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Interview with Giuliani Economist

In preparation for the economic debate, I just had a chance to interview David Malpass, a Rudy surrogate who is also Chief Global Economist of Bear Stearns. Malpass joined the firm in 1993 and is a Senior Managing Director. According to his bio, Malpass: "writes economic and financial studies and discusses financial market conditions with institutional investors. His duties include economic forecasts for the U.S. and major foreign economies, Washington analysis, and global investment themes."

On the question of how important it is to make the Bush tax cuts permanent, Malpass tells me it's "very important from a growth standpoint" because they generate growth.  He also added that they need to be permanent because, "having them constantly having to be renewed...creates uncertainty." 

When asked what would happen if Hillary were to allow the Bush tax cuts to expire, he tells me: "I think a recession would be likely."

On the subprime crisis, he thinks we're only about halfway through it.  On interest rate cuts, he believes the Fed was wise to cut interest rates in September, because it showed the Fed was actively working against a recession.  However, he doesn't necessarily think more rate cuts are ideal, because the biggest benefit has come from the initial rate cuts.

Regarding the Bush economy versus the Clinton economy, Malpass tells me the economy is sturdier now than at the same point during the Clinton Administration.  He notes a stock market crash and recession circa 2000, and says there is no doubt it was a "Clinton recession."  The 2003 tax cuts, according to Malpass got us back on track.  He believes Clinton gets credit for a good economy because of the timing of his tenure.  He came in in '93 as an expansion was underway.  Conversely, Bush had a year and a half before the tax cuts spurred the economy.

Regarding social security, he praised the idea of personal accounts, but wouldn't go so far as to tell me he'd advise Giuliani to try to push them as Bush attempted. 

On free trade, he tells me there are currently 4 free trade agreements before Congress, and that the Mayor supports all of them.  When I remind him the debate is in Michigan, he tells me the Mayor wants to create more manufacturing jobs by growing the economy -- not by blocking imports.

I asked Malpass about the possibility that Giuliani might pick populist Mike Huckabee, a candidate who has been critical of hedge-funds.  Malpass refused to bite ...

Rudy's message today, according to Malpass, will be his 12 commitments -- including holding down -- and cutting -- tax rates and reforming the tax code.  Regarding spending, Giuliani will stress restoring fiscal discipline and slowing the growth rate of government.

Malpass, of course, also stressed the fact that "Rudy's electable," and that he has the experience to push through these reforms in Washington, just as he did in New York.

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