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US must borrow and spend MORE, says Indian-born expert
The Chief Financial Officer of Washington DC, Natwar Gandhi, who is credited with turning around the financial fortunes of the US capital, on Monday said America needs to borrow more and spend more money in order to stimulate the economy.
He was of the view that though the American economy is weak, it is not headed toward a second recession.
"I strongly believe that the economy is weak. It is not going to go into the so-called double dip recession, but it is very weak, it is limping along and what we really need to do is to have another stimulus," Gandhi told Press Trust of India in an exclusive interview.
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US must borrow and spend MORE, says Indian-born expert
The second stimulus, he said, should be to the tune of $1 trillion.
"There is no consumer demand as we speak. The businesses are not investing as they do not see any demand out there. So the only player who can really generate demand is government.
The government needs to spend money. There is a need to spend money on our infrastructure, which is abysmal," he opined.
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US must borrow and spend MORE, says Indian-born expert
"This is the time to borrow. United States can borrow cheaply... Never have the interest rates been as low as they are now. Even with the so-called lower rating, people are still buying US Treasuries," he said.
"So my sense is that they should borrow money and spend in infrastructure," Gandhi said.
He said Standard and Poor's decision to revise the US credit rating downward was not very responsible, given that the Treasury had pointed out that there was a $2 trillion error in their analysis.
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US must borrow and spend MORE, says Indian-born expert
"Remember, these are the same guys who had given AAA to Enron and other corporations and all those financial institutions like Lehman Brothers... so I think it was irresponsible," he said.
Gandhi also said there is a big question mark on the credibility of S&P's credit rating.
"I think, they (S&P) should have been more careful about this," he said.
Gandhi, who assumed the post of CFO of Washington in June, 2000, is responsible for the city's approximately $7 billion annual budget.
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US must borrow and spend MORE, says Indian-born expert
He built Washington DC's financial progress by securing multiple rating upgrades (a total of 13 rating steps since 2000) from major rating agencies for its general obligation
bonds, which are currently rated A+ by Standard and Poor's and Fitch Ratings and A1 by Moody's Investors Service.
These are the highest ratings ever assigned to the District of Columbia's general obligation bonds.
In 2009, Standard & Poor's assigned a rating of AAA to the district's inaugural offering of income tax revenue bonds, which were rated AA by Fitch and Aa2 by Moody's.
Savings on debt service costs from the income tax bonds are estimated to total $28 million between FY'10 and FY'13.
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