Up   |  February 03, 2013

Job recovery and its link to the deficit

As differing economic reports roll in, Chris Hayes talks to his panel about the role of public investment in infrastructure projects and the availability of incentives and equity to promote risk.

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This content comes from Closed Captioning that was broadcast along with this program.

>>> make the case of why the sluggish recovery or the sluggish jobs recoveries particularly, what its link is to the deficit.

>> yeah. well, sort of. i think there's two constraints of buying the economy. one, properly trained talent is centered to the risk of growing the economy. that hasn't changed. secondly, you need equity to bear the risk that goes along with taking those risks. that has changed a lot. we woke up in 2009 and 2010 and recognized there's a lot more risk of damage of withdraws to our banking system and we have dialed down the amount of risk taking we're willing to take. it's no surprise that we have more equity per dollar per employee and per dollar of gdp and we've grown faster and produced more innovation than other economies have. so when we talk about spending more money in order to increase consumption in the short run, that money has to come from somewhere and it largely comes from income that would otherwise be saved and invested for equity. that surplus of capital sitting on the sideline is short-term capital that will not underwrite the growth of the economy. joe's work is all about equity, the lack of equity amplifies the business cycle because when you fear that you're going to go bankrupt in a business cycle , you dial backwards, thinking if you had more equity, you wouldn't do that.

>> okay. to the point, first of all, investment in the kind of risk taking kinds of things like software, rnd is really actually quite strong. the weakness in investment is not surprise, is in things like real estate because we overbuilt. if we hadn't had that problem in terms of the investment sector, not consumption, not exports, not government would be back to normal.

>> and, you know, the thing is, when you look at this whole notion of conservative investments, the mortgage area is one of those where we've seen the banks behave horribly. they were given money from the united states government with the notion that they would then invest. instead, what you've seen is a qualifier mortgage. you get from a 680 in 2008 to 720 in 2012 , which means it is much more difficult. especially for --

>> but that is the difference. that is another way of saying what ed said, right? which is risk aversion on the part of --

>> except -- but --

>> what --

>> what i'm saying here is the government gave these people these money. the thought was if the base had more money, they would spend it.

>> which they have not done.

>> no.

>> there's another constraint to the me. none of those things that you said about people wanting to invest would preclude the government from building a bridge or building 100 bridges. we got consumer numbers on friday. the spending on roads and bridges continues to decline until now and that's the unprecedented austerity that i'm --

>> if you go back to the great depression, one of the real forces that got us out of the great depression, and particularly maintained the economy after world war ii was all the investment that was done during the great depression on infrastructure and all the investments that were done during the war and after the war on human capital and technology.

>> and a big part of this question is how does -- i mean, from whichever side you approach it, right, the cash that's sitting on the sidelines, right? the question is how to push that out. that is in some ways the problem behind this.

>> all that cash was there before 2008 . you can see a chart of how that goes up.

>> what you should know for the news week ahead, coming