President Barack Obama speaks as
Vice President Joe Biden looks on before
signing the American Recovery and
Reinvestment Plan in 2009. Natwar
Gandhi says it was a big mistake not to
have had a bigger stimulus package then
What’s your prognosis for the economy on the eve of
President Obama’s much-awaited plan, which he now pro-
poses to articulate before a joint session of Congress? Can
the economy be turned around in the next year or so, which
would help him get re-elected, or do you see the economy
What the economy needs now is demand. Demand can
come from several places, most importantly, consumers.
Today, the consumer is not spending money and because
consumers are not spending, businesses are not investing ….
Even though they have trillions of dollars sitting in their
Absolutely. They are sitting on huge amounts of cash.
However, the only place that it can come now in some bulk
is from the federal government. We need to have a massive
stimulus program, particularly that relate to infrastructure
A few years ago, I was in China and the amount of money
they were putting in investment in infrastructure was enormous. This country needs to do that. We used to do that 50
years ago. We don’t do that anymore. Our infrastructure is
crumbling. The city of New York is living off infrastructure
and sewage systems that were put in over 100 years ago.
And, this is the best time to borrow money. You can borrow
most cheaply. Interest rates are at a 50-year low. We need
to make massive investments in our infrastructure and this
is what will generate jobs.
But won’t this all add to the massive debt this country is
carrying and make it even more beholden to the likes of
China? And what about the runaway deficit that may never
be bridged at the rate we are going?
Yes, debt is a major problem, but I would look at it long-
term. On that front, if you don’t address Social Security,
Medicaid, Medicare, and defense, you are not going to
address the debt problem or the deficit problem. You have
to address those things and you have to think in terms of
some kind of reasonable tax revenue. It doesn’t have to be
that you have to raise tax rates, but some kind of tax reform
by closing the loopholes, and you can generate enough rev-
enue to basically make up the tax that you need in addition
to the appropriate cuts in Medicare, Medicaid entitle-
investor, the clear case is: Am I going to get my bond serviced, am I doing to get my money back? I am confident that
this country will never default on its debt obligations. Even
ahead of a social security payment, they will make sure that
these bonds are serviced. So, I have no doubt about this
country’s ability to service debt. S&P’s basic argument was
that the political alignment is really not performing at a
level that they would have enough revenues coming in or
even tax paid to take care of the issue. I say, yes, it’s very
messy; we would go through a whole year without having
any structural reform, but we would still make our debt
payment and on that front, I though that they should not
have lowered the rating.
Do you believe they were driven more by the politics than
by anything else?
I really don’t know that. But I think it is simply a matter
But is it credible for these rating agencies, which after all,
represent a coalition of corporate interests and sectors to be
issuing these ratings? Isn’t there an undeniable conflict of
That is the argument that is being made. But then the
same thing can be made about accountants — Price
Waterhouse, Delloite and others. They get paid by the same
corporations for whom they provide certificates. And, the
system has worked so far. There are excesses in these ratings, particularly for these super-structures and borrowings and all these derivatives, etc and I think they realize
Finally, if the Obama administration is re-elected and they
come to you and say, we need a guy like you to head up the
OMB, would you seriously consider it?
I am always open to opportunities, so you should keep
that rumor going (laughing). (But) Who knows?