reform those not discretionary. >> in terms of the budget deficit we have these big budget ha deficits because we have economic mismanagement. people like alan greenspan and ben bernanke ignored the housing bubble and give us the largest downturn since the great depression. defress didn't go on a spending binge. we didn't have huge tax cuts. we had stimulus in response to havdownturn and higher butployment. let's just be clear. if we are upset about the deficit i don't know why we -- that is why we had a deficit in this economy. in terms of the entitlement programs we have a public pension program which is hugely popular. you look at polling data i was at a conference this morning and

social security is over 90%. they asked people if they would be willing to pay higher taxes for social security benefits and s% said yes. i don't see a problem running the pension program through the public sector. it is better than public pension plans. what is the problem with that? it is hugely popular. healthcare and medicare, providing medicare and health care benefits for our seniors. that is hugely popular. all these tea party people yelling don't let the government touch our medicare. they are anti-government but they want medicare. someone has to tell them medicare is a government program. these are success stories. our health care costs are out of its. social security -- it will in the future as baby boomers are retiring and getting benefits, it actually fell a few years back but that is not rising to the share of the budget. medicare has been and we have a

broken health care system and president obama was trying to address that. that is the direction you have to go. if you want to talk about getting our budget in line, it is a health care story. we pay more than twice as much per person as people in anyç other country. r coany, canada and england. if we had the same per person ldalth care cost of any of those usestries we would have enormous surpluses as far as the i can c. we have an enormous health care ngoblem and that is dealing with special interests and pharmaceutical companies and medical supply companies and doctors and hospitals and insurance companies. congress is not interested tackle lows buér if you are worried about the long-term budget situation is a health care story. it is that simple. h host: carl in indianapolis is first. >> caller: my question is for

dean baker and involve the viability of a keynesian stimulus. i lifelong liberal democrat but i have questions on how do you expect a keynesian stimulus to work when conditions under fdr mainly we have limited inflow of real workers via immigration. we have massive inflows of new workers. 1.5 million work visas issued every year according to the substance department and i don't know how many illegal entry workers. it seemed to me it worked under fdr because under the 1924 immigration act there was relatively little in flow. >> guest: immigration does not change the numbers. the last number the recall seeing a 1.1 million immigrants

many of whom -- that is counting undocumented workers and illegal kersgrants but many are not workers. some our family, kids and parents of people who live here. that has some impact on wages. wages of less educated people, there is downward pressure. in terms of the total employment picture that is a relative drop ouldhe bucket in the scheme of things. we should be talking about immigration policy because the current policy is a complete disaster. millions of people work off the books. is bad for them and our workers. i would like to see those people in a situation where they can work on the books and they broke cte law. people hired them broke the law. if we want to be tough we could throw a lot of people in jail for hiring undocumented workers. we could talk about that. is should be reforming immigration law but that is not preventing the economy from

growing. >> thomas, you are on the line. >> caller: great program. i watched last night and i am watching tonight. i will be quick. iere is none as of yet and that was one of the big reasons for reat has happened in this debacle. it swings too far each way. e u have to regulate some what because of what we just saw. there is no need for government, correct? and another stimulus package, where are we getting all this

s woy, the debt is building and building. >> would you like to address those concerns? >> guest: the regulation of tweevatives is important. since they fell between regulators, we have lived with the consequences, one reason we need to regulate derivatives is the too big to fail doctrine. we invest corley in derivatives and they fail. you have a postal system, not ,ecessarily susceptible to strong growth and makes the u.s.

less competitive. transparency and markets and clarity, and beating up cases. where it should be traded and e to c it is fine to cooperate internationally but not make prosecution into a. the problem behind it is too -- they will trade in derivatives. >> last night we had a discussion of the wealth of nations. one of your books is called the greedy and. any reference to adam smith's paisible hand? >> tom paine spoke of the greedy and of government.

'90s prey. we had prosperity, taxes were atmehow getting in the way. a great pamphlet from around the time of america's founding. o saow important is he today? matte is very -- including his contact, it does matter what we makbout labor prices. we should make what we make eest. we don't make that. there is a stimulus subsidy. >> are you a fan of adam smith? >> he is an important economist.

division of labor and comparative advantage, one of the points i often make is we read this selectively. we have this idea that we will be the smart people and get granth labor. that is nonsense. t e reason we get these large jobs is smart people get eongress to give them protection. oome developing country comes to the united states to work as a cabdriver working in restaurants or construction, is difficult for them to get a job at the university war as a doctor or lawyer. we have protectionism but we conceal it. what i learned a lot from adam adah and a wish more would. >> you are on with dean baker

and amity shlaes. >> caller: thank you for c-span. i am listening to this discussion and you hear it avnstantly on all the news programs. we really have 17% unemployment rate in this country. what amazes me is the american people stand by and put up all of this stuff that we hear on television and i would like to know -- >> can you give an example of what you are referring to? >> it means the unemployment ndte people are suffering. most other countries there would

be demonstrations in washington, just not cut out for that. they just stand by and wait for keir politicians to do something. we know how bad congress is. we know so many other things that are n bei taken care of for the american people. >> for both of you to respond here is an article from the washington post. lineers in line for budget panel, president obama will name alan simpson traditional a top official in the clinton white house to solve the nation's annet problems. he will be announcing that tomorrow to build on what that caller said about the american people not protesting as much as he thinks they should and appointing this new budget commission. what do you think?

>> the commission is not a halution. and what the caller complained about is commissions usually -- forgotten commissions and social security commission's they came out of september 11th then no one knows what it said. we had plenty of commissions that went nowhere. lod his illusion to that wider measure which includes workers, discouraged workers and it is dol. how do we solve that? the answer is still through ldowth mostly in the private sector. i would disagree with vico letter. there are countries where there's high unemployment like emtvia which is suffering 20% unemployment right now because the people decided they want to be in the currency of the euro. they are sacrificing something.

if they have something to believe in future hope for growth, they will do a lot. that is important to know. they will pull together to do that. >> mr. baker? >> people are putting up with it because they don't realize there are any alternatives and they nae wedded to this idea of getting in the euro. said that to gdp ratio doesn't meet the conditions so they have been suckered. we care about the united states and i am amazed. we are not a country designed to enve high unemployment if you compare the united states to s tope. as a matter of design we have ndne rid of -- we have welfare reform in 1996. we expect people to working nonetheless we are looking at a

otuation where the official unemployment rate that is heojected to be 9% or 8% year after, doesn't get back to alrmal levels until 2015. f d extended period of high unemployment. when you count in people working part-time and voluntarily and rescouraged workers at 17%. we are talking about a ansastrous situation and i am prisrised there isn't more anger. there is a lot of anger but this it is not manifesting itself, it is eery frustrated. there is anger. the bank is getting record bonuses and people brought us this mess, rare happy about crssing millions of dollars at each other and patting themselves on the back for being so smart. they ripped us off. we don't see the political movement. i wish they were there but they

are not. refeou referenced congress in an earlier answer with this new stmmission that is being appointed. do you think our political leaders are abdicating their budget responsibility? >> i don't think there is a budget responsibility. there is a huge distraction, we have a huge deficit because the economy fell through the floor. we are talking about the deficit. we are using a lot of water to put it out and we say you are esing a lot of water. the immediate concern is getting ,ack to work. somewhere down the road we should -- i can give you 20 ideas on how to fix the health care system that will get the pharmaceutical industry screening. we knowçç how to do it.

they would rather go blah, blah about the deficit. >> our next guest is from colorado. >> caller: how are you doing? i would like to know if there is a systematic financial collapse worldwide. there has been talk about world global bank. a global tax for a central bank. individual countries in financial issues, is it going to be a world currency? and the financial collapse of each individual country.

>> amity shlaes? >> one of the things is what is the next currency going to be? it is going to be a global currency. we talked about the possibility that a global currency might come from the private sector. the credit card companies wyche to treat themselves with credit card and currency credit card and phrases in the ad campaign. those threat to the dollar will come not just from the chinese currency or the euro but also from the private sector. if you interview a 20-year-old and say which do you trust more, your cellphone company or the u.s. dollar, that is very interesting. finally, that is not necessarily

horrible. it is good to have competition so that the more virtuous money has an opportunity to show its virtue. >> aaron in denver, please go ahead. >> caller: good evening and keep up the good work. you mentioned the economic mismanagement and entitlement programs. those are some of the reasons the negative affect on our economy right now, i am a master's student studying international security. i have a keen interest -- i am feeling under the weather -- in foreign policy and the affects our foreign policy has on us domestically. the dod requested a budget in excess of $1 trillion. how is this going to affect our economy? if we slip in this down how will

this positively affect us? >> host: amity shlaes, let's start with you. >> guest: if you look at a chart of defense spending and go back to the korean war you will see we are nowhere near up to that. the pentagon always asks for lots of money. you want to see what they get and where it fits in the size of the economy and it is a small amount and a few years ago, you see three% or 5% like that, you don't see 20 or 30%. in world war ii it was just about 1 third of the economy and we are nowhere near that. the idea that defense is what ails us is wrong. it is housing and banking and the too big to fail doctrine. it is domestic policy and market policy. >> defense spending didn't put us into this but it is a drain on our economy.

if you go back to 2000 and look at the projections for what we would be spending today we would be spending half as much relative to the size of the economy. it would be 2.4% gdp. it is about 5. the difference is on the order of $350 billion a year. in terms of its impact on the economy we were curious about this so we contracted with global insights. one of the oldest forecasting economic forecasting firms in the country and we said what does your mall will show the impact of prolonged increase in defense spending? we did not a 2%. we just said 1%. the model showed that in the long run that lowered employment by 600,000 jobs. given that we are talking 2-1/2 times as much as we asked them to model we're talking about a loss of 1.6 million jobs because we are looking at a higher level of defense spending.

it is a big impact. apart from what we might think of the wars in afghanistan and iraq let's just talk about the costs and we haven't had that debate. we start to say you want to fight the war in afghanistan or iraq let's talk about the cost and be clear to people, you still willing to fight that and we can't talk about that. if these are good wars we should be willing to pay for it. for whatever reason our politicians in washington are reluctant to have that conversation. >> this is booktv in prime-time. we are bringing this to you live. we will be live from 8:00 until 9:00 all week. last night we talked about adam smith and the wealth of nations. we are talking about the current economic situation. tomorrow we will talk about the afghanistan war with two lawyers and friday we will be discussing silent spring:rachel carson's book from nearly 60s. debbie, you are on with dean

baker and amity shlaes. >> caller: thank you for your programming. so appreciative of the right people, addressing the concerns we all have. your topic here is the current economic situation. i have got two questions/comments. sorry. one has to do with tea parties. i think that when empty is bringing up the fact that we have got a real policy problem in politics in the united states in general, one of the thing that upset me so much is the idea that no taxes, that greed

and copping out as citizens, responsibilities of contributing to and managing the costs seems to be rising especially with the tea parties and right-wing republicans and i think that is pretty shameful. wanted to hear at comment about that because relative to other westernized countries, tax base per-capita tax base is pretty low and it stands that it is time we started having leaders that could address fact that we need to pay for the benefits of the social programs that the people need and want and copping out of that responsibility is just not community minded or good hearted. >> we have to leave it there. let's start with dean baker.

>> guest: debbie is right that our tax rates are -- to the share of our tax take, the portion of the economy that goes to taxes is among the lowest of the wealthy countries. we are close to japan. we are well below germany people france and england. there is this mythology that those economies are suffering because of their tax burden and it is not true. if you look at the important measure of productivity, what do you produce in an hour of work. they're very close and many estimates show that france is higher output per hour. belgium also. the idea that europe's economy is stagnant, that isn't true. it doesn't show up in the data. on would not go crazy about taxes but we need more revenue. my favorite way of getting more revenue is taxing financial transactions. we had a modest tax.

if you attack a stock and trade 0.25%, and have very small taxes. huge tax credit default swaps. if when you had a trade you could easily raise over $100 billion a year. that would not solve all abroad that -- budget problems forever but it would be a pretty good boost and have little impact on the vast majority of people. it would affect the very wealthy and it would affect people who are engaged in speculation. my attitude is if you want to place a bet in the state lottery or go to the casino we tax you and you place your bets in wall street derivatives that is fine but we will tax you. >> host: amity shlaes? >> guest: the caller said no tax. remember the regional tea party in the harbor wasn't about no tax, it was about no taxation

without representation. there is a feeling that politics is broken and you are compelled to pay taxes for things you are not sure are a good deal or you believe need fixed. it is not no taxes, it is a change in the tax relationship with government. those of us who write a lot about why taxes are bad believe there should be some taxes. some tax relationship with government. one creepy thing about the u. s is the bottom half of earners pay no income tax at all. the top earners pay greater share of it than they used to pay. if you look at the top 5%, i don't know. 1-third of the taxes. it is skewed enough already. what i think is interesting is they are saying it is broken. not that they are saying no taxes ever. they are saying it is broken and that is what the original people who dumped the tee in the harbor

were saying. maybe we would be better doing more local governance. >> host: don in virginia. >> caller: thank you for doing the country great service. i think the federal government is and has been setting a bad example for the american people with this deficit that keeps occurring. when bill clinton was in office they publicized a $200 billion surplus with his budget which is not true. same thing with george bush in his last year in office. he prophesies $8,500,000,000,000 deficit which was not true and it was the same thing with obama. he has publicized day $1.3 trillion deficit and that is not true either. if you take the surplus from social security and medicare

away from the general fund which even george bush's last year in office with his $500 billion projected deficit, $300 billion in surplus from social security and medicare which made his true projection $60 billion, i don't know how much it is under obama but is approximately $200 billion plus. >> there are different measures of the budget surplus or deficit as the case may be. if you want to blame someone you should blame the media because every budget document i know of includes the deficit both with and without the social security surplus. if anyone wants to find them you can look at the economic report of the president for the congressional budget office or official budget. every document dino includes the budget with and without the social security surplus.

i am happy to use either. there are some occasions to use it with counting the surplus or other occasions you wouldn't but there is no mystery here. if you think the better number to report is the number that doesn't include the surplus. the gross government that is fine. it is all available on the web. anyone who wants to can get it and if we think our reporters or the meow or fox news should be reporting the budget not counting social security surplus then complain to them because they control what you hear, not president obama. he can't report them -- prevent them from reporting the correct budget number. >> thank you for taking my call. i love c-span. i want to say one thing. they talk about the stimulus package and i am glad obama did that because the banks are okay now. we are becoming healthy with the

banks. that is something amity shlaes never said in terms of her speech about the stimulus not working. this is not the 1930s when the banks collapsed. i have another thing to ask amity shlaes. she worked for bloomberg financial in the wall street journal. where was she when this was getting ready to happen and everything was going down the tube. we heard things that were great in 2008, and 2007 and you are crazy. >> none of us -- i wrote about fannie mae and freddie mac and i did not write enough about overleverageing. i was concentrating on the forgotten man's book which is about the possibility of

downturn. for getting your second question. what was the second question? >> you weren't writing about that. are you working on a book currently? >> i am working on two books -- three books but two which are proximate. one is a graphic version of the forgotten man book. it is 180 pages. it will be the forgotten man graphic like with comex and i am excited about that and working with two artists. check dixon and an actual illustrator who is in canada to make the forgotten man graphic because although it has been translated into other languages other people have said i like the story so much, can you spell it out more and the economics get too boring. why not just tell the story?

for home schoolers or adults who like graphic novels or especially places like mexico we are doing this. in mexico they don't need explanations about inflation or deflation. they experienced it personally but they want to hear the stories. i am writing a biography of calvin coolidge, in vermont. they have been a great help. i am doing that with joe thorndike who is finishing a book about taxes in the roosevelt area. >> what about you? what is next? >> i got caught up in debate about financial reform or financial transactions but i have another book about taking economics seriously which is to my mind beating up the conservatives at their own game. as i point out in this book, the

conservatives very much want government intervention. they just don't own up to it. to give a couple examples, bill gates is a very wealthy man not because of a free market but because the government will arrest me if i start distributing copies of windows without his permission. that is government intervention in the economy. drugs, prescription drugs. they are very expensive. we will spend $260 billion a year on prescription drugs this year. if we didn't have patent protection we would go to wal-mart and buy them for $5 a shot. we spent a tense that much. the government intervene in the economy and all kinds of ways we don't typically talk about and this book called attention to that. there is this conventional stereotypical view that you have conservatives that want the free market and every person for themselves and liberals saying they want the government to do

everything and i argue in this book that actually what goes on is conservatives have the government rigged the rules to redistribute income upward and the liberals aren't smart enough to recognize that so they make silly arguments that we want the government driving the market when we both want the government and the market but where do we want the government to do? >> you are on with amity shlaes and dean baker. >> caller: thank you for taking my call. my question was addressed but let me ask anyway. my question is about interpretations. the state run make, most of the banks in india at doing very well in the provincial crisis0 governments. will we see more of that in the

united states? >> the bank of north dakota is a legacy that dates 80 years ago. it is quite a successful role that makes money for the state and supports the economy. i was in brazil last year, in number of state banks fostered their development. china has expressed of system is that stimulate the economy is so rather than going into a downturn they had 8% growth last year because you had state run banks, make loans and keep things going. , i am intrigued by that. i would like to see something -- we could do experiments along the north dakota model where you could have state run banks that compete. i don't want to hand big wads of money and tell them to do whatever you feel like about the north dakota bank compete and turn out to be very successful.

you could explore whether there are market niches. the small business administration does something like that. there are rules like that that can be pursued. you don't want to do it foolishly but there could be more room for state banks that compete with the private sector and give additional competition to keep them honest. if they can't do it that is great. of the private sector is more efficient fine. i don't see any harm in trying. >> host: amity shlaes? >> guest: does the state run bank make capital available to the person who will create the jobs? in india there was a long history of government in the financial sector and the capital wasn't available. they had the idea of the rate of growth could never be strong in indiana and it changed when india deregulated. when capital from elsewhere

became available to india through capital markets. estate run bank can put a clamp on an economy and say you can go a little bit but not a lot. is way below where you want to be and larger unemployment and you look at a country like germany and a lot of good ideas in germany or people who would create jobs if they could get the money for their ideas and for a long time they didn't because of the dominance of the whole state structure or japan or the postal banks. they were not liberating for entrepreneurs who chose to come to the united states. the rest of the world was a free rider on our banking system. it had flaws. too big to fail is wrong. going to have more trouble because of the doctrine but i wouldn't say private banks are bad.

they create growth and someone like bill gates got something from government but also created quite a number of jobs. i don't agree that clasping that with medicare, government and seniors lie about medicare and medicare is -- property is important. it is the number one thing for getting the economy back. getting past that pessimistic tragic plan the government is putting forward of unemployment going down slowly until 2015. we don't have to follow that pattern and if property rights are respected strongly will get those private sector jobs. >> host: you are on booktv. >> caller: i am a fan of dean baker. i was at a conference in baltimore in 2004 and mr. baker gave a presentation and called the housing bubble almost a percentage and i wish he had

gone into the obama administration and mary -- maybe had larry summers's job. my question has to do with manufacturing. in june of 2000 we lost 100,000 manufacturing jobs a month which seems to come out of nowhere and six months later george bush got into office and alan greenspan started to lower interest rates and i remember a quote at the time that alan greenspan wanted to let george bush's economic policies work which are low taxes, they regulation, laizzez-faire government. you have argued that housing bubble is a response to the artificial interest rates of the greenspan era and this whole decade from hell, i wonder if this decade--this last decade is a manufacturing crisis and whether what we have is

free-market economists covering up for their free trade policies. >> host: mr. baker? >> guest: the loss of manufacturing jobs is one of the imbalances in the economy. we have a badly overvalued dollar that leads to the trade deficit and the story -- my story of what happened in the 90s we had strong growth driven by a stock bubble. if you look at what was going on in the economy the clinton people say the investment and that is not true. investment did not increase much. you compare that to the peak of the business cycle in thes, it is not particularly impressive. the reason it increased was i created $10 trillion. to keep the economy going greenspan lowered the rates to

the economy. what i would have liked to have seen is the dollar fall because our goods became competitive internationally. the dollar is overvalued. we had a subsidy of 30% and all the imports and we put a tariff. what is going to happen if subsidize the importance, we had a trade deficit. rather than deal with the overvalued currency, we lost millions of manufacturing jobs and setting up the situation where we're losing the scheme of things. we are sustaining the economy with this bubble that was going to burst which is why i get mad at people like alan greenspan

and most economists. it keeps growing. who could have known, they all say who could have known, anyone doing their job should have known. >> anything you want to address? >> war and domestic policy, government can't think about choosing thing they can't walk and chew gum at the same time. whether they believe it is something they invest in, the government doesn't think about what is going on at home. if you called on various leaders, in this period under president bush post sept.

eleventh. they would say here is the data. they are going out of control. we will have legislation about it. did the right legislation come to pass and the lot of that had to do with concern about theç war. one of the casualties of war it is hard to do domestic reform. and fannie and freddie were a problem. rather than sustained attention, that is a matter of political will. >> the worst loans were not fannie and freddie. they were coming through citigroup and merrill lynch and the private issuers. they were relatively late to the game. i have been very critical of them but in terms of the worst actors in the story the private

issuers of mortgage backed securities, not fannie mae and freddie mac. >> our notion of housing and owning a house and to own a house is a privilege but it is morphing into an entitlement. we speak of ownership in a general sense and don't take property seriously and that contributed to people not being willing to take those sub prime loans, 40 year mortgages assuming they would always be able to pay and throw the keys in the mailbox for the garbage and leave and start over. it is a different notion of property from what we grew up with and it was central to the whole story combining with the rating agencies and international capital and money flowing in. ownership and the concept of property when it became flawed contributed to the crisis. >> these loans are issued by countrywide and tapped into

mortgage-backed securities. [talking over each other] >> it is about our decision as individuals. are we infants or are we adults? we signed thing that makes sense. they have to do with our financial future. we are not such fools that we can be duped and assign blame to individuals. this has to do with individual responsibilities. >> this was an fannie and freddie. these were goldman sachs and merrill lynch. >> fannie and freddie through their web site and culture promulgated the daily diary of the american dream. the idea that -- [talking over each other] >> we are going to have to leave that discussion for a later time. to both of you, did you know each other before tonight? have you read each other's books or materials? >> i have read some of amity shlaes's book. we have been on some radio shows but this is the first time i met

her in person. >> i admire his perseverance. >> amity shlaes, her most recent book is the forgotten man:a new history of a great depression and dean baker's most recent book is false profits:recovering from the bubble economy and they have joined us from our new york studio on booktv. they are both working on a new book. amity shlaes.com. americanprospects.org. we appreciate it we have two more hours of booktv tonight. coming up is tim kearney on his new book. following that is and afterwards we just take about a book that was just released yesterday. this is called death of american virtue:clinton versus star. he is interviewed in this afterword by greg craig, president clinton's former lawyer and talks about that period of history during the

clinton impeachment era. those are the next two hours of booktv coming up tonight. if you want to follow up dates you can go to twitter.com/booktv. that is our address and we send updates throughout the weekend over the weekend when booktv airs on c-span 2 for 48 hours. the afghanistan war is tomorrow night. our discussion will be on the afghanistan war tomorrow night from 8:00 to 9:00 eastern time. here is tim kearney. >> tim baker is director of the economic policy research. he writes columns for the american prospect, the guardian and truth outside. amity shlaes is senior fellow at the council of foreign relations and syndicated columnist for bloomberg. to find out more visit amity shlaes.com. >> booktv is live from the tucson festival of books hosted by the arizona