Mark Thoma is Professor of Economics at the University of Oregon. His daily popular blog is Economist’s View.
What is the stand of the economy right now?
It looks to be turning the corner, finally, but the strength of the recovery – particularly for labour – is still unclear. I’m worried it will be a long, drawn out process.
What lessons do you draw from the debt crisis of the EU-Zone for the USA?
Our debt levels are not yet at the levels Greece is struggling with, so our need to make changes is not as urgent. But the rise in health care costs is leading to unsustainable debt levels in the future and the lesson that I hope we’ve learned is that this problem must be addressed or we may end up facing similar problems some day.
What is your take on the finance reform bill on the floor of the Senate?
It is looking to be stronger than I originally expected, but even so it will fall short of what is needed. I’m disappointed with the soft limits on leverage ratios that will likely prove too soft when they get in the way of profit. I’m disappointed by the failure to seriously address the political power that too big too fail banks have. I think these banks should be broken up, not because it will do much to ensure the safety of the system, I don’t think it will, but it will take away some of their political power and hence their ability to influence the regulatory environment they operate under. Finally, I’m disappointed with the treatment of the ratings agencies, or should I say the non-treatment since the policy doesn’t address the problems created by the way these agencies are paid. Since they are paid by the firms issuing the assets being rated, they have an incentive to tell the firms what they want to hear in order to preserve future business. This needs to change.
Thank you very much.
Mark Thoma is Professor of Economics at the University of Oregon. His research focuses on how monetary policy affects the economy, and he has also worked on political business cycle models and models of transportation dynamics.
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