"Well ... this would actually, if we did, be the third. We had a $200 billion tax cut in 2008, and of course we had the $800 billion stimulus and tax cut in 2009.

"Now the argument for another stimulus plan is simply, the private sector isn't spending so we need to have the government spend money or else everything will sink down more.

"The argument against a stimulus plan is, eventually we have to pay for that plan -- probably with higher taxes. And there are some economists who think that that's what people are focusing on now and they are not spending money because they are expecting to have to pay higher taxes down the road.

"There is actually a third view ... that says that it really doesn't matter what we do because the government -- the economy -- is destined to grow very slowly as households are bringing down their debts that they built up over the last 30 years.

"So you really have those three views, and it is going to be interesting to see how they pan out in the near term."

"Well, the first thing people need to remember when they go to the gas station to buy gas and see a price they don't like is don't blame that gas station operator. Ultimately the price of gas is based on the price of oil. And so what is happening in the oil market in terms of prices always shows up at the gas pump maybe two or three weeks later.

"Now if you were to have a control always on gas prices the concern that economists have always expressed is that if you set gas prices under what the market would indicate, then you can run into shortages. And we actually saw some of that in North Carolina a couple of years ago.

"And if you remember ... and I think you do because we are the same age, in the 1970s we had a form, if you will, of gas price control in the U.S. and we did have shortages. In fact one way the government solved the shortage problem was to have odd/even days for buying gasoline based on the digit of your license plate. You couldn't buy gas whenever you wanted to.

"And so economics point out that could be a cost of permanently controlling gas prices -- that gas would not be as plentiful, especially when there were problems in the oil market. And number two, you couldn't always get it when you want it."

"Well ... we are doing better. In fact, the savings rate over the last couple of years has edged up to between 3.5 and 5 percent. Also if you look internationally we are certainly not at the top, but we are no longer at the bottom.

"If you look at who is at the top, China still leads the pack: 38 percent of income earned in China by their households is saved -- 38 percent. India also has a very high saving rate at 35 percent.

"But we are not last. Again we are between 3.5 and 5 percent. Japan -- for a long time, Japan was a very high saving rate country. Now they are a low rate. They are around 3 percent right now.

"And at the bottom currently is Australia. Australian households currently save at the rate of only 2.5 percent."

"Well, this is the issue that economists call crowding out. And it is used by those who argue against federal government spending to help the economy. And the real question is, as you phrase it, ... well, where does the money come from when the government does have a stimulus plan and they don't have the tax revenues to support it?

"Well, obviously the government has to go borrow the money. Now is it a matter that that money is immediately taken out of private hands, which would have been spent anyway? Well, maybe and maybe not. Some of it could, but there also are other sources of money: In fact, there are about three.

"One obvious way is for the federal government to borrow from foreign lenders. And in fact we have done that: About half of the money that has been borrowed by our federal government over the last couple of years has been borrowed from foreign lenders.

"A second way is for the federal government to borrow money in our country that we would say is idle. Cash -- people that have a lot of cash around sort of keeping it in their sock drawer or in their safety deposit box -- if the federal government can borrow that then obviously that's not taking those funds away from any other investment.

"And then lastly the federal government can effectively borrow money by having the Federal Reserve print the money. So the Federal Reserve prints the money, and then that money is either used directly by the Federal Reserve or when the money gets into the private sector it is used by private people to buy the government bonds.

"So those are three ways that the federal government can raise money. Now they all have long-run implications, many of which we are now worrying about today."

"This actually could be very important. ... China, as most people know, runs a big trade surplus. That is to say, they sell a lot of products and goods to other countries like the U.S., and we sell some back to them but not nearly as much. And other countries think, rightly or wrongly, that this takes jobs away from them. And so China has been under pressure to do something about this, or else they may face what we call trade sanctions -- ... other countries saying, 'Hey, we are going to make it harder for you China to sell products in our country.'

"What China did with their currency by allowing it to fluctuate is that this will likely mean China's currency, the yuan, will actually go up in value against other currencies. Now what that will mean is it will make Chinese exports like to the U.S. more expensive. So things that are made in China and sold here in the U.S. will become more expensive, so we will likely buy less of them. And it will also make our exports to China less expensive for the Chinese to buy. So this should result in a slightly lower trade deficit from our perspective with China. Now it is not going to wipe it out, but it will likely be lower. Economists disagree on to what degree that trade deficit will get smaller. But this in some eyes is a step in the right direction for China to simply allow its currency to seek its own competitive value because before that they actually controlled directly that level."

"Actually ... it is not. In fact, there has been a lot of research by economists over the years that suggest there is a lot of what we call income mobility -- rich people sliding out of the rich category into the middle income, or poor and middle income going up to rich and poor people going up to middle income, etc.

"We actually now have a new study among these series of studies that looked at household income mobility from 1999 to 2007 and drew the same conclusion. In fact, let me give you some numbers: What this study found is that 60 percent of poor households actually moved up the income ladder over this time period. Forty percent of rich households moved down the income ladder. And when you looked at all households in total, 60 percent of households changed income status sometime during that eight years.

"So really we have a very dynamic economy in terms of people's incomes, and one implication of this is for public policy, because if you are targeting a certain group of households to be helped by public policy, that same group may not be there several years down the road."

"I think it is useful in answering this question to think of the economy as a car, and when that car goes in reverse -- goes backwards -- then we would say we have a recession. When the car is moving forward, we say we are not in a recession but we are in an economic growth situation.

"The economic car has actually been moving forward over the last six months at a fair rate of speed -- let's say 50 miles an hour.

"What I think the indicators are suggesting now is that in the coming months that rate of speed is going to go down. Maybe we will only move forward at 20 or 30 miles an hour. That still means we are not in a recession, but it means we are growing at a slower pace. And actually if you look at economic forecasts that were made about a year ago, that was suggested by many of these forecasters -- that we would have a burst of growth right after the recession ended, and then we would go back into much slower growth.

"And by slower growth, I mean about 2 to 2.5 percent -- just enough to nudge the unemployment rate down a smidgen each month but not anything to cause that rate to plunge. And I think that's the type of situation that we are in. We are in a sluggish economy. We are growing, but an agonizingly slow pace of growth."

"When we look at past recoveries from recessions, typically during an economic recovery you get a lot of job growth from new firms -- sort of like new births: people out there starting new businesses, people going into new lines of work. ... And so if you are an unemployed worker, going to new firms would stand you a good chance at getting a new job.

"So far, this recession seems to be different. It has been different in so many ways, in that if you look at where the new jobs that have been created over the last six months are being created, it is mainly in existing firms not in new firms. So again if you are an unemployed worker now you have a better chance in getting a job if you go to an existing firm.

"And the reason why we are not getting job growth from new firms, we think, is because new firms are actually often small firms. They are small businesses. And it is still tough, very tough for a new small business to get a loan. And so we think that is holding back growth among new firms."

"Since last winter North Carolina has actually added jobs -- about 66,000 jobs -- and if we look at where those jobs have been created, we see a couple sectors really account for most of them: in particular, professional and business services; trade -- that would be wholesale and retail trade -- and a category that economists call information, which can include communications as well as some computer work.

"All of those have gained at fast rates in North Carolina and actually have gained jobs faster than at the national level.

"We do want to mention that the government sector also has increased in jobs. Most of that, though, in North Carolina -- and, in fact, the predominant part of that -- is in teachers.

"Now, in terms of regions in the state, again we have seen a turnaround in the economy. If you look at jobs in most of our state's regions, the Triangle though goes at the top, growing much, much faster than any other region, followed by Charlotte and Hickory.

"And at the bottom of the list, interestingly, Wilmington: Wilmington has gained jobs at a very slow pace, and I think that's because of issues still with the tourist industry and perhaps real estate on the coast."

"No, there is really not. ... And this question always comes up after we have been in a recession, because one of the standard policy prescriptions for a recession is for a government to step in and spend money. However, to do that they usually have to borrow money, so it is very typical during recessions for government debt to be built up. This recession has been no exception.

"But we all know that there are some negatives to larger government debt: There is a lot of evidence that suggests that larger government debt results in the economy growing more slowly. So at some point, government policymakers have to say, 'Alright. Is the economy strong enough to sort of pull it off life support from the government, let it go on its own and then let's now focus on getting the debt situation under control?'

"And it looks like we are at one of those crossroad decision points now. And as you might expect ... we have divided opinion depending on how you assess the economy and how you assess the risk of more government debt. Some say, 'No, the economy is not yet strong enough to be on its own.' Others say, 'Yes, it is and we need to focus more on debt.'

"There is not an easy answer to this, but it certainly is a very important question."

"I'd say modestly so. ... First of all, we always look back at where we have been, and it looks like most of the economic indicators are suggesting that the state economy hit a bottom last fall and since then we have trended upward.

"If you look at indicators like jobs, retail sales, income, even state tax revenues -- those have all trended upwards since last fall. However -- however -- they are still below pre-recessionary levels.

"So we have improved, but we certainly are not back to where we were before the state went into a recession.

"North Carolina has added jobs at a faster pace than the nation, which is typical although we are slower on private-sector jobs.

"Looking ahead I see continued improvement, but slow improvement. Probably the indicator that most people look at is the unemployment rate, and I am predicting that at the end of this year, 2010, North Carolina's unemployment rate will get down below 10 percent. It will hit about 9.5 percent, and in 2011 8.5 percent. So going in a good direction but still uncomfortably high."

"Oh, very definitely. ... This is now a multibillion-dollar industry, and it is growing very rapidly. Every state wants a piece of this industry because, number one, it is a so called green industry that is it doesn't make a lot of demand on infrastructure and fuel, and secondly the salaries paid tend to be very high. So states are going after these firms, and here in North Carolina we have seen a lot of those companies locate around the Research Triangle Park area, one reason being that you obviously need college-educated workers to work in that area and obviously RTP has some.

"We are also seeing some of those firms locate around military bases because there are a lot of military applications to the games.

"So this is definitely a growth sector. It is a well sought after sector. And it is an economic sector where North Carolina is increasingly having a presence."

"It depends ... on the cause of the prices going down. That is to say that there is good deflation and there is bad deflation. Good deflation results when the falling prices come from businesses being able to manufacture something more efficiently. So, for example, if you look at the price of -- oh, let's say -- cell phones, they have actually come down quite a bit. And that's because cell phone manufacturers have gotten better at being able to produce them more efficiently. And so that is good deflation.

"Bad deflation, though, results from when prices are going down simply because people are not buying and a business simply wants to get rid of its inventory, so they drastically cut their prices in order to hope to move that inventory. And bad deflation is usually associated with a recession. In fact, last year in 2009, we actually had deflation for part of that year.

"The other reason it is bad is it is usually tied to wages and salaries going down. We actually saw that last year.

"And then finally, bad deflation makes the value of debts that people have -- because they pay those debts back in a set amount of dollars -- makes those debts more expensive."

"Now let's break that term apart. Real simply means you take out inflation. So we do adjust those income numbers over time for inflation. And the disposable part means we are taking out taxes. So again, what this means is, using the same value of the dollar, what do people have to spend year after year after year?

"And if you look at that number, and you look at what's happened over the last couple of years with the recession, as people might expect it has actually gone down. People have not had as much to spend, once you take out taxes and once you take out inflation. And indeed it doesn't look like we are going to get back to that pre-recessionary level of real disposable income maybe until about a year to a year and a half from now.

"So this is simply another indicator we can throw into our toolbox of indicators to try to get a feeling of what people are really feeling economically speaking, and real disposable income does suggest that we still have some issues."