On whether the U.S. has hit the bottom: Well, things are not getting better. They're just getting worse at a slower rate. I've dealt with journalists for many years, and they have a hard time distinguishing levels and rates of change. Distinguishing between first and second derivatives -- that seems to be beyond their ability. They see the unemployment rate is falling less rapidly and they interpret that as a sign of recovery.

We'll have a mild recovery in the fall. Whether it starts September, November, December, who knows? The ability of economists to forecast is nowhere near that accurate. There will be a recovery.

On the administration's forecasts being too optimistic: The administration has a 3.5 percent growth rate. When the Reagan administration said that, journalists screamed about rosy scenarios. This is as rosy -- we have low consumer spending, a weak tax cut, and low productivity problems. We're going to subsidize to an enormous extent the purchase of electric power. Nobody ever got rich doing that. The cap and trade program is a tax on business, so we're not going to get a lot of growth from that. We're investing in things with low productivity growth and we're going to tax the people that make investments. That's not a recipe for growth. If people would just look at France or Germany, where they've practiced these policies -- they have very low growth.

What would you tell the Obama administration: I would tell them two main things: our biggest long term problem which we should address during this transition, is that we're going to have to export more to service debt we've sold and going to sell. Consumption growth has to slow down. We have to invest more to export more. That's the very opposite of what they're doing.

The second policy I'd recommend to them is to do two things at least to prevent a future crisis: get rid of Fannie Mae and Freddie Mac, and put the subsidy for housing on the budget. That's what a decent democratic government does. It doesn't hide them in corrupt and inefficient agencies.

On housing subsidies: The Republicans are just as much inclined to subsidize as the Democrats. They're both going to subsidize housing. And the Bush administration and Reagan administration going all the way back to Eisenhower, who was the most budget-conscious president we've ever had (he ran surpluses in three of his eight years) never thought about cutting back on housing programs.

On banking: Part of my concern about the future is: I would eliminate the idea of too big to fail. We don't want to continue a system in which the bankers make the profit and the public takes the losses. I don't see any reason we could decide we want that.

Creating a super-regulator is the wrong thing to do. Put the responsibility back on the banks. Who's going to know more about banking than bankers?

On the banking overhaul: I think it's a way to pander to the public and get them to believe that they're doing things in the public interest when they're not.

On the United States' borrowing costs: Many of us remember the 1980s, when we finally got around to ending inflation that we never should have let start. If we have another period of inflation like that it will be the same -- high unemployment, a falling dollar, and slow growth.

The administration people, they say, "Well, people who talk about inflation want us to do something now, but now we have to deal with unemployment." But there's just a huge amount of research on that. Two of my former colleagues say the optimal way to think about today is to think about what you have to do tomorrow, and work on all those problems at the same time. We need to stimulate the economy. We need to be concerned about inflation. We should be dealing with both things at the same time.

On the end of the recession: I think as long as we have the stimulus, we have we'll get recovery. The economy will start slowly recovering. It may have one strong quarter, but in the long term, we're looking at a slow growth pattern, with rising unemployment, for the next six months. Absolutely.

Allan H. Meltzer is a university professor of political economy at Carnegie Mellon University.