INTERVIEW TRANSCRIPT

C-SPAN’S “NEWSMAKERS”

Guest: Keith Hennessey, Director, National Economic Council

Reporters: John McKinnon, Wall Street Journal and Patrice Hill, Washington Times

Moderator: C-SPAN

TAPE DATE: Friday, April 18, 2008

AIR DATE/TIME: SUNDAY, April 20, 2008 at 10 a.m. and 6 p.m. ET

Please use with attribution to C-SPAN’s “Newsmakers”….*

* NOTE: C-SPAN should appear in all-caps because it is an acronym for Cable Satellite Public Affairs Network

Please contact Amy Spolrich in C-SPAN's Media Relations Department at

202-626-7958 or aspolrich@c-span.org for questions

© NCSC

Copyrighted material: use with attribution only

PEDRO ECHEVARRIA, HOST, C-SPAN’S NEWSMAKERS: Joining us on “Newsmakers” is Keith Hennessey. He is the director for the National Economic Council.

Welcome, sir.

KEITH HENNESSEY, DIRECTOR, NATIONAL ECONOMIC COUNCIL: Thanks for having me.

ECHEVARRIA: Our guest reporters who will be interviewing him are John McKinnon of the “Wall Street Journal.” He’s their White House correspondent. And Patrice Hill of the “Washington Times.” She serves are their chief economics correspondent.

John McKinnon, you get the first question.

JOHN MCKINNON, WHITE HOUSE CORRESPONDENT, “WALL STREET JOURNAL”: Thanks.

Keith, why don’t you just start with, you know, what just happened here, because you guys had a pretty good record going with the economy for a long time, and lately, not so good.

So, what just – what’s been going on? And what do you see as the major factors here?

HENNESSEY: Sure. What we’ve seen is a significant slowdown in economic growth. There are three principal causes to it.

One is the problem in the housing market – actually, a couple of problems in the housing market. We have a fundamental imbalance between supply and demand in houses, in the buildings themselves. And as a result, builders don’t want to build houses, which means that the housing component of the economy is not growing.

That is a significant drag on economic growth, and it’s why the economy is basically around flat – a little above flat, a little bit below flat.

In addition, obviously, everyone knows that there have been problems in the mortgage markets. Those were initially triggered by problems with mortgages and with housing back in August and September. They’ve spread to a broader set of problems in credit markets, and the markets are working through those with the help of some policy changes from the government and from the regulators.

And then the third significant impact is $110 oil, which hurts people in terms of their pocketbooks. It’s a real hit in terms of family income and family budgets. And then it also contributes to inflation.

So, what you have is an economy where you’ve got strong export growth. Up until fairly recently, the consumer was growing – consumption was moving forward – but you had drags from housing and from financial market pressures, credit market pressures.

What we’ve got right now is, we’ve taken some significant policy action. The president proposed, and then Congress enacted, the stimulus bill back in January and February. We should see the initial impacts of that in May, and start to play out in May and June and July.

And the big question going forward is, how does that consumption growth from people having more of their tax money in their pockets to spend, how does that compare with the drag from the housing market and the financial market pressures and high oil?

And so, those two forces are in essence competing, with one dragging growth and one increasing growth. And then obviously, you have the effects of the Fed lowering rates, pushing things going forward.

MCKINNON: And do you still think that that stimulus that you did back in February that’s now kicking in – or about to kick in – do you think that’s enough? Or …

HENNESSEY: It’s hard to tell whether it’s enough, because you don’t know how significant the drag is, or how long the drag will continue from housing, and from the credit markets in particular.

What we’ve done is, we feel like we’ve taken the right actions, and we took then early enough that they’re having an effect now.

It’s kind of interesting in terms of the debate in Washington, where the president saw this coming in December and January, proposed it in January, and there was quick action. And then it was as if everybody else caught up to what he had been predicting might happen.

So, in February and March and April, after the Congress had taken action, they started saying, “What are you going to do about the economy?” Not waiting for, in fact, the effects of the law that they just passed to kick in.

So, we think that it will have a significant effect. The big unknowns are how quickly will the housing market adjust, and how quickly will the financial markets solve their problems?

It’s also why one of the most significant things we can do going forward is not slow down those market adjustments. It’s very tempting for policymakers to come in and want to do something, but you also have to make sure that the actions you take don’t slow down necessary and sometimes painful market adjustments, because slower is worse.

PATRICE HILL, CHIEF ECONOMICS CORRESPONDENT, “WASHINGTON TIMES”: The administration seems to have consistently underestimated the problems that developed in the housing and mortgage markets over a period of several years.

Looking back, isn’t it fairly clear that we had some kind of bubble going on, at least in regions like on the two coasts, California and the East, Northeast?

And what would you have done differently, in retrospect, given what we know today about the abuse of mortgages, and so on, that fed this bubble?

HENNESSEY: Well, I think you’re right, in that the housing construction booms that occurred tend to be regional. Florida, California, Arizona, Nevada are the states that saw that most significantly.

What you have to understand is that housing market issues in different parts of the country are very different. There are housing problems in, for instance, Michigan and Ohio, but those are largely a consequence of slow regional economies, not of housing constructions booms. In other parts of the country, you actually have moderate economic growth, but you have some mortgage market problems.

It’s not the government’s job to necessarily step in and interfere in private market interactions as they’re occurring. It’s our job as policymakers to look at the policies that are in place, to see if those policies are causing distortions, and then to fix those distortions as they’re occurring.

In retrospect, as you look at the lending practices that were in the mortgage markets, and you look at the new practices that the regulators have put in place, I think everyone now says that those actions that we’ve taken now and that the, for instance, the Fed and the banking regulators have taken now to provide guidelines to lenders on how to do – how to provide better information, better disclosure – are significant.

If you had a magic wand, would you like to have put those in place a few years ago? Sure. But we’re always learning as financial markets and financial practices are evolving. And you do your best to make those changes as they seem appropriate.

MCKINNON: Do you think that the housing market is close to what you might term a bottom? Or do you think that it’s too early to say that?

You’re sort of looking for the bottom, I can …

HENNESSEY: Sure. I don’t think we know. I don’t think anyone knows. And if they do know, they can probably make a lot of money investing off of that information.

We had some weak housing numbers just a couple of days ago. And we have a lot more housing data to come out over the course of the next week.

So, obviously, we are looking at every single piece of housing data that comes out, and we’re studying it and talking to people. I just don’t know that I can make a prediction about where we are and how much things will go forward.

I can say it’s probably the most significant factor and the significant open question in terms of the real economy going forward. If you knew that, then you’d be able to make much clearer decisions about right actions and wrong actions going forward.

But again, that’s why it’s so important that a government not interfere in those interactions as they’re occurring.

MCKINNON: Right. But do you have some projection, or some way of estimating what the – when the bottom is going to occur? Will it be sometime this year?

HENNESSEY: Again, I don’t feel comfortable making predictions. Our economists are constantly updating their projections. They’re talking with economists at the Fed and out in the private markets, and comparing their numbers.

I don’t know that we necessarily have a particular insight, other than other people who are studying those numbers, trying to make a profit off of them.

MCKINNON: Right.

HENNESSEY: I’m just not comfortable putting my own number and my own forecast out there.

We do think that the second half of the year is going to be stronger than the first. We are hopeful that the stimulus will have a positive impact in the second quarter. But no one really knows how long the housing drag is going to go on.

HILL: The oil problem seems to be sort of that classic sort of shock that occurred that no one expected. And since we’re the biggest consumer of oil, normally, when the U.S. goes into a slump, you would expect oil prices to come down. But instead, they just keep going up and up.

Is there any way the administration can tackle that administratively? Like, could you put – there’s a great deal of speculation in the market.

Is it possible to put like margin – increased margin requirements for those who are buying into the oil markets and speculating there? Or is there anything the administration can do on it?

HENNESSEY: We hear the suggestions frequently about changing the rules for trading. I think our view is that the fundamentals are what are driving oil prices right now. You have a world that is growing. In particular, you have China and India, industrial economies that are growing very fast and are thirsty for oil. That’s not a sudden cause. That’s something that’s been going on for years, and we expect will continue to go on for years.

So, there doesn’t seem to be a significant diminishment in global demand for oil, even as the U.S. economy has slowed.

At the same time, what you have not seen, as you’ve seen in some past times, you have not seen now a surge in supply.

So, with constantly growing demand, without an increase in supply, and with geopolitical risk out there, you have got factors which are keeping the price of oil high.

Again, I’m not a market forecaster, so I can’t tell you whether it’s going to go up or go down. But we fundamentally think that it’s those basic market forces that are driving the price to be where it is.

HILL: Rather than speculators?

HENNESSEY: I don’t feel comfortable quantifying what the effect of speculation should be. There are obviously two sides to any trade. So, for anyone who is buying risk in the oil market, there is someone else who is selling risk.

In terms of what could be done about it, those changes tend to be longer term policy changes. They tend to be things like increasing the efficiency in which we use oil in the economy. The president proposed, and Congress enacted, the CAFE rules – the higher fuel efficiency requirements for cars and trucks. Encouraging the use of more renewable and alternative fuels, which we also did last year and we’re implementing.

And encouraging domestic supply, whether it’s in the outer continental shelf down on the Gulf of Mexico – and that’s being implemented from a new law a couple of years back. Or steps we need to do like opening up the Alaska National Wildlife Refuge for some environmentally responsible drilling there.

But each of those changes takes years to have an effect. If you make a change in fuel efficiency requirements, you have to give the auto manufacturers a couple years to adopt their model plans and to adjust their vehicles. And even then, you don’t have people buying new cars every year, so the higher fuel efficiency requirements phase into the vehicle fleet only slowly.

It’s taken us years, even decades, to get in this situation. It’s going to take years for us to work out of it. But that’s not a reason for policymakers to delay taking action now.

HILL: Some people are saying that those actions actually have caused the oil producers to maintain sort of a lid on production, because they see that down the line, these efficiency measures will be coming in. And so, they’re not as inclined to just sort of go all out to increase supplies.

Is that a factor here?

HENNESSEY: I don’t know. I’m not an expert in that. I would tend to be pretty skeptical of it.

I think that most people controlling the capital investment in the oil sector are looking to maximize their revenue stream over time.

But one of the issues you have is that a lot of the world’s oil is, in fact, controlled by state governments that have other issues and are making decisions that restrict investment in increasing supply.

That’s a challenge to increasing the world’s long-term supply. And it’s part of the reason why you want to encourage alternatives, so that the world is not quite as dependent on a single fuel source for our transportation, which obviously makes our economy and makes the family budget so sensitive to a spike in the price of oil.

ECHEVARRIA: Can I step in with a quick question?

HENNESSEY: Please.

ECHEVARRIA: What do you make when you hear of Senator McCain, then, tout proposals like suspending gas taxes during summer months to give consumers a little bit of a break at the pump? As an economist, is there – or as a financial person – is there any merit to those kind of proposals?

HENNESSEY: We’ve looked at that, and I’m not sure exactly where that is in the current debate.

The president’s focus has tended to be on longer term measures, on longer term changes that are going to have an effect on the gasoline price a year from now, or a couple of years from now. Short-term changes in the tax can have effects on consumers and can have effects on the prices at the pump now. The president’s focus over the past seven years – and, I think, for the remainder of his term – will probably be on the longer term changes that our country and the world need.

MCKINNON: Why is that? To follow up on that, why – that’s an idea that has been around for a few years. And you have consistently resisted the idea of suspending taxes, or anything like that, even though you’re sort of anti – you’re in favor of lower taxes generally.

So, what’s the rationale? Why not …

HENNESSEY: I think that it’s principally, when you’re trying to address the energy problems that we have, making a temporary change can provide temporary relief, which is a good thing.

But this president, one of his features is that he tends to look at the long run. He tends to be looking at things years and decades down the road and saying, where do I think America’s energy supply-and-demand future is going to be in the future, and what changes can we make?

So, from his standpoint, it’s more a question of prioritization than are you for or against any particular short-term policy change. And the way he’s prioritized it is, for instance, saying we’re dependent on oil. We can substitute ethanol as a fuel for it. But obviously, that causes consequences, for instance, in food supply.

But if we can push technology, then maybe the private market will develop things like cellulosic ethanol or other alternatives, so you’ll have that flexibility and supply.

So, it’s not to say that a particular short-term change is a good thing or a bad thing, it’s just to say that his focus and where he puts his efforts, when he’s talking about energy policy, tend to be on the longer term issues.

HILL: A lot of people warned when you all put out that ethanol mandate, that there were going to be strains in the food supply as a result. And it does seem to be panning out, although it’s sort of hard to sort out how one market affects another.

But it does seem as though you’re seeing prices for food going up in an uncomfortable way here in the States, and certainly, even more desperate situation in the poor parts of the world.

Do you have any regrets about that or think there’s any need to reverse, even in part, some of this ethanol mandate, so as not to be diverting food supply into the fuel system?

HENNESSEY: No. You’ve got a couple goals. Obviously, one is you want food to be affordable. You want people to be able to – in the U.S. and around the world – to be able to get the food that they need.

We also have energy needs and, in particular, energy security needs. There is a national security externality, is the way the economists would talk about it, from using oil. And so, when you make that change there are going to be consequences through the economy.

We looked at the effects of the ethanol mandate and increased ethanol usage, for instance, on the price of corn. I believe we found that about a fifth of the increase in the price of corn in the U.S. results from increased domestic demand for ethanol. And about a third of the domestic price increase for corn comes from increased global demand for ethanol.

Now, the world does not have ethanol mandates. Part of the reason why people and firms are switching to use ethanol is because oil is at $110 a barrel.

So, does the ethanol mandate change decision-making in the U.S.? Yes. And we think that’s the right thing to do, because of the national security issue.

Is it affecting the price of corn? Yes. But it is not the principal cause of the increase in the demand for the price of corn. There are other market forces in agriculture markets.

We also looked at the effects on the price of wheat. And our economists think that it is a small influence, for instance, in the price of wheat as a food supply.

So, there are more basic supply-and-demand features that are driving the demand for most grains and most food stocks around the world. And we think that the energy policy that the president proposed and Congress enacted is the right one.

HILL: So, you’re saying, the more basic thing is that there’s just increased demand for these grains. Why? Because people are eating more meat in Asia or …

HENNESSEY: Yes, I have not gotten into the details of what those additional supply factors are.

What we looked at most recently was the influence of energy demand – and, in particular, ethanol demand – on the food supply. And we found that, while it is an impact, it is not, for instance, what you might have expected, which is the majority of the impact or all of the impact. That’s just not what the numbers suggest to our experts.

MCKINNON: You know, there’s been some suggestion, Keith, that President Bush is a little out of touch with everyday people’s economic situation. What’s your response to that?

And what is his interaction with the real economy? I mean, he’s basically kind of locked up in the White House a lot of the time. How does he actually experience the economy?

HENNESSEY: Well, we do – we as a staff do our best to try to make sure that he’s interacting on a fairly regular basis with real people who have lives outside of the bubble of Washington and the bubble of the White House.

We brought in about maybe eight or 10 small business owners from around the country about a week-and-a-half ago to sit down with him and talk about what they were seeing in their small businesses. Whether it was Illinois – we had one from the upper Midwest, we had some local small businesses – and just from a wide variety of different small businesses, different parts of the country.

And we bring them in, and they just have about an hour-long conversation with the president – not just about policies, but also about what they’re seeing in the economy and what they’re seeing in their lives.

One of the things we wanted to ask them was, what are you seeing in demand for your goods and services? And did the stimulus bill that was enacted that the president proposed, did that help them? Did it encourage them to increase their capital investment? In most cases, the answer was yes.

One thing that we did not anticipate was, they were talking a lot more about the effects of high fuel prices on their businesses. One gentleman had a trucking business, and that was his most significant concern.

And so, bringing those people in to talk about not just the hot topics of Washington policymakers, but about what they’re seeing in their lives, that’s part of how he gets that impact.

And he’s out on the road fairly frequently and interacting with people. I went with him to St. Louis, I think it was in March, where he sat down in a coffee shop with a bunch of local, again, small business owners, just to hear what they were seeing in their local economy.

So, we do our best to make sure that he’s not just getting information from government reports and memos from his advisors. And, you know, he is always pushing to say, “I want to be out there interacting with people.”

He really enjoys interacting with small business owners, with the entrepreneurs who are doing it.

MCKINNON: But if people are bugged about high gas prices more than, maybe more than folks expected, doesn’t that sort of tell you that you might want to address that in a more immediate way than you’ve done so far?

HENNESSEY: I think our job as policymakers is to look at the fundamentals of the economy, to talk to people, and then to figure out which policy choices are wise, and, in particular, where should the president focus his efforts.

There’s a lot of interest right now in housing. And so, he is focusing his efforts on making sure that Congress enacts some policy changes that are smart on housing, and doesn’t do some things that are dangerous on housing.

We’ve spent a lot of time on energy over the course of this administration. We spent a lot of time last year with, again, the fuel efficiency requirements and the renewable fuel standards.

I anticipate that his actions and his focus will be on implementing those changes, which, again, will have ramifications beyond his administration, and also doing things like getting the stimulus in order.

HILL: Well, have you – did the flair-up in inflation that we’ve seen – especially given the weak economy – did that surprise you? And are we going to have a lingering inflation problem? Because our food and fuel prices seem to be pretty much looking like they may be permanently higher.

HENNESSEY: I do think that expensive oil is an ongoing issue. It is important to remember that the way that inflation is measured – inflation is measuring a change in prices.

So, if oil were to stay at its current price, that’s bad for people driving. It’s bad for people who use oil in their businesses. But it means that energy prices would not be contributing to inflation going forward, since inflation measures the change in price from one time to another.

Obviously, it would be better for everyone in America if oil prices came down. But the inflation effect is, I think, a different effect from it.

You know, it wears away at your paycheck. It wears away at the real value of the goods that you’re purchasing. Yes, we’d like it to be lower.

The president has certain tools in his portfolio, working with the Congress. They tend to be on the fiscal policy side and the regulatory side. And he does what he can over there.

The Federal Reserve, they have their monetary policy tools. And, you know, they use their tools as they best see fit, as they’re looking at the macro economy, as well.

HILL: Aren’t you concerned about the increase in fuel prices? You do see this run-up in the spring, prior to Memorial Day. That’s been a pattern for several years now, and it tends to peak around Memorial Day, the gasoline price.

Aren’t you concerned that this is hitting the economy just when it’s already weak and, you know, could essentially nip in the bud any possible improvement in the summer?

For example, some economists estimate that the stimulus, the tax rebates that you put out there, will be almost entirely consumed by just paying for higher fuel prices.

HENNESSEY: There are seasonal demand factors, and seasonal supply factors, actually, with gasoline. What you’re getting at is, as the summer driving season approaches, as the weather gets nicer, more people are going out for a drive. More people are going on vacation, and driving patterns change.

Then again, as gas prices go higher, people are also saying, hey, let’s take the train, or let’s fly, or let’s do something closer to home. So, those forces push in opposite directions.

Yes, gas prices hurt a family budget, and we’d like them to be lower.

What we’re focused on are the things that seem to make sense from a macroeconomic standpoint. We’ve taken those actions, and we think they’re the right ones to move forward with.

MCKINNON: Can we take a minute and talk about the housing bill that you were …

HENNESSEY: Sure.

MCKINNON: … referring to a minute ago?

What do you – what are the elements that you’re looking for? And what particularly are you not looking for?

HENNESSEY: Well, the president announced a change, I guess it was probably about a week ago, in his FHA Secure program, which is something that he’s doing administratively. It’s a slight relaxation of the standards by which people can apply to the FHA for a mortgage – for mortgage insurance, actually.

And so, we think that’ll help, on the margin, help some more homeowners, who are looking to refinance their homes into probably a fixed rate mortgage, so that they can afford to keep their homes going forward.

We had some concerns that the administration expressed with respect to the Senate bill. There were some changes in there. There was a change to allow returning soldiers some more time, if they faced foreclosure, to be able to adjust. There were some changes in counseling funds – some fairly small, but significant policy changes.

We were pleased that that bill did not include the bankruptcy change – the so-called “cram-down” provision, which we think could have a significant negative effect on the market.

MCKINNON: That would allow bankruptcy judges to just change rates, essentially.

HENNESSEY: Well, yes, to come in and say – you’ve got a mortgage, and the judge comes in and says, “Here, I’m going to write down the value of the mortgage.”

We really have a concern – we have a couple of concerns with that. One is, inserting a judge into a negotiation between a borrower and a lender is likely to slow down that transaction. And again, we want these transactions, we want these adjustments to happen as rapidly as possible, so we can get the housing problems behind us and have the economy keep growing.

Also, there’s just a principle of having the government come in after the fact and forcibly force one party to renegotiate a contract. That’s a fundamental principle. A deal is a deal, once you’ve made it. And for the government to come in and force one side of that deal to change the rules doesn’t make sense.

The other thing is that, making those changes in the bankruptcy law would raise borrowing costs in the future, because lenders would say, now I have to account for the risk that a judge may come in and change the terms of the mortgage.

There’s a balance there in terms of how you want the bankruptcy law to work in the short run, and the long-run effect on borrowers.

And from our standpoint, we really don’t want to be changing the rules after the fact, and we don’t want to be making it harder for people to get mortgages in the long run.

ECHEVARRIA: We have about 30 seconds left.

HENNESSEY: OK.

ECHEVARRIA: Today there was an announcement that the SBA administrator is going to become the head of HUD, Steve Preston.

What’s behind the move? And what does he bring to the position, especially in light of current economic times when it comes to housing?

HENNESSEY: Steve Preston is a phenomenal guy. I’ve had the honor of working with him in his job at the SBA for a while.

He is a terrific guy. He’s done a great job at SBA. He’s an incredibly strong manager. I think he will do a great job at HUD.

There’s a lot going on at HUD right now. There are changes in FHA. There are direct operational issues that you want to deal with, as you’re changing a program that is directly interacting with the public.

When you have thousands of homeowners who want to get their mortgages insured, who want to refinance their mortgages, you want to make sure that things run smoothly. You want to make sure that those changes actually happen.

And Steve is a great guy. He’s got great policy instincts, and he’s served the president – well, I look forward to continuing to work with him. I think he’s a great choice.

ECHEVARRIA: Keith Hennessey is the director of the National Economic Council. Thanks for being on the “Newsmakers.”

HENNESSEY: Thank you for having me. Really appreciate it.

ECHEVARRIA: And we’ll be right back.

(BREAK)

ECHEVARRIA: John McKinnon, many of your questions dealt with housing issues. From everything that was said from Mr. Hennessey’s point of view, what do you think of the administration’s take on the current housing situation?

MCKINNON: I think that they’re doing pretty much everything they can at this point. They perceive that there is a continuing problem in the housing market, and everybody else agrees with that assessment. They have done a certain amount administratively to try to get struggling homeowners into a situation where they can actually make their mortgage payments every month.

At the same time, you know, the leaders in Congress are working on their own solutions, which are a lot more wide-ranging, and many of which the administration has genuine, I think, genuine sort of policy concerns about. So, they’re trying to manage that process as best they can to produce the outcome that they want in a timely fashion. Now, some people may say, well, why don’t you get it done a little quicker? But, you know, it’s Congress and the White House, and it just takes a long time.

ECHEVARRIA: What do you make when you ask him questions about, do you foresee an end to this, or do you foresee an uptick? And when you get responses about, you know, their – I guess he didn’t want to speculate, of course.

But what do you make of, I guess, an administration’s point of view, with the ability to, I guess, foresee the future, so to speak?

MCKINNON: Well, President Bush, as everyone knows, is a very optimistic guy. And so, for one of his top economic aides – his top economic aide – to say that they don’t really want to predict when the bottom comes in the housing market is a little sobering. I mean, that tells you that they really don’t know.

ECHEVARRIA: Patrice Hill, many of your questions dealt with oil issues, and particularly when it comes to ethanol and world food prices.

What did you learn from the exchange?

HILL: Well, I thought that was very significant.

The administration was a major player in this switch to ethanol. They actually proposed it and did that earlier than Congress did, several years ago. And then Congress passed a bill, essentially requiring that 20 percent of our gasoline – or, let’s say our fuel – comes from ethanol within a matter of 10 to 15 years.

So, this is a very stringent requirement. And he didn’t go back on it at all, even though we now have evidence that it is affecting world food prices.

So, it seems that they feel this is a very important decision they had to make for purposes of securing our future, energy future, and that we’re – you know, it will have some negative effects on food prices and affordability even here, but especially in a lot of poor countries, but that there’s really no going back on this, because we do have a serious, looming shortages in the oil markets.

And national security issues is one thing he mentioned as a reason to try to lessen our dependence on imported oil.

So, that, to me, seemed quite significant, and that they did a study, they’ve been studying the effects that the ethanol requirement has had on food prices. And they don’t feel it’s that significant here, but I think they’re acknowledging that worldwide it is a significant factor.

ECHEVARRIA: And he also talked about other factors in rising food prices as far as supply-and-demand issues. What did you make of those arguments he was bringing?

HILL: Well, I think the administration should be credited for being realistic about the fact – and, you know, something that maybe Americans generally need to think about – that we’re not the only nation that consumes oil and gas, and we’re not the only nation that consumes food, that other nations around the world are growing and getting stronger and more richer and more powerful.

And they need fuel and food, too. And this is putting pressure on the prices of energy and food prices all around the world. And that it’s not something we can apply any kind of a quick fix to. It’s something we have to adjust to.

It’s a structural change that’s occurring in the world that’s affecting everything that we consume. And we’re very frustrated as Americans, because we’re used to sort of being the only ones out there using gasoline so much. And so, when we stop using it, the prices go down. When we want to use it, the price – you know.

Right now, Americans are actually – the demand for fuel is falling in the United States. And it’s practically unprecedented to have demand falling in the United States, but prices still going up for oil.

So, it’s a major adjustment for Americans. And I think they’re being very realistic about, what can we do about it. We can’t control the fact that China is growing strong and is consuming more fuel every day – India, the same way.

And so, it is something that Americans simply will have to adjust to.

ECHEVARRIA: And John McKinnon, when you were following up talking about short-term efforts, like stopping gas taxes during the summer months of driving, and things like that, he responded that traditionally, it’s been a long-term look.

I guess, from a reporter’s standpoint, has that always been a response of the administration, taking the long term rather than a short-term approach to fixing and controlling prices?

MCKINNON: Very definitely. I mean, they always take the long-term view, particularly in these big economic decisions that you have to take on things like energy policy.

And so, it’s not surprising to hear him repeat that view again. However, I think it’s going to be another sobering reality for people as these prices at the pump continue to climb.

I think that they are hoping that the stimulus bill that they passed in February, which is about to kick-in in May, will give consumers a little bit of relief. It’ll give them a little extra cash, which they’re going to turn around and spend on gasoline in a lot of cases.

So, I’m hoping – I’m thinking that they’re hoping that that will ameliorate the sort of broader economic effects.

ECHEVARRIA: Joining us on “Newsmakers” this week to interview our guest were John McKinnon of the “Wall Street Journal.” He’s their White House correspondent. And Patrice Hill of the “Washington Times,” their chief economics correspondent.

To both of you, thanks for being on the “Newsmakers.”

END