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 glad it is the stimulus anniversary because now we can say we are done with stimuli in 2010 will be a non-stimulus word and maybe barry that wording get it out of our public vocabulary, because stimuli don't work all that well regardless of what the president claimed. >> host: now, the president said the stimulus package presented a second depression. >> guest: well, i regard that as hyperbole. the analogy here for our economy is not the u.s. in the 1930's but rather japan, where there were i believe ten stimuli over

a series so of the anniversary of the stimulus to get another stimulus and in the end japan's debt was up there with zimbabwe's in jamaica's and unemployment went in the wrong direction during that period so we want to compare where we are now to the '90s, what became the lost decade in japan and that demonstrated the weakness of stimuli as a care. plus could dean baker, same question to you. >> guest: wiley think president obama exaggerated the impact certainly but for example i don't think we did before the great depression. it requires not just one bad year but basically prolongs ten years of stupid economic policy and that something that was really in the cards but i think it did lead to growth, did lead to employment. there is a number of independent estimates in the congressional budget office, moody's, global

so they are pretty much the same range somewhere in the order of 1.2 to 2 million might be a little high. 1.8 million jobs, probably closer to a percentage point added to and-a-half 3% of gdp or. that is a big deal. is not nearly enough and we are still looking at an unemployment rate that is almost 10% in projections are we are still even two years of looking at an unemployment rate averaging 03% and are now projected to get back to normal levels of unemployment until five years out which is why i would like to see much more stimulus but it is important to put this in context that we should've seen much more class february, but it did have a big impact and a positive impact. we would be much worse shape without a. host: you would like to see another stimulus just as big or bigger maybe? >> guest: to put this into some context of the look of our lost demand why are we in the

situation? we have this housing bubble. we are building houses like crazy. we had a bubble and nonresidential real estate. that purse. the bubble wealth around $8 trillion in bubble well, most of that has disappeared. that bubble wealth was feeling so you to add up how much lost we have because of the collapse of residential and nonresidential construction it is somewhere in the order of $1.2 trillion a year. the stimulus package president obama has drawn on the table people talk about 787 billion. 87 billion of that was technical tax issues from the stimulus, around 100 billion or so will be spent in later years so if you say what are we spending 2009/2010 it comes to roughly $300 billion a year so we are trying to replace $1.2 trillion in lost man with $300 billion in stimulus.

that is not going to be enough. i think it was a step in the right direction and i'm glad we did it but is nowhere near enough stimulus. >> host: ms. shlaes, any reaction to that? >> guest: i have the supply orientation so i would ask and a lot of us would ask, what would make someone want to supply something to supply a job, to supply a new-product? keene is arguing more from a keynesian perspective. i would argue from a classical perspective then when you have spending like that what happens if there are all kinds of distortions in the economy? to put it in common sense terms you don't know what the next emulous is coming if you are a little firm. you don't know where it will be. you know tax increases are coming to pay for the stimuli. you are worried about the health care situation. maybe that will help their business to have help from the government but it might put a mandate on you so you don't, you

to not contribute to the economy and that very much is what is impeding our recovery. stimulus there gets in the way as opposed to helps. you can see purchases advanced over time. the government gives you get big enough offer you will buy a car this summer where the then next, but milton friedman, often you were moving around purchases he planned to make any way and you also by the way, sometimes don't purchase of all because you think we'll mac that that looks big overtime in the government will have so much debt in my lifetime, maybe i will be a lot more cautious than i might it then five years ago so all of these are factors. us the good evening to you also. as the mentioned at the top this is a call-in program and we want to hear from our viewers. (202)737-0001. here in the mountain and pacific

times sounds 202-73-7002. you can also ascendancy tweet at twitter.com/booktv or an e-mail at booktv at c-span.org. let me tell you a little bit more about our guests before we get to your calls. for speier going to start with dean baker, the co-director of the center for economic policy research. he is the author of numerous books including "plunder and blunder" and his most recent is "false profits" recovering from the bubble economy. appeared in several publications including "the atlantic monthly," "the financial times" and "the washington post" in currently writes columns for the american prospect, the guardian newspaper and trista or. if you want to follow his blog you can go to american prospect bought borgen click on the top of the tehjan blogs and you will find him there. his blood is called "meet the press." amity shlaes as a senior fellow at the council of foreign relations, syndicated columnist

from bloomberg news service and a former columnist for the editorial board for "the wall street journal." she is written several books including "the greedy hand" how taxes drive americans crazy and what to do about it and the one we mentioned "the forgotten man," a new history of the great depression. she has a web site, amity shlaes.com. we want to show our viewers the federal budget proposed for 2011 along with the deficit then what is left for discretionary spending. the obama administration has proposed this. about $3.8 trillion in federal spending. that $3.81.4 trillion is in discretionary funds and the projected deficit is about $1.3 trillion, about 8.3% of the gdp. now, dean baker and amity shlaes, today on the american

enterprise institute web site, norm ornstein growth this about government spending. government has been transformed from said the program sets indigested year-to-year by politicians responding to short-term and long-term problems to one of an automatic pilot. the old phrase that mr. ornstein learned in college was to budget is to choose. we no longer choose and that makes the over focus on the tiny share of the budget allocated to discretionary domestic spending so discouraging. amity shlaes, first of all is the deficit too big and do we not have enough discretionary spending funds? >> guest: sure the deficit is too big but what is different now safe from the 1980's or the '70s is exactly that tuition norm ornstein is the looting. were trapped by our entitlements, those created first of all and the new deal

period such as social security. that is not the discretionary part and then you add to that the great society entitlements and also this is a bipartisan thing, medicare part d for example under president bush. they hog the budget and they hogget wider and wider in the discretionary spending is squeezed to decide. you want to mention also i believe defences discretionary people don't want to mess with that so you have discretionary spending that they are-- very narrow thing. the economic theory that fits here is called public choice theory which says government is aggressive and what you see when you see a budget like that this government winning. >> host: so, what is the solution in your view? is it cutting spending? is that raising taxes? >> guest: we used to save the cut taxes it will be alright. this time you can't do that. you have to have to rearrange

the budget and rethink the entitlements and start with the idea that young people don't expect social security to be there for them in any case and we also were rained some of these things. i was interested to see congressman paul brian has a new proposal that is rather thorough. he changes social security, he changes health care, he changes the tax code radically. including for many high earners probably increasing their tax with the flat tax rate anyway of 25%, to rates ten and 25 and stop taxing capital gains and that is a big change. it is a completely-- that is the kind of discussion we need to have been there is more common ground i think in the two parties then one would imagine there. both parties have to talk about this, democrats and republicans about how the reform those nondiscretionary? >> host: dean baker.

>> guest: first thought in terms of the budget deficit, we have big budget-- deficits. people like alan greenspan and ben bernanke gave us the largest downturn since the great depression. that is why we have a huge budget deficit. we didn't have a huge tax cuts. we had stimulus and response to the downturn. we have higher unemployment if we have not had that but let's be clear if we are upset about the deficit greenspan and bernanke, i don't know why we reappointed bernanke. in terms of the entitlement programs, yeah we have a public pension program, which is hugely popular. you look at polling day that-- i was at a conference this morning in social security is over 90%. they ask people would you be willing to pay higher taxes to sustain sosa security benefits and 70 to 80% said yes. i don't see any problem with running a pension program through the public sector.

what is the problem with the? it is usually popular. health care costs, medicare again. we are providing medicare health care benefits for seniors. that is also hugely popular. you have these tea party people out there yelling don't let the government touch medicare. they are anti-government but they want medicare. medicare is a government program. these are success stories. our health care costs are out of line in such as security has not been rising in its share of the budget and it will in the near future is baby boomers are retiring and getting benefits. in fact it actually fell a few years back but in any case that is not the big share of the budget. medicare because we have they broken health care system and president obama was trying to address that, but that is the direction you have to go, so we want to talk about getting our budget in line really this is a health care story and one point

to understand here, we pay more than twice as much per person as people do in any other country we think is comparable, germany, canada, whatever country you want to point to. with we have the same for person health care costs we would have enormous surpluses as far as the eye can see. so we have an enormous health care problem and that is dealing with special interests, the pharmaceutical companies, the medical supply companies, the doctors, the insurance companies. congress is not anxious to tackle those but if we are worried about the long-term budget situation it is the health care story. >> host: it is time for your calls. carlynn indianapolis, your efforts. >> caller: hi, my question is for dean baker and it involves the viability of the campaign stimulus. let me first-aid i'm a lifelong democrat but i have major questions on how any keynesian stimulus will work when the conditions that allowed the

keynesian stimulus to work under fdr namely, that we had very limited in flow of workers the immigration. not what we have today. we have massive inflows of new workers, i think 1.5 million issued new visas every year according to the census department and i don't know how many illegal entries for workers. it seems to me the keynesian stimulus worked precisely because under the 1924 immigration act there was relatively little in flow. >> host: mr. baker? >> guest: i don't think immigration changes the story. i think your numbers are a little high. mini emigrants, accounting undocumented workers and illegal immigrants but many of those are not workers. some of those are families, kids and parents of people who work here but in any case that has some medpac that would say on

wages that there is a lot of research showing wages of less educated people tend, there is downward pressure but in terms of that total employment pi#:"5i pennsylvania. thomasian on the line with amity shlaes and dean baker. >> caller: how are you doing?

great programming c-span. i have a couple of quick questions. one is the regulation of derivatives, there is none as of yet and i think that was one of the reasons what has happened with this debacle, and also, it is one of the things where the pendulum sometimes swings too far and you can't regulate too much, where you fort growth but you have to regulate somewhat because of the things we just saw like thomas jefferson said if men were angels there would be no need for government. also come on the one gentleman, mr. baker mentioned about another stimulus package. where are we getting this money? is that just seems to be building and building and building. >> host: amity shlaes would you like to address those concerns? >> guest: thank you for that question. the regulation of derivatives is important because there was a

big what we would kindly call disingenuousness on the part of the market and regulators since derivatives fell between regulators they didn't have to be regulated and we have lived with the consequences of that but i would also save one reason we need to regulate derivatives is the too big to fail doctrine, and a better way to go about this is to let those who invest poorly in derivatives failed. then they want next time make the wrong that. if you overregulated and overregulated and then press ewind westy you have a postal system, very team, not susceptible to strong growth, makes the u.s. less competitive so the standard for derivatives regulation should be transparency, markets and clarity not arbitrary prosecution and beating up cases where the agency goes after this person or that person but if you have lots of clarity about how derivative should be traded and

were, that is fine. it is time to cooperate internationally. what is not find this to make prosecutions out of it and again the problem behind it is the too big to fail doctrine because then too big to fail banks will trade in derivatives. host: the gentleman referred to our programming last night. we had discussion of the wealth of nations by adam smith. amity shlaes one of your books is called "the greedy hand." is that any reference to adam smith's invisible hand? >> guest: not really, although it is related. it is from tom paine who spoke of "the greedy hand" of government, thomas paine, making our prosperity its prey. when i wrote this book we had prosperity. it was the '90s but it seemed that taxes for some of getting in the way so i was trying to capture that. thomas paine was a great pamphleteer from around the time of america's founding. >> host: very quickly what is

your opinion of adam smith and alimport missy today? >> guest: he is very important and he is worth bringing in. i am just trying to think of something pithy to say about him, including his concept of the comparative advantage. because it does matter for example what we do about labor prices. now we are in a competition. globally we should make what we make baston and you have you know for example stimulus money we often make what we don't make best because there is a stimulus subsidy for it so i say read adam smith and don't right stemi why. us cabeen baker, are you a fan of adam smith? >> guest: we have all learned from adam smith just as we have from keynes. in terms of this idea of the division of labor comparative advantage, you know, one of the points i often make is that we

often read this so selectively so we have this idea somehow we are going to be the smart people and get the labor from the developing world. that is nonsense because they are plenty of people in india and china who are every bit as smart as the player and the reason we tend to get the smart jobs is because they are smart people get congress to give them protection so it is easy for someone from mexico or developing countries come to the united states and work as a cabdriver or worked in restaurants or construction and very often off the books for code is very difficult for them to get a job as a doctor or lawyer so we have protectionism. we just tend to conceal it so i learned a lot from adam smith. i just wish more economists would learn from adam smith. >> host: richard from brooklyn, thanks for holding. you are on with amity shlaes in dean baker. >> caller: first of all thank you for c-span. i am listening to this discussion and you hear it constantly on all of the news programs.

we really have 17% unemployment rate in this country. it is not 9.7 or ten and what amazes me is that the american people just stand by and put up with all of this stuff that we hear on television. i would just like to know-- >> host: koehler can you give an example of the kind of stuff you were referring to? >> caller: i mean, you know, i mean it means the unemployment rate, people are suffering and did most other countries there would be demonstrations in washington. the american people are just not cut out for that. they just stand by and wait for their politicians to do something. we know how bad congress is. we know so many of the things

that are not being taken care of for the american people. >> host: let's leave it there. let me add something to that for both of you to respond to. here is an art from this morning's "washington post." leaders henline for budget panel, president obama will name allen simpson and erskine bowles and the clinton white house to chair a commission to solve the nation's budget problems and he will be announcing that tomorrow. to build on what the 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 about both of them? why don't we start with amity shlaes? >> guest: well, a commission is not a solution and there we hear what the caller richard from brooklyn is complaining about. there is sometimes yap yet been commissions don't usually have strong outcomes. i can think of the social security commission that came

out after september 11th and no one remembers what it said even though was interesting. we have had plenty of commissions that went nowhere so here we share the callers restoration and also his measure of unemployment which includes workers, so-called discouraged workers and if it is real. so how do we solve that? the answer is still true growth, mostly in the private sector. i would disagree with the caller. i can think of countries alas such as latin pheaa which is suffering i believe 20% unemployment right now because the people have decided they want to be in the currency of the euro. they are sacrificing something. with people's something to believe in, if future hope for growth, they will do a lot and that is important to know. i think if we had a more coherent vision about our own reform the country would pull together and do that. >> host: mr. baker?

>> guest: lotfi it is an interesting example and i think people are putting up with it because they realize there aren't any other alternatives. their debt-to-gdp ratio would be too high. but that aside, we care about the united states first at four mustin i am actually amazed, we are not the country designed to have high unemployment so if you compare the united states to europe we as a matter of design have got rid of essentially non-work supports. we had welfare reform in '96 and we said you know, we expect people to work so if you don't work you don't get health care, you don't get normal income. you really can't get by in nonetheless we are looking at a situation where we are looking at again the official unemployment rate projected to be over 9% next year or 8% the year after investing get back to normal levels until the 2015. we are talking about an extended period of their high unemployment. when it candon people working

part-time and voluntarily, discourage workers you are up 17% so we really are talking about a disastrous situation and i am surprised there is and more anger. there is a lot of things but it does not manifesting itself in any sort of organized political effort. itis take that as many people are very frustrated but clearly there is anchor and people looking at wall street, the banks getting record bonuses and people basically brought us this mess. they got their bailout and now they are happy and tossing around millions of dollars and crediting themselves on the back for being so smart. maybe they are because they ripped us off. but no, we don't see the political movements. i wish they were there but they are not. >> host: mr. baker you reference congress in an earlier statement. do you think the political leaders are abdicating their budget responsibilities? >> guest: no, i mean i don't think there is a budget

responsibility. i see this as a huge distraction. we have accused-- we are talking about the deficit. it is really kind of silly. it is sort of like our house is on fire and we are using a lot of water to try and put it out in we get these guys to run over and say you are using a lot of water. it is close to crazy. the media concern should be getting people back to work in the longer term issue, somewhere down the but we have to fix our health care system, better sooner than later and i can give the 20 ideas on how to fix the health care. we know how to do it but no one, the politicians still want to tackle those powerful and as groups and would rather go blah, blah, blah about the deficit. >> host: our next call comes from westcliff come colorado. dennis, go ahead. >> caller: hi, how are you folks doing? i would like to note there could be a systematic financial

collapse worldwide and the reason i say that is there has been talk of the world global bank and if the bank, the banking system right now was talking about a global tax for a central bank, and my concern is that there is no involvement of the world bank or the imf can any of these individual countries' problems with financial issues, and my concern was if there is a global bank that is there going to be possibly a world currency, and the financial collapse of each individual country so that we have a one world order? >> host: amity shlaes? >> guest: one of the things we have been talking about at the council on foreign relations is what is the next currency going to be? you get the argument will it is going to be a global currency, a dollar plus zero instead of the dollar but we have also talked

about the possibility a global currency might come from the private sector because technology makes that possible. you see and ads of the credit-card companies they like to treat themselves as money, gold credit card, the currency credit card. you will see those phrases in ad campaigns of the big names. i think the threat to the dollar will come not just from the chinese currency or from the euro but also from the private sector somehow or other. if you entered qa 20-year-old in india and say which the trust mark yourself phone company or the u.s. dollar, he might hear the cell phone company name. that is interesting and finally that is not necessarily horrible, to have a private money or a free money. it is good to have competition among monies so the more virtuous money has an opportunity to show its virtue and free fail. >> another call from colorado, this one from erin in denver. >> caller: good evening to you folks in keep up the good work

c-span. mr. baker you mentioned earlier economic mismanagement and ms. shlaes mentioned entitlement programs as some of the reasons why we have a negative effect on our economy right now. i am actually a master students studying international security. i have a keen interest, excuse me i am feeling under the weather coming in foreign policy and it particularly the effects of our foreign policy has on us domestically. the dod recently requested a budget in excess of $1 trillion. how is this going to affect our economy and if we slim this down how will this policy-- positively affect us? >> host: amity shlaes let's start with you and then then the maker. guess delicti chartered defense spending in kobach to world war ii you will see we are nowhere near up to that in the pentagon always ask for lots of money but

you want to see what they get and where it fits in the size of the economy and it is a surprisingly small amount. i remember a few years ago writing about the fence. 3%, 4%, 5%@ h7 2010 and went before% of gdp instead it is five.

the difference is 350 billion the year so that is not a chump change. we are curious about this so we contracted with global, one of the alvis forecasting firms in the country who said show us what does your models show the impact would be of prolonged increase in defense spending? weise said 2.5% of gdp. leagis said 1% of gdp in their models showed in the long run that lowered employment by 600,000 jobs, 600,000 jobs. given we are talking to .5 times as much as buckbee asma modeled we are talking about a loss in the order of perhaps 1.5, 1.6 million jobs because we are looking at the higher level of defense spending so it is a big impact and apart from what we might think of the wars in afghanistan and iraq let's just talk about the cost and we haven't had that debate. when we start to say okay you want to fight the war in afghanistan, let's talk about

the cost and be clear to people, are you still willing to fight that and then people runyan scream, we can't talk about that. if there were that we should be willing to pay for it and for rather for reason our politicians in washington are reluctant to have that conversation. >> host: this is booktv well congress is in recess for the week. we will be live from 8:00 to nine mikuak all week and last week we talked about adams smith and the wealth of nations in tonight the current economic situation. tomorrow night we will be discussing the afghanistan war with two authors and friday night we will be discussing silent spring, rachel carson's book from the early '60s. debbie in everett, washington you were on with dean baker and amity shlaes. >> caller: thank you very much for your program i am so appreciative of the people in our country that are addressing the concerns that we all have.

i know your topic here is the current economic situation. i have got kind of to sort of questions/comments. one has to do with tea parties. i think that's when mg is bringing up the fact that we have eight real policy problem in politics in the united states in general, one of the things that upset me so much is the idea that no taxes, that's copping out the citizens in terms of responsibilities not contributing and managing the cost seems to be rising especially with the tea parties and some of the really right wing republicans.

and i think that is pretty shameful. so, i wanted to hear a comment about that because i know relative to other western countries, again heart attacks base per capita tax base is pretty low and i think it is time that we started having leaders that could address the fact that we need to pay for the benefit of the social programs that the people need and want, and that kaupthing out of that responsibility is just not community minded. plus cud debbie we are going to have to leave it there. let's start with dean baker. >> guest: certainly debbie is right that our tax rates are among some of the share of our tax take, what portion of the economy goes to taxes is among the lowest in the wealthy countries. we are closer to japan but were

well below germany, france and england. we are well below those countries and there's this mythology that some of those economies are suffering enormously. if you look of the most important measure of vitality, productivity, what are you producing in an hour for their clothes and in some cases menez michelle france for example has higher output per hour of work. belgium also said this idea somehow europe's economies are stagnant, that really just isn't true. i want to go crazy about taxes but i think we probably do with the end of the day need more revenue. my favorite ways taxing financial transactions. we had a modest tax, if you tax say stock trades, 0.25%, a quarter of 1% and have very small taxes, say tax credit default swaps, 1/100th of 1%, when you had a trade than you could easily raise well over

$100 billion a year. that won't necessarily solve all the budget problems forever but that would be a pretty good boost and have little impact on the vast majority of people and affects some of the very wealthy and infect people engage in speculation, which my attitude towards that is if you want to place abed in the state lottery and you want to go to the casino we taxi and if you want to place your bets on wall street in derivatives that is fine but we are going to tax you. >> host: amity shlaes? >> guest: i was interested the caller said no tax. you want to remember what the original tea party was about. it wasn't about no tax. it was about no taxation without representation. so there is a feeling now that politics is broken and you are compelled to pay taxes and entitlements taxes for things you are not sure are a good deal or believe need to be fixed so it is not no taxes. it is a change in the tax

relationship with government. we all believe, even those of us to write a lot about how taxes are bad, believe there should be some taxes, some tax relationship with government. indeed one sort of creepy thing about the u.s. now is the bottom half pays almost no income tax at all. the top earners pay a greater share of it then they used to pay so you look to the top 5% paying i don't know, the nasonex gurganus, one-third of the taxes? it is skewed enough already. what i think is interesting about the tea party is is they are saying it is broken. they are saying it is broken and that is what the original people dumping that he in the harbor were saying. our relationship is broken. maybe we would be better doing more local governments. >> host: don in virginia, good evening. >> caller: thank you c-span fur taking my call. you do a great service.

i think the federal government is and has been setting a great example for the american people with this deficit that keeps occurring in for example when bill clinton was in office, they publicized a 200 billion-dollar surplus with his budget, which is not true. the same thing with george bush in his last year in office. he publicized in the proximal 500 billion-dollar deficit, which was not true and it is the same thing with obama now. if you take the surplus from social security and medicare away from the general fund, which in george bush's last year in office was a 500-dollar-- there was-- which made his trip projection $860 billion i don't

know how much it is now under obama but they know it is probably approximately $200 billion plus. >> host: mr. baker? >> guest: there are different measures of the budget surplus or deficit that's the case may be and if you want to blame someone here you really should blame the media because every single budget document i know of includes the deficit, both with and without the social security surplus, so you know if anyone wants to find and you conducted the economic report of the president, you could look at the official budget, every document i know includes the budget both with and without the social security surplus. i am happy to use either, depends on the purpose. i would use one or the other. there's some occasions he would want to use with counting the surplus and others wouldn't but there isn't any great mystery here. if we think the better number to report is the number that does

include the surplus, and that the gross government debt, that is fine. it is all available. anyone who wants to can get it and if we think the media, fox news or whoever might be reporting the budget not counting the social security surplus then complain to them because they are the ones to control what they hear. not president obama. he can't prevent them from hearing the correct budget. >> host: paul, good evening to you. >> caller: thank you for taking my call. i appreciated and i love c-span. up with this stimulus package and i am sort of what obama did that because the banks are okay now and we are becoming healthy as a bank and that is one thing that amity never said in terms of for speech about the stimulus not working. this is not the 1930's were the banks just completely collapsed but i have another thing i want to ask amity. she worked for bloomberg

financial and "the wall street journal." where who is she when all this stuff is getting ready to help and then everything was going down the tubes? we heard things are great and rosie in 2008, 2007 and if you think there's going to be a financial collapse, you are crazy. >> host: amity shlaes? >> guest: thank you. i wrote more than once about fannie and freddie, but they did not write in of about overleveraging, so that is where we are. also in that period i wasn't concentrating hard on "the forgotten man" book, my book which is about the possibility of a downturn, so i am for getting your second question. what was the second question? >> host: i think you address what he was talking about, that you were writing about that at the time. are you working on a book currently? >> guest: i am working on

three books, but to which are proximate. one is the graphic version of "the forgotten man" book. is 140-180 pages. abel be "the forgotten man" graphic like with comics and i am very excited about that. i am working with to artists and an adapter, chuck dixon and an actual illustrator who is in canada come to make forgotten man graphic because though "the forgotten man" has been translated into languages there have been many people who have said i liked the story so much can you spell it out more and the economics gets too boring. why don't you just tell the story and so for homeschoolers, for adults who like graphic novels and especially for places like mexico we are doing this. in mexico they don't need explanations about what inflation or deflation are. they have experienced it personally but they do want to hear the stories.

the other is i'm writing a pyett garfield calvin coolidge. i have been working with the calvin coolidge memorial foundation in vermont on this. they have been a great help and we have a blog. we invite you to go to it. i am doing that with joe thorned iq's just about finished with a book about taxes and the roosevelt era. >> host: mr. baker, what about you? what is next? >> guest: i am caught up in the debates today about financial reform, financial transactions but i do have a book coming out, taking economic seriously which is to my mind beating up the conservative set their own game because what i tried to point out in this book is that in fact the conservatives are people really very much wanting government intervention. they just want up to it. to give a couple of examples, bill gates is a wealthy man not because of the free market but because the government will rest me if i start this jim thing

copies of windows without his permission. copyright, government intervention in the economy. drugs, prescription drugs. they are very expensive. we are projected to spend $260 billion a year on prescription drugs this year. if we did not have protection we would go to walmart and buy them for for $5 shot. the government intervenes in the economy and all sorts of ways we don't typically talk about and this book is trying to call attention to that. i think we have to rethink this so there is a conventional stereotypical view you have conservatives that want the free market for every person for themselves and then you have your liberals out there who are saying they want the government to do everything in what i argue in this book is that no actually what goes on its conservatives that the government read the rules to redistribute income upward and the liberals aren't smart enough to recognize that so they make silly arguments about the market when in fact we both want the government in the

market. the question is what we want the government to do? >> host: czar rash in washington d.c. your honor was 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 bank regulations, like for example you have examples in other

countries. i was in brazil or i guess i should say let's do they have a number of things that help foster development. china has extensive systems, state banks that help them stimulate their economies of china rather than going into a downturn they have a great% growth last year. lot of that was because they had state run banks where they could tell them make loans, keep things going. i am intrigued by that. what i would like to see is something, we could do more experiments along the north dakota model where you could have state run things that compete. i don't want to hand big wads of money to the state run banks and tell them do whatever you feel like but the north dakota bank, that is not what they do. they compete and do so fairly successfully so i think you can explore those market niche is going on now. we already do that to some extent that the small business administration. so i think there are routes like that that could be pursued. we have to do it cautiously. but i think it can be more room

for state banks that compete with the private sector and in fact give additional competition and keep them on this. if it turns out they can't do it, that is great. the private sector is more efficient, find that ilc-- >> host: amity shlaes. >> guest: the question you want to ask is this the state one bank make capital available to the person who will create the jobs and in india there was a long history of government in the financial sector and the capital was not available. they even have this idea the rate of growth could never be strong in india and it only change when india deregulated, went capital from elsewhere became available to india through capital markets so a state-run bank can put a clamp on an economy and say you can grow in a little bit but not a lot. what you get then is well, the growth rate below where you wanted to be come a larger unemployment in sorrow.

you look at a country like germany and there are a lot of good ideas in germany. a lot of people who would create jobs that they could get the money for their ideas in for a long time they didn't because of the dominance of the whole state structure or japan, the post of things. they want exactly liberating for entrepreneurs who chose to come to the n so the rest of the world was a free rider on our banking system for a long time foreclosured had floods and the policy now was wrong. too big to fail is wrong. we are going to have more trouble because of that doctrine, but i wouldn't say private things are bad. on the contrary, they create growth and i want to mention also that someone like bill gates got something from government but he also created crichton number of jobs. why don't agree with the in that class and that with medicare, yes the government in seniors lamek to themselves about medicare and medicare is for the

government that property is important. it is the number one thing for getting our economy back, for getting past that extremely pessimistic tragic plan that the government is putting forward if unemployment is going to go down slowly until 2015, we don't have to follow that pattern and if property rates are expected you will get those private sector jobs. >> host: ted, sunnyville california he wore on booktv. >> caller: i was said the conference in baltimore in early 2004, and mr. baker gave a presentation and called the housing bubble right on, almost to the percentage. i really wish he would have gone into the obama administration and mary-- maybe head larry summers job but my question has to do with manufacturing. in june of 2000 we started losing 100,000 manufacturing jobs a month which really seem to come out of nowhere and six

months later george bush got into office and alan greenspan shortly started to lower interest rates. i remember a quote at the time that alan greenspan on into-- which were basically low taxes, deregulation and laissez-faire government. so, i think you have argued that the housing bubbles are responsible for the artificially low interest rates of the greenspan era in this whole decade that i guess the decade from hell, i wonder if this decade this lost decade is a manufacturing crisis and whether what we have is a free-market economist covering up for their free trade policies? >> host: mr. baker? >> guest: i think the loss of manufacturing jobs is the result of one of the mane and balances in the economy. we have a badly overvalued dollar which leads to the large trade deficit we have in this

story come at least my story of what happened in the 90's in this decade we have strong growth at the end of the '90s driven by a stock bubbles lapook i.t. what was going on in the economy the clinton people will tell you it was investment for coinvestment did not increase much and we compared the share of the economy to the peak of the business cycle in the 80's are the '70s and does not particularly impressive. what did increase was consumption because we had trillions of dollars, $10 trillion to stock bubble well. that collapsed in 2002 and gave us the recession in the 01 and then to keep the economy going to boost the economy. eventually but that the economy going with the housing bubble so we went from one bubble to the other. what we would have liked to have seen as the dollar falls so that our goods became more competitive internationally. when you have an overvalued currency and i will say that the dollar is overvalued 20 a 30%,

it is the exact same thing is if we had a subsidy of its one-year 30% on all the imports to come into the jana and we put a tariff, a tax on all exports. what you think is going to happen if we subsidize imports and put a tariff on our exports? rather than deal with the overvalued currency we have this talk, the strong dollar, blah, blah, blah and what that meant his we lost millions of manufacturing jobs and that set up the situation where we were losing a good thing jobs but also we are sustaining the economy with this bubble that of course is going to burst and that is what i get so mad at people like ben bernanke. most economists, god knows what on earth was going through their heads as they watch the bubble keep grow and grow and grow and said everything was okay. now they are surprised fukuda agnone? that is a joke we have around washington.

anyone who is doing their job should have known. >> host: amity shlaes anything there you want to address? >> guest: i think it is important to think about the interplay between the war in domestic policy because it is true the government can think about two things at once. it cannot walk and chew gum at the same time and when you have a distraction, whether you believe it is something we should invest then, afghanistan, iraq, the government does not think well about what is going on at home so if you called on our various leaders that the fed or at the white house over time under, in this period under president bush,'s september 11 you would say are you concerned about fannie mae? they would say absolutely, here's the data and they are going out of control, fannie and freddie and we will be have legislation about it. did the right legislation come to pass? nolan they think a lot of that had to do with concern about

international and concern about the war. one of the casualties of war is that it is hard to do domestic reform during the war but we all knew that fannie and freddie were a problem. that and the problem was uber only paying episodic attention to them instead of sustained attention and that is a matter of political will. >> guest: the worst loans or not fannie and freddie. the worst loans were coming from goldman sachs, citigroup. fannie and freddie were relatively late to the game in terms of worst loans. i was critical of them at the time, but in terms of the worst actors in this story they were the private issuers of mortgage-backed securities. >> host: ms. shlaes? >> guest: i would disagree with that. i think the notion of housing and to own a house as a privilege but it is morphed into an entitlement in the u.s..

we speak of ownership and the general sense. we don't really take property seriously and that contributed mightily first to people being willing to take the sub-prime loans, a 40 year mortgage is assuming they would always be able to pay, assuming they could throw the keys in the mailbox and start over. it is a different notion in which we corrupt and it was central to the whole story, combining with the ratings agencies, combining with international capital with a pool of money flowing in but the ownership and the prospect of economy when it became flog that contributed to the crisis. >> guest: these loans are being backed by countrywide. >> guest: this is also about our decisions as individuals, what do we sign? are we infants or are we adults? we signed things that makes sense that to do with their financial future. we are not such fools that we can beat dupes in we can all

just assign blame to individuals. this is a lot to dean about individual responsibility. >> guest: my point is this was and fannie and freddie. it was goldman sachs and-- >> guest: fannie and freddie through their web site and culture promulgated the data leak diary of the american dream that the idea-- >> guest: if you want to blame them for promoting the dream that is fine. >> host: i think we are going to have to leave the discussion for a later time. very quickly to both of you, did you know each other before tonight and have you read each other's books are materials? >> guest: i have read some of them in the's books. i think we have been on radio shows. >> guest: i have read much of being's work and i admire his perseverance and his center. >> host: amity shlaes, the most recent book is "the forgotten man," the industry the great depression and the bacon's most recent book is "false profits," recovering from the

bubble economy and they have joined us from our new york [inaudible conversations] >> thank you. this theater seats 340 and every

seat is occupied. i want to welcome you to the second annual tucson festival of books. my name is tom miller. this panel was called the u.s. mexico border living and writing on the edge. so if there's anyone here for the workshop please check your schedule. our panel this afternoon here at the university of arizona student union gallagher theater consists of david from the east coast, margaret a well-traveled tuscsonan. and that's arizona, not argentina is that correct? thank you. we will begin to the panelists very soon but first we have some housekeeping announcements from our sponsor. this eve and will last for one hour including questions and answers from these microphones at the end of the aisles. for the time being please hold your questions. believe me, we will be getting to them. at the conclusion the panelists

and myself will go to what is called the mad and media signing myriad number one tent be. got that? mad and media center tent 1 b. it's about 100 steps down to the right. we will sign books for you there. you can pick up the book at any of the vendors. for those of you watching at home these books are available at the local bookstore and you no longer have a local bookstore through the online bookstores. further, when you are back in front of a computer please go to the tucson festival of book web site and complete the survey for the festival in general and this session in particular. and most important that the count of tree all cell phones off. one, two, cell phones off. okay. so enough of the housekeeping. once there was a dog, the dog lived in malaya, a well-to-do suburb of san diego. she was a french poodle. she had tight white curls and