Obama’s Re-Election Means More Stagnation, Says Ex-Treasury Chief O’Neill

Former Treasury Secretary Paul O’Neill, special advisor to Blackrock, was interviewed Thursday by Bloomberg T.V.’s Tom Keene, host of Midday Surveillance. During the interview, O’Neill discussed the outlook for the U.S. economy, the tax code and the state of political leadership in Washington.

On the continued economic rebound in 2012:

I think, you know, our economy is inching ahead. And if we don't have any more shocks, I think we will keep moving up, hopefully to 2% or 3% real GDP this year. But as you indicated earlier, housing is a really important part of this. It's hard to see a really robust economy without housing starts moving back up above a million.

On political leadership and taxes:  

It's hard for me to see right now a path through to what I believe we need, which is what I call architectural leadership in the presidency. It means we have structural problems in our economy. One of the four most structural problems is a tax code … our tax code proves we're not an intelligent people. And I don't see how we get our tax code fixed unless, first of all, we have a president who throws politics aside and articulates the substance of what we need to do as a nation to straighten out our tax code. And it's hard to see how we get there because, right now, it looks like the Republicans are going to maintain control of the House, may even control the Senate. And if the president's re-elected, that says four years of stagnation.

On encouraging capital investment:

I think as demand materializes, companies will respond with investment to facilitate their ability to respond to demand.  And you know, I think there are more encouraging signs than just the reduction in the jobless claims. It looks like the automobile industry in the United States could move up close to maybe 14 million units this year, which would be a major advance from where we were at the depth of the recession; where we were around nine million units. And even in Europe, auto sales were looking like 19 to 20 million, which is not bad for an economy that's struggling like the euro is.

On reducing unemployment:

I believe a president should say it's not really possible for a president to create more jobs. We have this fiction where we go on that, you know, it's all in the president to create more jobs. I don't think that's true. I think it's possible for a president and for our political process to create the basis for stability, which is critical to making the long-term investment decisions that you referred to when I was at Alcoa. When I was at Alcoa, if we were going to make an investment in a new smelter, that's a 50-year investment, right? It's not something you do casually. And so you need stability and the prospect of stability going forward to make long-term investment decisions.