Grim and grimmer: Economic divide at Panetta

Last night, I was in Monterey at the Panetta Institute’s first 2010 lecture.

After a session with Cal State Monterey Bay students in the afternoon, former SEC Chairman Harvey Pitt and economist and former Clinton administration Labor Secretary Robert Reich found plenty to disagree about at the Monterey Convention Center in a nighttime discussion provoked and moderated by CNBC business journalist Ron Insanta.

What was most disturbing was what all three agreed upon: that the recession is not lifting anytime soon and that unemployment almost certainly will remain unacceptably high. But the evening was more than fascinating, as Reich and Pitt staked out diametrically opposing viewpoints on who is at fault, what’s to be done, and the role of government. If you didn’t know before why Republicans and Democrats are going to war over health care reform and financial reforms, Pitt and Reich exemplified the divisions.

This is the 13th year the Panettas, Leon and Sylvia, have been convening key figures from the government, the quasi-government and media to discuss top national issues. This is the second year without Leon Panetta, who is deeply under cover in Washington running the CIA. He’s stayed out of the press corps limelight in the past month or so, after raising a few eyebrows (a distinctive Panetta feature) with his pronouncement that another al Qaeda strike in the U.S. is imminent.

Here’s the Sentinel’s editorial on the Reich-Pitt discussion (which, remarkably, mirrors some of my own thoughts while listening and talking to the participants):

The Great Divide

Economic recovery?
If you were listening to Robert Reich and  Harvey Pitt discuss the economy Monday night at the Panetta Lecture Series in Monterey, you probably didn’t come away with a sense things are going to get better in the short term — or that the partisan divide will be bridged.
Reich — a member of President Barack Obama’s transition team, former Clinton administration labor secretary and an economist — was the more hopeful of the two, seeing a recovery in the next year and a half. But, Reich warned, without an increase in demand among consumers, even that projection could be optimistic —  and with no end in sight for double-digit unemployment, he’s probably right.

Former Bush administration chairman of the Securities and Exchange Commission Pitt, a lawyer, stated flatly, “Prosperity is not around the corner.” Pitt blamed a “failed” regulatory system, muddled policies, and a still overinflated stock market.

Pitt said little has been done to prevent a repeat of the economic crisis and collapse of the past two years. He criticized the Obama administration for giving stimulus money to the very companies and banks whose misconduct caused the systemic failures in the first place and said the money should have been put into the pocketbooks of taxpayers to create a ripple effect in the economy.

Moderator Ron Insana, a CNBC analyst and business journalist, commented on the number of high-up legislators and regulators he’s interviewed who simply do not understand complex financial issues.

Reich decried the “incredible polarization,” fueled by cable TV, the Internet and talk radio, that has created a wave of anger among many Americans. He also faulted special interests and lobbying for swaying Congress from making serious reforms.

Pitt agreed gridlock is the worst he’s seen in 42 years working around the federal government, but he blamed the problem on an unwillingness from the White House to seek compromise solutions. He also accused the president of trying to create a “class war” by demonizing bankers and other Wall Streeters.

Reich replied that if anything Obama should be faulted for compromising too much on health care, the environment and financial regulation. He also said the wealthy in America, including Wall Street, have waged class warfare “on the rest of us.”

Insana asked both what they might say a year from now, if the economy continues to falter. Reich said he would ask why unemployment remains high, why the income gap remains between the wealthy elite and everyone else and “why is Sarah Palin so popular ..?”

Pitt got the last word. “Sarah Palin doesn’t have the least bit to do with any of this.”

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