Dow Soars, Dem. Claims President is Responsible

This is a rush transcript from "Your World With Neil Cavuto," March 31, 2010. This copy may not be in its final form and may be updated.

NEIL CAVUTO, ANCHOR: With us now, Connecticut Democratic Congressman Jim Himes.

Congressman, I guess you would call this a Barack Obama rally, then?

REP. JIM HIMES D-CONN.: Well, Neil, I think, whatever you call it, the fact remains that, a year ago, we saw negative 6 percent GDP growth, and, in the last quarter, we saw a positive 5.6 percent GDP growth.

Look, the facts speak for themselves. Look at the market. Look at the quarter. Look at how the market has performed in the last 18 months. Talk to anybody in business out there and they will tell you that we’re living in a radically different world than we were living in a year ago.

Now, nobody can predict the future. You know, we have got a very serious fiscal issue to deal with, a debt overhang we need to do deal with. But I think that anybody who is paying attention, anybody who is serious, would say that, today, where we are, compared to where we were exactly one year ago, is a pretty staggering economic improvement.

CAVUTO: All right, you know, it could just be a cycle, too, right? I mean, presidents and parties love to take bows for stuff when things happen their way, but recessions, bear markets, 18 to 24 months, that tends to be their lease on life. And this one was un-leasing its life, so to speak.

So, maybe that’s all that happened here. And with all this spending, yes, something was bound to stick. But the bill for it sticks longer. What do you make of that?

HIMES: Well, Neil, you know, when you get out of the political world, and you listen to serious people, when I got to Congress a year ago, pretty much everybody, economists of the left and the right, said we’re experiencing one of the most severe recessions we have ever seen, and you need a response, you need a stimulus.

There was no disagreement over that. Now, I suppose, with the — with hindsight and now that, clearly, the economy has turned, and we hope that that continues to express itself in actually jobs being created, but now that the economy has turned, the financial markets are — are stable, you know, yes, the Republicans are going to say, nah, that stimulus had nothing to do with it.

Now, that’s just baloney.

CAVUTO: Well, by the way, with all due respect, Congressman — and you’re a very smart guy — but not everyone was saying back then that stimulus was the way to go. Others argued keeping interest rates low and cooling it on constant bailouts was another way to go.

HIMES: Well, I will tell you that I....


CAVUTO: But we can go back in history. We can go back in history. I know the various economic groups that said you have got to goose this economy one way or the other. We could differ over how it was goosed. But you’re right, that the end results could be the proof in the pudding.

What I’m wondering...


HIMES: And listen to people to Ben Bernanke, right, Ben Bernanke, serious guy, appointed by a Republican president.

CAVUTO: All right. I love Ben Bernanke, but Ben wasn’t exactly astute to see this financial crisis when it hit in 2008. So, there’s a lot of blame to go around.

All I’m saying, Congressman, is that do you, in your heart of hearts, believe that more government spending would then be in order to keep this going?

HIMES: Look, this policy problem was always a problem of timing.

When we were experiencing the kind of economic distress that we felt a year ago, the answer was very clearly that the government needed to step in, in classic Keynesian fashion, and do exactly what it did. Was it perfect? No. Could we have done a more efficient, economically, stimulus? Probably.

But, hey, the proof is in the pudding. The facts are the facts, and the numbers are the numbers. Now we’re in a world where GDP is looking...


CAVUTO: So, you don’t give any credit just to the fact that interest rates have been very, very low...

HIMES: Interest — low interest rates...

CAVUTO: ... and we were already as low as we could go, and it was hard to go much lower? You don’t buy any of that?

HIMES: No, no, no, no, no, you’re putting words in my mouth here. I was talking about the stimulus. The stimulus helped. Zero real interest rates helped. The massive expansion of the Fed’s balance sheet also helped. Now, all that stuff is politically uncomfortable, but now we need to turn that around, right?

CAVUTO: Well, no. No, no, Congressman, I just want to be clear. Maybe I misunderstood you, sir.

You’re — you’re saying that, had it not been for stimulus, which you apparently see hand in hand with low interest rates, we would not have seen the thousands of extra points on the Dow that we have seen since?

HIMES: That’s not what I said.

I said that, in the last year, you have seen a very substantial stimulus, you’ve seen very low interest rates, and you’ve seen an expansion of the Fed’s balance sheet. Those three things working in concert have had a profound positive effect on the economy.


HIMES: And now the challenge is precisely what you’re talking about. We see good growth, so now is the hard part, taking away the punch bowl.

Rates will need to go up if we’re not to see inflation. The fiscal situation will need to be brought in order. And nobody likes that stuff, but, if we’re to set the stage now for long-term growth, we’re going to do those things.

CAVUTO: All right.

Well, Congressman, I appreciate you coming here. Very good having you.

HIMES: Thank you.

CAVUTO: All right.

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