Veteran Democrat Jack Lew expresses dismay at US deficit but blames Joe Biden too
Jack Lew is as decorated as they come when it comes to US economic leaders from the Democratic side of the aisle having served as President Obama's treasury secretary, and before that as his director of the office for management of the budget (OMB), a role he also held in the Clinton White House, when he was instrumental in the administration balancing the budget in the late 1990s - the last time that has happened.
As President Trump's "one big, beautiful bill" makes its way through Congress, Mr Lew expressed dismay at the direction of the US deficit.
"The simple rule that in good economic times you ought to come as close to paying your bills in the current sense as possible, certainly not running a deficit more than 3% of GDP, is the right rule."
"Then in a bad time, you don't worry about nickels and dimes. You don't worry about a COVID response or a financial crisis response," Mr Lew said on The Master Investor Podcast with Wilfred Frost.
"What you can't do is never worry about it because then the hole just gets deeper and deeper and deeper. And that's why we're now looking at a deficit that is going to grow to 6% of GDP with this bill. That's terrible."
2:24
Of course, the deficit, having leapt during COVID-19 at the end of the first Trump administration, did stay elevated through the recent Biden administration, when Lew served as ambassador to Israel, and he said he felt that Biden's Build Back Better Bill was not a great decision.
"The reality, the political reality at the time when there was a bill that in my own view was too large, it gave cash to people who were already working at a time when there was a concern about inflation," Mr Lew said.
"The political reality was you couldn't get Democrats and Republicans to vote for something without that. If you asked me at the time was the risk of the economy not recovering great enough to take that on, I would have said you can't afford not to come out of COVID strong.
"So I didn't think it was a great decision, but I don't think there was an alternative other than doing nothing, and we've seen from experience that the US recovered stronger and better than other countries from COVID, and the inflation is running its way through the system."
Need for compromise
Giving insights on how to balance the budget, he spoke about the need for political compromise.
"I've always been able to convince most of the wisdom and the benefit of the compromise. And I work for presidents who were able and willing to make that case.
"As in everything else in life, relationships matter deeply. Having a counterpart that you know and that you've worked with in the past and knows that they can trust you and you can trust them gives you the freedom to explore ideas that might actually work, but if they were prematurely made public, would be potentially very painful to either or both sides. So you have to have a space that you can talk about middle grounds in that isn't totally off limits or poisoned."
Ruefully, he added, "there's no bipartisan conversations going on".
An economy 'doing ok'
Despite being down beat about the Trump administration's economic policies he acknowledged that "the US economy is actually doing ok", and was reassured that despite a 10% fall in the dollar so far this year, which he puts down to "policy chaos in the US", the bond market appeared calm to him - for now at least.
"The economy is not yet in a place where it's in distress."
But, "I think we have to be careful. Right now, I think we're in a place where there's no alternative to the dollar, which is why you're not seeing more departure from the dollar", he added.
"The renminbi is not in a place where it's fully convertible and market-controlled. There's not enough high-rated European debt to meaningfully replace the dollar.
"Japan mostly is a domestic lending and borrowing market. So I have always been of the view that the fact that it's not there now does not mean we should take for granted that the US dominance will be perpetual."
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Independent
38 minutes ago
- The Independent
Which stores will be open on July 4th?
The Fourth of July will see banks, the stock market, and the United States Postal Service closed, though online banking and ATMs will remain accessible. Costco stores will be closed for the entire day on July 4th, resuming normal business hours the following day. Many major retailers, including Target, Walmart, Kroger, Starbucks, Dunkin' Donuts, and Walgreens, are expected to be open, with some operating on reduced hours. Aldi and Trader Joe's will also be open but with limited hours, typically closing earlier in the afternoon. Most fast-food restaurants, such as McDonald's, Wendy's, Burger King, and Chipotle will be open, though specific opening times may vary by location.
The Guardian
an hour ago
- The Guardian
Elon Musk's xAI gets permit for methane gas generators
Elon Musk's artificial intelligence company xAI has been granted a permit to run methane gas generators at its massive data center in Memphis, Tennessee. The county health department approved the permit for the 15 machines late Wednesday, a move that has sparked outcry from the local community and environmental leaders, who say the generators pollute their neighborhoods. 'Our local leaders are entrusted with protecting us from corporations violating on our right to clean air, but we are witnessing their failure to do so,' said KeShaun Pearson, the director of the local environmental non-profit Memphis Community Against Pollution. xAI set up its massive data center in Memphis roughly a year ago. To supplement the facility's heavy power usage, the company brought in dozens of portable methane gas generators. xAI did not have a permit for the generators, which require municipal approval to deploy, but seemed to have found a loophole in the system that allowed it to use the turbines as long as they were not in the same location for more than 364 days. In January, xAI did apply for a permit for 15 generators – even though it had been running up to 35 generators on-site, according to photographs. After months of public forums and community protests, the Shelby county health department issued the permit. A satellite image that Memphis Community Against Pollution took on Tuesday and shared with the Guardian shows at least 24 turbines still set up at xAI's facility. 'xAI welcomes today's decision,' a company spokesperson said in a statement. 'Our onsite power generation will be equipped with state-of-the-art emissions control technology, making this facility the lowest emitting of its kind in the country.' Sign up to TechScape A weekly dive in to how technology is shaping our lives after newsletter promotion Environmental groups dispute whether xAI's power usage will actually be low emitting. The Southern Environmental Law Center has conducted studies on the pollution that the turbines emit and says they have the capacity to emit thousands of tons of harmful nitrogen oxides, along with toxic chemicals like formaldehyde. 'The decision to give xAI an air permit for its polluting gas turbines flies in the face of the hundreds of Memphians who spoke out against the company's permit request,' said Amanda Garcia, a senior attorney for the Southern Environmental Law Center. She added that the health department is allowing 'another polluter to set up shop in this already overburdened community without appropriate protections'. xAI is in the industrial zone in Memphis, which is surrounded by several neighborhoods where residents have long dealt with pollution. This area is historically Black and has higher rates of respiratory diseases and asthma and a lower life expectancy than other parts of the city. Studies have shown these neighborhoods also have a cancer risk four times higher than the national average. The pollution coming out of xAI, along with its proximity to Black neighborhoods, has caught the attention of the NAACP civil rights group. It has initiated a lawsuit against xAI alleging the company is violating the Clean Air Act by illegally installing and operating the methane gas generators. 'While the NAACP is glad that 15 of xAI's turbines are now subject to greater transparency and accountability around their methane gas emissions … this decision ignores the community pushback,' Abre' Conner, the NAACP's director of environmental and climate justice, said in statement on Thursday. 'We are still committed to holding xAI and the Health Department accountable.'
The Independent
an hour ago
- The Independent
How the ‘Big, Beautiful Bill' will affect grad student loans
The House of Representatives is advancing the GOP's 'Big Beautiful Bill', which is set to significantly alter how graduate students finance their higher education. The bill proposes eliminating the federal Grad PLUS loan program starting July 2026, replacing it with increased but potentially insufficient limits on federal Stafford loans. Graduate students would face annual borrowing limits of $20,500 and a lifetime cap $100,000, while professional students could borrow up to $50,000 annually $200,000 lifetime maximum. Critics warn the changes could force students into private loans, deter them from pursuing advanced degrees, and exacerbate shortages in high-demand sectors like rural healthcare. While Republicans argue the limits will help control college costs, President Donald Trump is scheduled to sign the bill, which will also affect borrowers on the Biden-era SAVE plan from next summer.
