You’ve said before that you don’t think it went far enough.
I don’t think it was big enough.
How much bigger do you think it should have been?
I’m not an expert, but probably at least twice as big. … If you’re getting into a situation where you’re on the verge of a deflationary spiral, where you can’t use monetary policy because interest rates are already at zero, the only way to prevent going down into a depression is to stimulate aggregate demand. And that means you want to replace aggregate demand, replace as much as possible the difference between what it would be in a normal full economy and what it is. … That seems to be well over $2 trillion likely, over two years, which means we should do a well over $2 trillion stimulus.
Is that to say you think we’ll have to come back [for another stimulus package]?
I fear that we will have to come back and that we will not be successful in coming back.
Do you think that the American people would have tolerance for that?
I fear that what’s going to happen is that you would do the stimulus bill, it slows, but does not stop, the descent into depression. … If you then come back and say, ‘Gee, we undershot, we need another $800 billion,’ the Republicans are going to say, ‘Come off it. We told you you were wasting that $800 billion, we told you the $700 billion in TARP was wasted.’ … At that point, I don’t think you can prevail over that, so I fear that what we’ve done is not enough and we won’t get another shot.
The mayor and the governor have both proposed tax increases. Is there a worry that that could exacerbate the situation?
As a general rule, any of the cuts they make, almost all of the tax increases they make, hurt the economy, but they have no choice.
On the city level, there’s a debate between sales tax or income tax.
And those both hurt the economy. The only thing that arguably doesn’t hurt the economy would be a tax on rich people. There are two different levels you look at that. … From a national point of view, the question is, does it affect their spending levels, and the answer is, probably not. … The other question you ask about a tax on the rich is, do you kill the goose that lays the golden egg? Do they move to California … or New Jersey? And that is a very practical question.
[In the city] you’ve always pushed more industrial development than the mayor’s been doing.
One thing we said for many years—I wrote articles about this in the ’80s—and I said that the city was becoming too dependent upon one industry: finance, insurance, real estate; and that you shouldn’t put all your economic eggs in one basket, because God help you if that basket develops a hole.
Every politician seems to talk about diversifying—
They didn’t then. When I was talking about this, I was opposing very specific things. We pushed manufacturing out of the city at six times the normal rate of decline because we followed land-use policies designed to do that.
And you think we still did that under Bloomberg?
Yes. For example, now it seems to be changing a little, but this whole fight we had with ASI [a Brooklyn container port the Bloomberg administration wanted to supplant with mixed-use development] … That whole fight was the same thing. [Former Deputy Mayor Dan] Doctoroff and company—they looked at that waterfront and they saw dollar signs. They looked at that waterfront and they said, ‘You’re not using it for the highest and best use,’ the highest and best use being defined as whatever produced the highest rental value.