Former House Speaker Newt Gingrich on Monday morning painted a dire picture of the U.S. economy, saying that it is headed “off a cliff” and that President Obama has failed to bring fresh and original thinking to the problem so far.
Mr. Gingrich, 65, said that the nightmare scenario used by top financial officials to persuade President Bush into crafting the $700 billion bailout last fall is still on the way.
“Probably I would have voted yes,” Mr. Gingrich said of the bailout, “just because if you have the secretary of the Treasury and the Federal Reserve chairman saying to you, ‘Vote yes or we’re all going to go off a cliff.’”
“Well, the fact is, we’re all going to go off a cliff. That’s what’s happening. This is a much more profound problem than people think,” said Mr. Gingrich, a Republican from Georgia, during a breakfast with reporters and columnists organized by the Christian Science Monitor.
“I keep getting told there’s another [$1.2 trillion] in losses coming down the road, minimum. Goldman Sachs, I think, said Friday, $4 trillion to finish bailing out the banks,” he said, predicting another “three to five years, at a minimum, of working our way through this.”
And Mr. Gingrich, who has earned a reputation for irascibility, slammed the Obama administration’s current response.
“The continuity between the Bush bailout and the Obama bailout will be mildly amazing. This is not the change you can believe in. This is more of the same,” he said, mocking one of Mr. Obama’s campaign slogans.
Mr. Gingrich’s harshest words were reserved for recently confirmed Treasury Secretary Timothy Geithner, whom he mentioned repeatedly as a symbol of the government and business class refusing to learn lessons.
“Geithner is fronting for the banks. Frankly, that’s what I think Paulson ended up doing. Paulson ended up being a Wall Street deal-maker who was happy to take your money to bail out Wall Street deal-makers. That’s not the purpose of the secretary of the Treasury.”
The former speaker, who led the Republican revolution in 1994 but was undone by GOP infighting and fights over the federal budget with President Clinton, now leads the American Solutions think tank.
He sounded populist notes when discussing government aid to financial institutions through the $700 billion bailout and other loans and guarantees from the Federal Reserve.
“What we have to do is look at the very simple question: ‘What is it going to take to succeed in the world market, how do we reset the American economy, how do we get rid of the wreckage, and how do we start growing a new generation of institutions?’” he said. “But if you watch, all these guys we are bailing out are laying people off. So you are giving money to Citibank, which I think dropped 53,000 people. And so all you’re doing is cushioning, for the guys who are in charge, the degree of their own failure. And you don’t learn lessons that way.”
“We’ve been through three years of economic pain with almost no thought,” he said. “The political class has panicked, largely goaded by the financial class, and the result has been like going to a doctor who said, ‘I can’t do a CAT scan, I can’t do any lab work, but I’ve got tons of morphine,’ as opposed to, ‘What’s gone wrong, how do you reset the system and how do you realistically expect this system to operate in the world market in the future?”
“Which is a much harder and much more painful conversation than any political figure’s been wiling to have so far. I think that bodes badly.”
By Andrew P. Napolitano
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