LL: The bailout in Europe has failed to calm the markets. What is your outlook on this crisis and do you think there is another shoe to drop?
DS: There are still many shoes to drop on the sovereign debt situation in Europe, not least of which is whether European banks will be able to handle the weakness as it reverberates from the South across the continent. The stress tests for Europe's banks did not even attempt to deal with the risks of the sovereign debt crisis.
As for the US, we don't export a tremendous amount to Europe, but are exposed. I am most concerned about how we approach deficit reduction in US. We need to attack the long-term structural deficit, which includes simplifying tax code and some meaningful debate on entitlements without derailing a still fragile economic recovery. Gridlock will not get us on the right long-term track.
Moreover, strong is a relative concept. When you have lowered the hurdle on the data to such low levels, it is much easier to clear.
LL: Do you think this latest effort by the White House with Geithner and Lew make any difference when it comes to the extention of the Bush Tax Cuts? If the Bush Tax Cuts expire, do you fear a double dip recession?
DS:I expect the Bush Tax cuts to be extended in full. The greater threat to the near-term recovery is extensions of unemployment insurance, which is now likely to be a part of any tax cut extensions.
LL: Gridlock can be the theme for this Fall in DC. The FCIC delayed its report, the Deficit Commission delayed its vote to Friday and my sources tell me the divide is still wide over support of the plan.
It seems all these groups are successful at is highlighting how inefficient our government leaders are and the groups are created for more show than anything. The ideas they present are provocative and spark discussion, but we need action. What is needed to get our elected officials get serious about cutting the deficit and spending?
DS: I am totally befuddled by the inadequacy of our government to have meaningful debate with regard to the deficit. I am not sure what will get them there. In the past, it was an extremely politically active Fed that moved the debate.
Alan Greenspan held out on monetary stimulus (thinking the economy was still expanding when it was actually contracting) in 1990 to get the 1990 Budget Accord passed. He then flew to Arkansas to meet with President Elect Clinton in 1992 to make sure deficit reduction stayed a priority, which it did.
Unfortunately, his political "success" has made it almost impossible for anyone to follow in his footsteps without loosing credibility for the Fed. Bernanke has been particularly careful to advocate for long-term deficit reduction without advocating any particular proposals. The result has left a void of real economic content in the fiscal policy debate.
LL: Raising the debt level is always lumped in with the budget. Should the GOP make is a separate vote to highlight how bad the deficit is rather than having it buried in another vote?
DS: The issue of the debt level is skewed by cyclical issues. I would rather we see more focus on structural than cyclical issues when discussing deficit and ultimately debt reduction.
LL: In the end, fiscal responsibility ends with the President. Do you think the President is capable of leading our nation to the path of fiscal responsibility?
DS: In the end, the President has to get people to the table to begin a discussion on deficit reduction. I think he will try to do that, and he has shown that he can be diplomatic in approaching the GOP.
The problem is that neither party has shown any real will on the deficit issue. I have to have hope that the partisanship will abate, but hope is about all I have now.
LL: Rep. Ron Paul will be chairing the subcommittee that overseas the Fed. What do you think of that?
DS: Ron Paul and the Fed in the same sentence scares me to my bones and gives me nightmares.
LL: Has the Fed lost its punch, focus?
DS: The Fed is focused on fulfilling is mandate. That is not a loss of focus. The question is whether they have the tools to do that, which they themselves have admitted that they do not. Fiscal policy has to be part of the equation.
LL: Half of the jobs equation is psychological. What is needed to boost confidence in our economy/ economic future so businesses will hire?
DS: Psychology? All the rhetoric on regulation and uncertainty would be nothing more than noise if the economy was growing closer to the pace we SHOULD be seeing—8 percent or higher—given the losses we have endured.
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A Senior Talent Producer at CNBC, and author of "Thriving in the New Economy:Lessons from Today's Top Business Minds."