1
00:00:15,356 --> 00:00:24,036
Speaker 1: Pushkin from Pushkin Industries. This is Deep Background, the show

2
00:00:24,036 --> 00:00:27,236
Speaker 1: where we explore the stories behind the stories in the news.

3
00:00:27,716 --> 00:00:32,516
Speaker 1: I'm Noah Feldman. Our country is facing a genuinely challenging

4
00:00:32,596 --> 00:00:37,396
Speaker 1: historical moment. There are two major stories that are proceeding

5
00:00:37,636 --> 00:00:42,156
Speaker 1: right now. The first is the protests, the demonstrations and

6
00:00:42,236 --> 00:00:45,796
Speaker 1: in some instances looting triggered by the tragic death of

7
00:00:45,836 --> 00:00:49,316
Speaker 1: George Floyd. We talked about that earlier this week with

8
00:00:49,396 --> 00:00:52,316
Speaker 1: Finita Kupta, and we're going to continue to cover that story.

9
00:00:53,316 --> 00:00:56,036
Speaker 1: The second story, which has not gone away, is the

10
00:00:56,076 --> 00:01:01,796
Speaker 1: coronavirus pandemic and its consequences for the world. Today, we're

11
00:01:01,796 --> 00:01:04,836
Speaker 1: going to focus on that story. The federal government has

12
00:01:04,876 --> 00:01:08,116
Speaker 1: said that it's planning to borrow nearly three trillion dollars

13
00:01:08,396 --> 00:01:11,436
Speaker 1: between a in June of this year to help businesses

14
00:01:11,436 --> 00:01:16,116
Speaker 1: and workers affected by the coronavirus shutdown. That's a record

15
00:01:16,156 --> 00:01:19,636
Speaker 1: breaking amount of money. Think of it this way. During

16
00:01:19,636 --> 00:01:23,916
Speaker 1: the entirety of last year, the government borrowed one point

17
00:01:23,956 --> 00:01:27,356
Speaker 1: to eight trillion dollars. That's compared to three trillion in

18
00:01:27,516 --> 00:01:30,996
Speaker 1: three months. How worried do we need to be about

19
00:01:30,996 --> 00:01:36,316
Speaker 1: the remarkable, indeed astonishing scope of our emerging national debt.

20
00:01:37,076 --> 00:01:40,676
Speaker 1: In order to explore answers to this question, both mainstream

21
00:01:40,796 --> 00:01:45,556
Speaker 1: and otherwise, I'm joined by Professor Jason Furman of the

22
00:01:45,596 --> 00:01:50,396
Speaker 1: Harvard Kennedy School. Jason served as President Obama's Chairman of

23
00:01:50,436 --> 00:01:55,556
Speaker 1: the Council of Economic Advisors from twenty thirteen to twenty seventeen,

24
00:01:56,036 --> 00:02:00,036
Speaker 1: effectively serving as the president's chief economist and a member

25
00:02:00,076 --> 00:02:04,396
Speaker 1: of the cabinet. He's also the best macroeconomist at explaining

26
00:02:04,436 --> 00:02:11,916
Speaker 1: things that I have ever met. Jason, thank you so

27
00:02:11,996 --> 00:02:15,836
Speaker 1: much for being here. We're obviously in an unprecedented situation

28
00:02:16,116 --> 00:02:20,916
Speaker 1: of economic crisis, with forty million people unemployed, that's nearly

29
00:02:21,076 --> 00:02:24,676
Speaker 1: a quarter of the workforce, and in that context, every

30
00:02:24,756 --> 00:02:28,396
Speaker 1: economist that I know thinks that it's completely reasonable to

31
00:02:28,476 --> 00:02:31,756
Speaker 1: spend the money that we're spending now on some combination

32
00:02:31,796 --> 00:02:34,836
Speaker 1: of a bailout slash life support system for the economy.

33
00:02:35,596 --> 00:02:39,396
Speaker 1: What I'm curious about is is there a limit? Is

34
00:02:39,396 --> 00:02:43,956
Speaker 1: there any maximum point beyond which we cannot go? Well,

35
00:02:43,996 --> 00:02:46,236
Speaker 1: it sounds like you have great taste in the economists

36
00:02:46,316 --> 00:02:50,756
Speaker 1: that you hang out with, so congratulations on that. I

37
00:02:50,796 --> 00:02:53,316
Speaker 1: don't think there is a limit to the amount of

38
00:02:53,396 --> 00:02:59,236
Speaker 1: money that can be spent on effective measures. So I

39
00:02:59,276 --> 00:03:02,516
Speaker 1: wouldn't think of it as a target, nor would I

40
00:03:02,556 --> 00:03:06,116
Speaker 1: say this a ceiling. I would ask the question, is

41
00:03:06,196 --> 00:03:10,796
Speaker 1: what I'm doing going to have a multiplier that's close

42
00:03:10,876 --> 00:03:13,876
Speaker 1: to one or higher than one, in which case you

43
00:03:13,916 --> 00:03:16,916
Speaker 1: can definitely do it because it means GDP will go

44
00:03:17,076 --> 00:03:19,276
Speaker 1: up by more than debt and it will actually help

45
00:03:19,316 --> 00:03:22,556
Speaker 1: your fiscal sustainability. And then if it doesn't have a

46
00:03:22,636 --> 00:03:24,956
Speaker 1: multiplier more than one, you still might want to do

47
00:03:24,996 --> 00:03:28,356
Speaker 1: it because you care about education, you care about protecting

48
00:03:28,716 --> 00:03:31,716
Speaker 1: a family and need and the like. Don't put a

49
00:03:31,756 --> 00:03:35,596
Speaker 1: budget constraint on it, but do ask real questions about

50
00:03:35,636 --> 00:03:38,836
Speaker 1: whether what you're spending is useful, is likely to help

51
00:03:38,876 --> 00:03:42,116
Speaker 1: the economy or not. When I spoke to Larry Summers,

52
00:03:42,156 --> 00:03:45,276
Speaker 1: it's now probably almost six weeks ago. He said, Listen,

53
00:03:45,356 --> 00:03:47,676
Speaker 1: nobody should get the idea that we're passing a stimulus.

54
00:03:48,156 --> 00:03:52,276
Speaker 1: There's no stimulus here. There's just life support and people

55
00:03:52,316 --> 00:03:53,876
Speaker 1: need to stay alive, and so you need to spend

56
00:03:53,916 --> 00:03:56,876
Speaker 1: on life support. That's a little different than the idea

57
00:03:56,916 --> 00:04:00,716
Speaker 1: that you know this will have a multiplier of one. Yeah,

58
00:04:00,796 --> 00:04:03,956
Speaker 1: So there is some evidence in the last several weeks

59
00:04:04,076 --> 00:04:06,916
Speaker 1: that the days that people got checks, for example, from

60
00:04:06,956 --> 00:04:11,196
Speaker 1: the economic stimulus payments, spending went up at certain big

61
00:04:11,236 --> 00:04:14,636
Speaker 1: box stores and the like. I think that will be

62
00:04:14,676 --> 00:04:17,716
Speaker 1: even more true going forward when you're more able to

63
00:04:17,756 --> 00:04:22,396
Speaker 1: spend money. So, to some degree economists is the nerdy

64
00:04:22,516 --> 00:04:25,156
Speaker 1: term consumption smoothing. You don't want people to have to

65
00:04:25,276 --> 00:04:28,356
Speaker 1: radically reduce their consumption and then radically raise it again.

66
00:04:28,756 --> 00:04:30,996
Speaker 1: You want them to be able to smooth through shocks.

67
00:04:31,476 --> 00:04:35,876
Speaker 1: If you're helping people smooth their consumption, you're helping them

68
00:04:35,916 --> 00:04:40,436
Speaker 1: avoid unnaturally large reduction in it, and you're actually helping

69
00:04:40,436 --> 00:04:43,636
Speaker 1: the economy relative to what would happen otherwise. So I

70
00:04:43,716 --> 00:04:49,916
Speaker 1: do think unemployment insurance, nutritional assistance money for states and localities.

71
00:04:50,156 --> 00:04:53,156
Speaker 1: The evidence on all of those is that they do

72
00:04:53,236 --> 00:04:57,196
Speaker 1: add more than a dollar to GDP per dollar you spend. Now.

73
00:04:57,436 --> 00:05:00,156
Speaker 1: Does a dollar to GDP get added six months from

74
00:05:00,196 --> 00:05:02,916
Speaker 1: now rather than now? You know, that's certainly possible. I

75
00:05:02,916 --> 00:05:06,036
Speaker 1: don't know exactly what the timing is. When does the

76
00:05:06,076 --> 00:05:08,276
Speaker 1: bill come do for all of this? I mean, the

77
00:05:08,276 --> 00:05:11,036
Speaker 1: theory behind a multiplier of one or a greater is

78
00:05:11,076 --> 00:05:14,796
Speaker 1: that at some point the government, if it's the lender

79
00:05:15,196 --> 00:05:17,876
Speaker 1: or the grant will get its money back. And if

80
00:05:17,876 --> 00:05:20,596
Speaker 1: it's debt, I suppose it would ask for its debts

81
00:05:20,636 --> 00:05:24,276
Speaker 1: to be repaid. If it's in the form of grants,

82
00:05:24,636 --> 00:05:26,916
Speaker 1: there would be more GDP, so we could get tax

83
00:05:26,956 --> 00:05:29,836
Speaker 1: money and then the government could pay itself back via

84
00:05:29,916 --> 00:05:32,356
Speaker 1: the taxes. First of all, am I getting that process right?

85
00:05:32,716 --> 00:05:35,036
Speaker 1: And second of all, is there any time frame on

86
00:05:35,076 --> 00:05:37,076
Speaker 1: that that's logical or reasonable or do we just say, well,

87
00:05:37,076 --> 00:05:39,796
Speaker 1: just wait until we can afford it. Yeah. There's two

88
00:05:40,756 --> 00:05:44,516
Speaker 1: freeish lunch aspects to this, and both of these free

89
00:05:44,596 --> 00:05:49,516
Speaker 1: ish lunches have constraints on them. The first is that

90
00:05:49,716 --> 00:05:53,156
Speaker 1: for fiscal sustainability, what you care about is the debt

91
00:05:53,676 --> 00:05:57,556
Speaker 1: relative to the size of the economy, and so it's

92
00:05:57,636 --> 00:06:00,756
Speaker 1: debt divided by GDP. If you can do something that

93
00:06:00,916 --> 00:06:06,156
Speaker 1: raises debt by less than it raises GDP, the denominator

94
00:06:06,196 --> 00:06:08,676
Speaker 1: goes up more than the numerator and the debt to

95
00:06:08,756 --> 00:06:12,756
Speaker 1: GDP ratio goes down. We're not in that situation now,

96
00:06:12,756 --> 00:06:15,276
Speaker 1: though it appears, oh, debt is certainly rising. The question

97
00:06:15,316 --> 00:06:17,956
Speaker 1: is would debt rise even more if we didn't do

98
00:06:18,036 --> 00:06:20,916
Speaker 1: some of the fiscal measures we were doing. For some

99
00:06:20,956 --> 00:06:23,076
Speaker 1: of the fiscal measures we're doing, especially some of the

100
00:06:23,076 --> 00:06:25,996
Speaker 1: ones that are more effective, I think they're probably in that.

101
00:06:26,796 --> 00:06:32,276
Speaker 1: The second is what is your interest rate after accounting

102
00:06:32,316 --> 00:06:35,796
Speaker 1: for inflation. That's called the real interest rate, And right

103
00:06:35,876 --> 00:06:40,076
Speaker 1: now the real interest rate is negative, which is to say,

104
00:06:40,116 --> 00:06:43,676
Speaker 1: if the federal government borrows one hundred dollars today, a

105
00:06:43,716 --> 00:06:46,876
Speaker 1: decade from now, it has to pay back about ninety

106
00:06:46,876 --> 00:06:51,756
Speaker 1: five dollars adjusted for inflations worth of stuff. So the

107
00:06:51,876 --> 00:06:55,156
Speaker 1: question you want to ask yourself in that environment is

108
00:06:55,196 --> 00:06:59,276
Speaker 1: what would you rather have one hundred dollars today or

109
00:06:59,436 --> 00:07:02,956
Speaker 1: ninety five dollars a decade from now. Most people would

110
00:07:02,956 --> 00:07:06,716
Speaker 1: answer a hundred dollars today, especially given all the needs

111
00:07:06,756 --> 00:07:09,476
Speaker 1: we have now, there's a limit on those. If you

112
00:07:09,556 --> 00:07:12,676
Speaker 1: do things that are ineffective, you don't get that. You

113
00:07:12,716 --> 00:07:15,236
Speaker 1: could drive up interest rates if you try to do

114
00:07:15,276 --> 00:07:18,476
Speaker 1: too much, if you try to expand the economy beyond

115
00:07:18,516 --> 00:07:21,036
Speaker 1: where it wants to be, you could get large and

116
00:07:21,116 --> 00:07:24,356
Speaker 1: increasing amounts of inflation. So none of that is a

117
00:07:24,436 --> 00:07:28,556
Speaker 1: blank and unlimited check, but for well designed policies within

118
00:07:28,636 --> 00:07:33,836
Speaker 1: the regime, wherein there is a freish lunch aspect to

119
00:07:33,956 --> 00:07:36,916
Speaker 1: what's being done with respect of the second freish lunch.

120
00:07:36,996 --> 00:07:39,956
Speaker 1: The negative interest rate is that based on a projection

121
00:07:40,036 --> 00:07:42,436
Speaker 1: of what inflation is likely to be over the next

122
00:07:42,516 --> 00:07:44,956
Speaker 1: ten years, and if the rates were to change, if

123
00:07:44,956 --> 00:07:49,116
Speaker 1: there was to be deflation or just much much lower

124
00:07:49,196 --> 00:07:51,516
Speaker 1: or minimal inflation, would that turn out not to be

125
00:07:51,556 --> 00:07:53,156
Speaker 1: the case, that lunch would not have been as freeish

126
00:07:53,156 --> 00:07:57,756
Speaker 1: as it appears. So the government mostly issues what are

127
00:07:57,756 --> 00:08:01,436
Speaker 1: called nominal bonds, which is they have an interest rate

128
00:08:01,436 --> 00:08:03,116
Speaker 1: in the interest rate is just the way we normally

129
00:08:03,196 --> 00:08:06,796
Speaker 1: understand the interest rate. Some of what the government issues

130
00:08:06,796 --> 00:08:09,836
Speaker 1: are inflation index bonds, and they pay an interest rate,

131
00:08:10,236 --> 00:08:13,556
Speaker 1: which is, will pay you the inflation rate plus blank

132
00:08:13,716 --> 00:08:17,476
Speaker 1: or will play you the inflation rate minus blank. Right now,

133
00:08:17,516 --> 00:08:20,276
Speaker 1: the interest rate on those inflation index bonds is negative.

134
00:08:20,316 --> 00:08:24,476
Speaker 1: So quite literally, the government, no matter what happens to inflation,

135
00:08:24,796 --> 00:08:27,756
Speaker 1: if it wanted to issue more of those bonds, and

136
00:08:27,996 --> 00:08:29,876
Speaker 1: you know, might change the interest rate on them. If

137
00:08:29,876 --> 00:08:32,476
Speaker 1: you tried to issue too many, but at least on

138
00:08:32,516 --> 00:08:37,076
Speaker 1: those bonds right now, you could lock in negative interest rate.

139
00:08:37,316 --> 00:08:38,796
Speaker 1: But I don't want to push this too far. You're

140
00:08:38,836 --> 00:08:41,516
Speaker 1: certainly right, you know, interest rates could change in the future.

141
00:08:41,996 --> 00:08:45,436
Speaker 1: You know the FED could stop trying to keep them low, etc.

142
00:08:46,236 --> 00:08:49,716
Speaker 1: I've spent thirty five years watching every single interest rate

143
00:08:49,756 --> 00:08:53,116
Speaker 1: forecast anyone has made has been too high, and interest

144
00:08:53,196 --> 00:08:55,356
Speaker 1: rates have come in below it rather than above it.

145
00:08:55,596 --> 00:08:57,596
Speaker 1: But that doesn't you know, just because my whole adult

146
00:08:57,596 --> 00:08:59,796
Speaker 1: life has been like that doesn't mean it's the timeless

147
00:08:59,796 --> 00:09:03,196
Speaker 1: truth that we should count on. How long does this

148
00:09:03,516 --> 00:09:06,836
Speaker 1: large debt overhang have to last and how big does

149
00:09:06,836 --> 00:09:10,716
Speaker 1: it have to be? The certain economic theory that says

150
00:09:10,516 --> 00:09:12,876
Speaker 1: it's actually the standard one that when you get shock hits,

151
00:09:13,276 --> 00:09:15,436
Speaker 1: your debt's going to be higher as a result of it,

152
00:09:15,996 --> 00:09:18,956
Speaker 1: and you actually it's okay if you lock in at

153
00:09:18,996 --> 00:09:22,956
Speaker 1: that new higher level of debt. In this case, I

154
00:09:22,956 --> 00:09:25,676
Speaker 1: think it's completely plausible that a decade from now the

155
00:09:25,756 --> 00:09:28,956
Speaker 1: United States would have a debt to GDP ratio of

156
00:09:28,996 --> 00:09:32,756
Speaker 1: one hundred and fifty percent, which is higher than we've

157
00:09:32,756 --> 00:09:36,036
Speaker 1: ever had in our history, but something that the UK

158
00:09:36,316 --> 00:09:39,636
Speaker 1: had for centuries and centuries and centuries while it was

159
00:09:39,676 --> 00:09:43,236
Speaker 1: the world's pre eminent power, And so one hundred and

160
00:09:43,316 --> 00:09:47,516
Speaker 1: fifty percent of GDP may be okay, it may be

161
00:09:47,636 --> 00:09:51,436
Speaker 1: something that we're able to get used to. It would

162
00:09:51,476 --> 00:09:56,236
Speaker 1: depend on interest rates staying below the growth rate to

163
00:09:56,476 --> 00:10:00,676
Speaker 1: make it at all feasible to stay at that level,

164
00:10:01,196 --> 00:10:04,476
Speaker 1: there'd still need to be some adjustment, some additional revenue

165
00:10:04,516 --> 00:10:07,716
Speaker 1: or spending cuts to even stabilize add one hundred and

166
00:10:07,716 --> 00:10:10,516
Speaker 1: fifty percent of GDP. But I think we're going to

167
00:10:10,596 --> 00:10:14,516
Speaker 1: find ourselves a decade from now that's going to probably

168
00:10:14,556 --> 00:10:17,756
Speaker 1: look perfectly reasonable, when if you'd told people even a

169
00:10:17,836 --> 00:10:21,156
Speaker 1: year ago, they would have thought it was nuts. The

170
00:10:21,236 --> 00:10:23,636
Speaker 1: British Empire example, I have to say it makes me

171
00:10:23,716 --> 00:10:26,276
Speaker 1: a bit nervous because it was at least the theory

172
00:10:26,316 --> 00:10:28,716
Speaker 1: of the British Empire during this period of huge debt

173
00:10:29,156 --> 00:10:30,836
Speaker 1: that the reason they were borrowing that money is they

174
00:10:30,836 --> 00:10:33,636
Speaker 1: were in the process of conquering the known world, which

175
00:10:33,636 --> 00:10:35,676
Speaker 1: they were in fact doing. You know, that was exactly

176
00:10:35,676 --> 00:10:37,716
Speaker 1: the period in which the British Empire came to be

177
00:10:37,756 --> 00:10:41,276
Speaker 1: the empire over which the sun didn't set, and the

178
00:10:41,316 --> 00:10:43,716
Speaker 1: British were very explicit that the goal of their empire

179
00:10:43,956 --> 00:10:47,476
Speaker 1: was to enhance their commercial opportunities and success. They took

180
00:10:47,516 --> 00:10:50,556
Speaker 1: over a country or in one case, a whole subcontinent

181
00:10:50,956 --> 00:10:54,196
Speaker 1: with a specific goal of exploiting it for its resources.

182
00:10:54,636 --> 00:10:57,276
Speaker 1: In the case of India textiles. Roughly speaking, in the

183
00:10:57,316 --> 00:10:59,516
Speaker 1: case of Africa, they didn't make it over the whole continent,

184
00:10:59,556 --> 00:11:03,156
Speaker 1: but minerals they saw that debt as an engine of growth.

185
00:11:04,196 --> 00:11:07,196
Speaker 1: I'm wondering if you think there's anything even slightly comparable

186
00:11:07,276 --> 00:11:09,556
Speaker 1: for the US in this period. I mean, we wouldn't have,

187
00:11:09,596 --> 00:11:13,076
Speaker 1: let's say, a business plan for very substantial growth that

188
00:11:13,116 --> 00:11:15,716
Speaker 1: would justify borrowing that money. In our case, it seems

189
00:11:15,716 --> 00:11:17,636
Speaker 1: more like we're borrowing that money now to overcome with

190
00:11:17,676 --> 00:11:21,036
Speaker 1: the shock. Yeah, so first of all, lesson learned. Never

191
00:11:21,116 --> 00:11:25,516
Speaker 1: bring up history with somebody that knows history. You know,

192
00:11:25,596 --> 00:11:28,156
Speaker 1: the UK also had debt. Britain had debt, you know,

193
00:11:28,196 --> 00:11:31,076
Speaker 1: often two fifty three fifty percent of GDP over that

194
00:11:31,156 --> 00:11:32,956
Speaker 1: period of time, So this would even be a decent

195
00:11:32,996 --> 00:11:35,916
Speaker 1: amount below it. But I certainly agree with you that

196
00:11:36,036 --> 00:11:39,956
Speaker 1: adding to debt is much much more appealing when you're

197
00:11:39,996 --> 00:11:43,836
Speaker 1: adding to debt in order to help economic growth than

198
00:11:43,956 --> 00:11:47,076
Speaker 1: when you're adding to debt to, for example, give tax

199
00:11:47,116 --> 00:11:49,756
Speaker 1: cuts to high income households so they can consume more

200
00:11:49,796 --> 00:12:01,716
Speaker 1: in the present. We'll be back in a moment. I

201
00:12:01,756 --> 00:12:03,716
Speaker 1: want to turn out to a topic which when I

202
00:12:03,796 --> 00:12:08,116
Speaker 1: bring up with our economics colleagues at Harvard and MIT,

203
00:12:08,676 --> 00:12:10,676
Speaker 1: people get red in the face, And I want to

204
00:12:10,676 --> 00:12:12,036
Speaker 1: bring it up in a way so that nobody has

205
00:12:12,036 --> 00:12:13,596
Speaker 1: to get red in the face. But I think it's

206
00:12:13,596 --> 00:12:16,116
Speaker 1: important because it's in the public discourse now, and that's

207
00:12:16,316 --> 00:12:20,076
Speaker 1: MMT or modern monetary theory now. As recently as a

208
00:12:20,156 --> 00:12:22,916
Speaker 1: year or two ago, if it even came up in conversation,

209
00:12:23,556 --> 00:12:26,116
Speaker 1: my anecdotal report is that people just rolled their eyes

210
00:12:26,116 --> 00:12:28,556
Speaker 1: and said, this is a crackpot theory, no reason to

211
00:12:28,556 --> 00:12:32,116
Speaker 1: worry about it too much. And yet now out in

212
00:12:32,196 --> 00:12:34,756
Speaker 1: the public discourse there has become a kind of trope

213
00:12:34,996 --> 00:12:37,596
Speaker 1: of people saying, oh, well, we're all MMT people now,

214
00:12:37,636 --> 00:12:39,716
Speaker 1: we all think that the government can always print money

215
00:12:39,716 --> 00:12:41,556
Speaker 1: to get itself out of any deck crisis that it's in.

216
00:12:41,596 --> 00:12:44,156
Speaker 1: And that's a wildly oversimplified account of what the theory is.

217
00:12:44,916 --> 00:12:48,396
Speaker 1: And even just saying that again makes our economist colleagues

218
00:12:48,636 --> 00:12:50,156
Speaker 1: go a little crazy. So I wonder if you would

219
00:12:50,156 --> 00:12:52,716
Speaker 1: do the flying for us. It's hard to ask somebody

220
00:12:52,756 --> 00:12:56,796
Speaker 1: to summarize of you that he may think is completely wrong,

221
00:12:57,076 --> 00:13:00,796
Speaker 1: but would you at least give us a caricatured version

222
00:13:01,036 --> 00:13:03,116
Speaker 1: of what people mean when they say, oh, we can

223
00:13:03,156 --> 00:13:05,396
Speaker 1: print money to get out of this, and would you

224
00:13:05,436 --> 00:13:09,316
Speaker 1: give us some one oh one account of why that's wrong?

225
00:13:09,356 --> 00:13:12,236
Speaker 1: If indeed it is sure, and I should say that,

226
00:13:12,396 --> 00:13:15,956
Speaker 1: I personally think MMT is like a stopped clock that's

227
00:13:16,076 --> 00:13:19,236
Speaker 1: right twice a day at this moment. It's roughly right.

228
00:13:19,796 --> 00:13:21,836
Speaker 1: Lots of other theories would have gotten to us to

229
00:13:21,916 --> 00:13:25,196
Speaker 1: the same place. But that's broadly speaking, my take. So

230
00:13:25,356 --> 00:13:27,636
Speaker 1: what's the theory that's right twise a day? Number one?

231
00:13:28,196 --> 00:13:30,996
Speaker 1: MMT says that rather than have the FED be the

232
00:13:30,996 --> 00:13:34,636
Speaker 1: first line of defense in business cycles, the treasury should

233
00:13:34,636 --> 00:13:37,756
Speaker 1: be the first line of defense in business cycles. That's

234
00:13:37,836 --> 00:13:41,316
Speaker 1: one thing that MMT says. So if the treasury is

235
00:13:41,316 --> 00:13:43,716
Speaker 1: the first line of defense, what should the treasury do

236
00:13:43,916 --> 00:13:47,156
Speaker 1: in a business cycle downturn? The treasury should cut taxes

237
00:13:47,236 --> 00:13:51,436
Speaker 1: in a downturn. The Treasury should increase spending in a downturn,

238
00:13:51,956 --> 00:13:55,156
Speaker 1: and the treasury should keep doing that until it sees

239
00:13:55,196 --> 00:13:58,916
Speaker 1: inflation rising. And then if inflation is rising where it

240
00:13:59,196 --> 00:14:01,956
Speaker 1: above where it wants to go, then you stop that

241
00:14:02,036 --> 00:14:05,156
Speaker 1: process and maybe even reverse it a little bit by

242
00:14:05,236 --> 00:14:08,716
Speaker 1: raising taxes and cutting spending. So, you know, the thing

243
00:14:08,756 --> 00:14:11,236
Speaker 1: we normally think of the FED raising and lowering interest

244
00:14:11,356 --> 00:14:14,596
Speaker 1: rates in order to keep the economy on track. MMT

245
00:14:14,956 --> 00:14:19,156
Speaker 1: has that primarily happening with the Treasury and the Congress

246
00:14:19,356 --> 00:14:23,396
Speaker 1: raising and lowering taxes and spending. A second thing in

247
00:14:23,676 --> 00:14:30,956
Speaker 1: MMT is the idea that there's no constraint on what

248
00:14:30,996 --> 00:14:34,836
Speaker 1: the government does in terms of people being unwilling to

249
00:14:34,956 --> 00:14:39,316
Speaker 1: lend to the government, because ultimately the central bank can

250
00:14:39,356 --> 00:14:42,236
Speaker 1: always print the money if it wants to, and so

251
00:14:42,276 --> 00:14:46,516
Speaker 1: you don't need to worry about will anyone lend. You

252
00:14:46,556 --> 00:14:50,836
Speaker 1: don't need to worry about will government spending drive up

253
00:14:50,876 --> 00:14:54,836
Speaker 1: interest rates? All the traditional concerns. Instead, the only thing

254
00:14:54,876 --> 00:14:58,276
Speaker 1: you should worry about is that if you spend too much,

255
00:14:58,516 --> 00:15:02,236
Speaker 1: you'll get inflation. That part is the part that sounds

256
00:15:02,836 --> 00:15:07,876
Speaker 1: very counterintuitive to sort of the very simplified idea that

257
00:15:08,476 --> 00:15:11,796
Speaker 1: when governments get into trouble because they owe too much

258
00:15:11,796 --> 00:15:13,996
Speaker 1: money and try to print money to get out of

259
00:15:13,996 --> 00:15:16,276
Speaker 1: it and pay their debts, that that then drives a

260
00:15:16,276 --> 00:15:20,276
Speaker 1: cycle of hyperinflation that gives you Argentina or Germany between

261
00:15:20,316 --> 00:15:24,196
Speaker 1: the wars. So their MMT is denying that intuition, right.

262
00:15:24,236 --> 00:15:26,196
Speaker 1: I think one of the problems with MMT is it

263
00:15:26,276 --> 00:15:29,876
Speaker 1: presents itself as a timeless truth, and a lot of

264
00:15:29,876 --> 00:15:31,916
Speaker 1: the people that support it, you know, will point to

265
00:15:31,956 --> 00:15:35,436
Speaker 1: all sorts of identities and equations and they're like the

266
00:15:35,516 --> 00:15:38,956
Speaker 1: law of gravity, they should always hold. And the fact

267
00:15:39,036 --> 00:15:43,116
Speaker 1: is they hold in certain countries at certain times. So

268
00:15:43,156 --> 00:15:48,196
Speaker 1: if Argentina tried to do MMT, the results would be abysmal.

269
00:15:48,476 --> 00:15:50,676
Speaker 1: You know, at various points in history when countries have

270
00:15:50,756 --> 00:15:53,476
Speaker 1: tried to do it, the results have been abysmal. Maybe

271
00:15:53,516 --> 00:15:55,396
Speaker 1: the United States can do it right now. But then

272
00:15:55,436 --> 00:15:58,156
Speaker 1: that begs a question, you know, why is it In

273
00:15:58,196 --> 00:16:02,036
Speaker 1: some circumstances you can borrow a lot. In other circumstances,

274
00:16:02,396 --> 00:16:05,036
Speaker 1: you can't borrow a lot. And MMT doesn't have a

275
00:16:05,076 --> 00:16:08,956
Speaker 1: whole lot to say an answer to that question, because

276
00:16:09,236 --> 00:16:12,236
Speaker 1: it presents itself as a timeless truth. So you're coming

277
00:16:12,276 --> 00:16:14,356
Speaker 1: to the third component. Yeah, And the third component of

278
00:16:14,476 --> 00:16:18,756
Speaker 1: MMT is generally a belief that the economy is persistently,

279
00:16:18,836 --> 00:16:23,556
Speaker 1: for very long periods of time, operating below its capacity,

280
00:16:24,356 --> 00:16:29,516
Speaker 1: with excess slack, with excess unemployment. And so it's not

281
00:16:29,676 --> 00:16:32,236
Speaker 1: just when you're in a recession or coming out of

282
00:16:32,276 --> 00:16:36,876
Speaker 1: it that you can do fiscal stimulus, extra tax cuts,

283
00:16:36,916 --> 00:16:41,196
Speaker 1: extra spending increases. But if you're planning a health system,

284
00:16:41,716 --> 00:16:43,676
Speaker 1: you know, single pay or whatever it is for the

285
00:16:43,716 --> 00:16:47,036
Speaker 1: next twenty years, you can even plan ten or fifteen

286
00:16:47,116 --> 00:16:50,596
Speaker 1: years from now to do definite it's spending, because ten

287
00:16:50,676 --> 00:16:53,036
Speaker 1: or fifteen years from now we're probably going to need

288
00:16:53,116 --> 00:16:56,796
Speaker 1: fiscal stimulus. Also because the unemployment rate is almost always

289
00:16:56,796 --> 00:17:01,436
Speaker 1: too high. Is there a single identifiable analytic error here,

290
00:17:01,636 --> 00:17:05,196
Speaker 1: or is it a series of claims that aren't empirically

291
00:17:06,036 --> 00:17:07,756
Speaker 1: born out. Is this the kind of thing where one

292
00:17:07,796 --> 00:17:11,396
Speaker 1: can say MMT is wrong because and is the because

293
00:17:11,436 --> 00:17:13,156
Speaker 1: in the nature of an analysis of the world, or

294
00:17:13,236 --> 00:17:15,556
Speaker 1: is it in the nature of an analysis of economic principles?

295
00:17:15,756 --> 00:17:17,996
Speaker 1: I mean, MMT shifts around a lot, so it's a

296
00:17:18,036 --> 00:17:22,476
Speaker 1: little bit hard to pin down. Is not clear what

297
00:17:22,676 --> 00:17:25,156
Speaker 1: evidence you could give to an mm tier that would

298
00:17:25,196 --> 00:17:29,716
Speaker 1: cause her him to change their mind. And you know,

299
00:17:29,756 --> 00:17:31,516
Speaker 1: just to go back to the three things I said,

300
00:17:31,876 --> 00:17:35,076
Speaker 1: who should take the lead in fighting recessions? Think for

301
00:17:35,116 --> 00:17:38,756
Speaker 1: a normal garden variety recession, the Fed. Actually it's okay

302
00:17:38,796 --> 00:17:40,836
Speaker 1: for the central Bank to take the lead raising and

303
00:17:40,916 --> 00:17:44,156
Speaker 1: lowering interest rates. Right now, interest rates are at zero,

304
00:17:44,276 --> 00:17:46,956
Speaker 1: so you do need the Treasury and the Congress. So

305
00:17:47,116 --> 00:17:50,476
Speaker 1: MMT is right for the moment, that doesn't mean it's

306
00:17:50,516 --> 00:17:53,996
Speaker 1: always right. You know, we've already talked. MMT says no

307
00:17:54,076 --> 00:17:58,396
Speaker 1: constraint on borrowing. Argentina faces a lot of constraints on borrowing,

308
00:17:58,436 --> 00:18:01,596
Speaker 1: so that's not a timeless truth. That is something situational.

309
00:18:02,476 --> 00:18:06,036
Speaker 1: And finally, the claim that we're below full employment, that's

310
00:18:06,036 --> 00:18:08,476
Speaker 1: certainly true right now. I think that's going to be

311
00:18:08,516 --> 00:18:11,156
Speaker 1: true to you from now. If you're making a health

312
00:18:11,156 --> 00:18:13,396
Speaker 1: plan that's going to last for the next fifty years,

313
00:18:13,836 --> 00:18:16,196
Speaker 1: I think it would be really rash to assume that's

314
00:18:16,236 --> 00:18:18,116
Speaker 1: going to be the case for the next fifty years,

315
00:18:18,116 --> 00:18:20,196
Speaker 1: since so you don't ever need to pay for that

316
00:18:20,316 --> 00:18:24,396
Speaker 1: health plan. On the constraints on borrowing, which is also

317
00:18:24,476 --> 00:18:28,796
Speaker 1: thematically where we began, I'm trying to understand from a

318
00:18:28,836 --> 00:18:32,876
Speaker 1: conceptual standpoint, how we should think about constraints on borrowing.

319
00:18:32,956 --> 00:18:36,636
Speaker 1: I mean, the ordinary intuition that people have is you

320
00:18:36,676 --> 00:18:40,156
Speaker 1: can borrow as much money as people will rationally lend

321
00:18:40,196 --> 00:18:42,716
Speaker 1: you if they have enough information to make the prediction

322
00:18:42,956 --> 00:18:45,876
Speaker 1: that you'll pay it back. The intuition is that borrowing

323
00:18:45,956 --> 00:18:48,916
Speaker 1: is not at all about a free lunch, because at

324
00:18:48,956 --> 00:18:51,316
Speaker 1: some point it must be paid back under the terms

325
00:18:51,316 --> 00:18:52,796
Speaker 1: of the lunch. You can get a really good deal,

326
00:18:53,076 --> 00:18:54,956
Speaker 1: which makes it, as you said, a free ISSH lunch,

327
00:18:55,196 --> 00:18:56,716
Speaker 1: but it's not a free lunch in the sense that

328
00:18:56,836 --> 00:18:58,996
Speaker 1: something must be paid back, and that thing which must

329
00:18:58,996 --> 00:19:01,236
Speaker 1: be paid back is essentially that which has been agreed

330
00:19:01,276 --> 00:19:04,916
Speaker 1: to paid back upfront. In your view, is there any

331
00:19:05,076 --> 00:19:07,796
Speaker 1: escape from that idea or is that closer to a

332
00:19:07,916 --> 00:19:12,196
Speaker 1: law of gravity in the context of borrowing. I think

333
00:19:12,236 --> 00:19:15,516
Speaker 1: that's broadly right, I tend to think. And this is

334
00:19:15,556 --> 00:19:18,236
Speaker 1: not based on incredibly strong evidence. This is based on

335
00:19:18,356 --> 00:19:22,356
Speaker 1: sort of common sense, and that's a little bit worrying

336
00:19:22,396 --> 00:19:24,996
Speaker 1: to have to rely on that. It also depends on

337
00:19:24,996 --> 00:19:27,836
Speaker 1: the circumstances. If every one of the rich countries in

338
00:19:27,876 --> 00:19:31,436
Speaker 1: the world is borrowing more, then you know, people aren't

339
00:19:31,436 --> 00:19:34,076
Speaker 1: going to say the United States is irresponsible. If the

340
00:19:34,156 --> 00:19:36,436
Speaker 1: United States is the only country in the world doing it,

341
00:19:36,476 --> 00:19:37,956
Speaker 1: they'll say, you know what, we don't want to buy

342
00:19:38,116 --> 00:19:41,516
Speaker 1: US debt. We'd rather buy European debt, We'd rather buy

343
00:19:41,596 --> 00:19:43,876
Speaker 1: Japanese debt. So there's a little bit of a strength

344
00:19:43,916 --> 00:19:46,556
Speaker 1: in numbers, and this is what this is a constraint

345
00:19:46,596 --> 00:19:50,036
Speaker 1: on individual countries. We actually do see an individual country

346
00:19:50,076 --> 00:19:52,876
Speaker 1: in Europe has a harder time borrowing to get out

347
00:19:52,876 --> 00:19:56,236
Speaker 1: of a downturn because people can shift away from lending

348
00:19:56,236 --> 00:19:58,156
Speaker 1: to that country to another one. You see the same

349
00:19:58,156 --> 00:20:00,596
Speaker 1: thing with US States. So it's a little bit of

350
00:20:00,596 --> 00:20:04,236
Speaker 1: a safety in numbers. There's a little bit of you know,

351
00:20:04,236 --> 00:20:06,476
Speaker 1: if it looks like you're borrowing because you needed to

352
00:20:06,596 --> 00:20:08,756
Speaker 1: because something bad happen to you, or you needed to

353
00:20:08,796 --> 00:20:12,996
Speaker 1: do someth think about something bad, that that's okay. Whereas

354
00:20:13,036 --> 00:20:15,516
Speaker 1: if the United States had woken up there was no

355
00:20:15,596 --> 00:20:18,956
Speaker 1: pandemic and we just went nuts and decided we're going

356
00:20:18,996 --> 00:20:21,156
Speaker 1: to increase our debt two hundred and fifty percent of

357
00:20:21,196 --> 00:20:24,596
Speaker 1: GDP to build a big monument to the leader or

358
00:20:24,596 --> 00:20:28,516
Speaker 1: something like that, financial markets might have been more punishing

359
00:20:28,996 --> 00:20:32,636
Speaker 1: of that type of debt and then finally a trajectory.

360
00:20:32,756 --> 00:20:35,036
Speaker 1: If they knew we were stabilizing in one hundred and

361
00:20:35,076 --> 00:20:38,756
Speaker 1: fifty percent of GDP for debt, maybe people would have

362
00:20:38,796 --> 00:20:41,236
Speaker 1: patience with that. If they could see no end in

363
00:20:41,316 --> 00:20:43,676
Speaker 1: sight and it was going to two hundred, three hundred,

364
00:20:43,756 --> 00:20:47,196
Speaker 1: five hundred one thousand percent of GDP, maybe they wouldn't

365
00:20:47,236 --> 00:20:51,116
Speaker 1: like it. So I do think borrowing is who's willing

366
00:20:51,156 --> 00:20:53,596
Speaker 1: to lend to you. Who's willing to lend to you

367
00:20:53,916 --> 00:20:56,956
Speaker 1: depends on circumstances. Are you in good company, are you

368
00:20:57,036 --> 00:21:01,116
Speaker 1: doing it for good reason? And do you have some

369
00:21:01,236 --> 00:21:04,596
Speaker 1: plausible exit strategy from all of it. The reason I

370
00:21:04,636 --> 00:21:07,436
Speaker 1: asked this, even though maybe it sounds two elementary, is

371
00:21:07,476 --> 00:21:09,676
Speaker 1: that it's sort of the back of my mind. I

372
00:21:09,756 --> 00:21:13,556
Speaker 1: always have this desire not to be what the ordinary

373
00:21:13,556 --> 00:21:16,316
Speaker 1: non economist would probably have been. When the world gradually

374
00:21:16,356 --> 00:21:19,076
Speaker 1: went off the gold standard. The ordinary person, the non

375
00:21:19,076 --> 00:21:21,836
Speaker 1: economists intuition was, well, this is just necessary. There has

376
00:21:21,876 --> 00:21:24,716
Speaker 1: to be something of value, and unless everything is in

377
00:21:24,756 --> 00:21:26,996
Speaker 1: reference to that thing of value, the whole system will

378
00:21:27,036 --> 00:21:29,036
Speaker 1: break down. And of course that turned out just not

379
00:21:29,076 --> 00:21:31,476
Speaker 1: to be true for me. One of the takeaways from

380
00:21:31,476 --> 00:21:35,076
Speaker 1: that historical takeaway is the ordinary non economist should not

381
00:21:35,156 --> 00:21:39,156
Speaker 1: completely trust intuitions about questions like this, which is exactly

382
00:21:39,156 --> 00:21:42,236
Speaker 1: why I'm asking you about it. Is there on the

383
00:21:42,276 --> 00:21:46,956
Speaker 1: horizon a similar kind of intuitive error that ordinary people

384
00:21:47,116 --> 00:21:49,716
Speaker 1: are making about the economy, you know, similar to the

385
00:21:49,756 --> 00:21:51,476
Speaker 1: old intuition that of course there had to be a

386
00:21:51,516 --> 00:21:55,916
Speaker 1: gold standard or a sterling standard. Just the notion that

387
00:21:55,956 --> 00:21:58,596
Speaker 1: when times are tough, you should tighten the belt. It's

388
00:21:58,636 --> 00:22:02,676
Speaker 1: just a very very powerful one. President Obama used that

389
00:22:02,756 --> 00:22:05,676
Speaker 1: line a few times in speeches in you know, maybe

390
00:22:05,676 --> 00:22:09,236
Speaker 1: it was two thousand and nine or two ten. He

391
00:22:09,316 --> 00:22:13,236
Speaker 1: understood these issues incredibly well, and you know, was doing

392
00:22:13,516 --> 00:22:15,756
Speaker 1: or trying to do all of the right things. And

393
00:22:15,796 --> 00:22:17,996
Speaker 1: were you there in the Council of Economic Advisors waving

394
00:22:18,036 --> 00:22:19,796
Speaker 1: your arms in the air and saying, don't say that.

395
00:22:20,916 --> 00:22:24,756
Speaker 1: So some of us were not thrilled with that vocabulary.

396
00:22:24,796 --> 00:22:28,036
Speaker 1: And it just shows you how powerful the pull of

397
00:22:28,756 --> 00:22:33,156
Speaker 1: the family. Analogies don't apply at the level of the government,

398
00:22:33,276 --> 00:22:37,116
Speaker 1: because what the government is trying to do is take

399
00:22:37,156 --> 00:22:39,356
Speaker 1: a set of people that aren't working instead of factories

400
00:22:39,396 --> 00:22:44,596
Speaker 1: that aren't utilized, and reconnect them. And with that you

401
00:22:44,756 --> 00:22:47,596
Speaker 1: go back to the Freish lunch type of stuff we

402
00:22:47,596 --> 00:22:51,676
Speaker 1: were talking about before. That doesn't have an exact analog

403
00:22:51,796 --> 00:22:55,036
Speaker 1: in the case of a household. Among mainstream economists or

404
00:22:55,036 --> 00:22:58,476
Speaker 1: people you would consider mainstream economists, is there right now

405
00:22:58,676 --> 00:23:02,916
Speaker 1: a very active debate or disagreement that you see about

406
00:23:02,996 --> 00:23:05,676
Speaker 1: what should happen now and over the next several years,

407
00:23:05,756 --> 00:23:08,716
Speaker 1: or do you think we're in a moment of relative consensus,

408
00:23:08,716 --> 00:23:10,996
Speaker 1: And I'm after you answer that if you would compare

409
00:23:11,076 --> 00:23:13,636
Speaker 1: that to the way things looked after the two thousand

410
00:23:13,676 --> 00:23:17,996
Speaker 1: and eight crisis. So I talked to people who had

411
00:23:18,036 --> 00:23:22,556
Speaker 1: the job I had under President Obama, under President Bush,

412
00:23:22,636 --> 00:23:26,676
Speaker 1: and they have pretty similar views in terms of the

413
00:23:26,716 --> 00:23:31,916
Speaker 1: need to provide large scale relief to families, the importance

414
00:23:32,076 --> 00:23:35,516
Speaker 1: of relief for state and local governments, the need for

415
00:23:35,676 --> 00:23:41,156
Speaker 1: large amounts of liquidity for businesses. My perception is there's

416
00:23:41,236 --> 00:23:45,796
Speaker 1: more consensus now, and in part that's because it's just

417
00:23:46,156 --> 00:23:50,636
Speaker 1: totally unambiguous that the economy shut down. You know, there's

418
00:23:50,676 --> 00:23:53,036
Speaker 1: no debate over whether, you know, is growth going to

419
00:23:53,076 --> 00:23:55,716
Speaker 1: be negative? Is it not going to be negative. There's

420
00:23:55,756 --> 00:23:59,116
Speaker 1: no debate that the Fed by itself can't handle the problem.

421
00:23:59,196 --> 00:24:03,556
Speaker 1: The federal Reserve is begging for more tax cuts or

422
00:24:03,796 --> 00:24:08,076
Speaker 1: government spending increases. And you know, and insofar as there

423
00:24:08,076 --> 00:24:10,836
Speaker 1: debates among economy now, they just go in lots of

424
00:24:10,836 --> 00:24:13,516
Speaker 1: different directions. They're economists on the far left and the

425
00:24:13,556 --> 00:24:16,996
Speaker 1: further right that like crants to businesses as a way

426
00:24:17,036 --> 00:24:20,436
Speaker 1: to get businesses through. There's other economists that really don't

427
00:24:20,636 --> 00:24:24,876
Speaker 1: so some of the debates are more scrambled ideologically than

428
00:24:24,916 --> 00:24:27,396
Speaker 1: they have been in the past. As well. The grants

429
00:24:27,396 --> 00:24:31,836
Speaker 1: to businesses debate is not breaking down along standard ideological lines.

430
00:24:31,916 --> 00:24:34,716
Speaker 1: It's not Democrats say give it right to the workers

431
00:24:34,716 --> 00:24:36,676
Speaker 1: and Republicans say give it to the businesses, or it

432
00:24:36,716 --> 00:24:40,516
Speaker 1: doesn't roughly follow those lines. Bernie Sanders has co sponsored

433
00:24:40,596 --> 00:24:44,036
Speaker 1: legislation in the Senate that, in its original version, would

434
00:24:44,036 --> 00:24:46,076
Speaker 1: have given a lot of money to companies like Disney,

435
00:24:46,836 --> 00:24:49,996
Speaker 1: not just to pay their furloughed employees, but to cover

436
00:24:50,516 --> 00:24:53,476
Speaker 1: some of their operating expenses as well. So it is

437
00:24:53,476 --> 00:24:56,356
Speaker 1: ideologically scrambled in a way that's reassuring. I mean, I

438
00:24:56,436 --> 00:25:00,116
Speaker 1: suppose it's always challenging to the layman when the experts

439
00:25:00,156 --> 00:25:03,756
Speaker 1: are disagreeing, but it's nice when they're not disagreeing along

440
00:25:04,116 --> 00:25:07,876
Speaker 1: relatively familiar or expected partisan lines. That makes it look

441
00:25:07,876 --> 00:25:10,796
Speaker 1: like it's not being driven by interest politics, but by

442
00:25:10,836 --> 00:25:14,156
Speaker 1: genuine intellectual disagreement. I think there's a certain amount about that.

443
00:25:14,196 --> 00:25:16,236
Speaker 1: And I think you know, this, in some ways is

444
00:25:16,276 --> 00:25:20,196
Speaker 1: a very novel type of economic crisis, and there's some

445
00:25:20,316 --> 00:25:23,836
Speaker 1: tools that are well trodden and well understood, and as

446
00:25:23,916 --> 00:25:26,476
Speaker 1: others that people are trying to event to deal with

447
00:25:26,516 --> 00:25:31,516
Speaker 1: this novel situation, and you know, they hate to say it,

448
00:25:31,556 --> 00:25:33,476
Speaker 1: but it's sort of interesting at a time like this,

449
00:25:33,516 --> 00:25:37,156
Speaker 1: And unfortunately, we'll only have a better idea when, you know,

450
00:25:37,196 --> 00:25:39,756
Speaker 1: people write the wonderful papers about everything that was done

451
00:25:39,756 --> 00:25:42,956
Speaker 1: a decade from now. What am I not asking you

452
00:25:42,996 --> 00:25:45,876
Speaker 1: that I should be asking you. We've seen a larger

453
00:25:45,876 --> 00:25:48,636
Speaker 1: fiscal response in the United States than we've seen in Europe.

454
00:25:48,716 --> 00:25:50,396
Speaker 1: We've seen a very large one in Europe, but we've

455
00:25:50,436 --> 00:25:52,756
Speaker 1: seen a very very large one in the United States.

456
00:25:53,196 --> 00:25:56,396
Speaker 1: The response in the United States has been larger than

457
00:25:56,436 --> 00:25:59,276
Speaker 1: we've ever done in our past. It's larger than what

458
00:25:59,316 --> 00:26:02,916
Speaker 1: other countries are doing now. We've also seen a smaller

459
00:26:02,916 --> 00:26:07,836
Speaker 1: reduction in economic activity in the United States than in Europe.

460
00:26:08,596 --> 00:26:11,556
Speaker 1: Partly that's that we didn't do as effective a lockdown

461
00:26:11,836 --> 00:26:13,916
Speaker 1: and we may end up getting bitten by that later

462
00:26:13,996 --> 00:26:17,156
Speaker 1: on if there's too much virus out there. But in

463
00:26:17,236 --> 00:26:19,756
Speaker 1: part the evidence is and we sort of hate to

464
00:26:19,756 --> 00:26:22,116
Speaker 1: ever look at anything positive or good that we did.

465
00:26:22,196 --> 00:26:24,676
Speaker 1: We must like to lament and talk about everything wrong

466
00:26:24,716 --> 00:26:27,876
Speaker 1: and change. To date, we have done a decent job

467
00:26:28,476 --> 00:26:33,836
Speaker 1: protecting American households from a fall and disposable personal income.

468
00:26:33,996 --> 00:26:36,796
Speaker 1: Too many have fallen through the cracks. It's very, very

469
00:26:36,796 --> 00:26:40,316
Speaker 1: far from perfect, but compared to almost any recession in

470
00:26:40,356 --> 00:26:45,196
Speaker 1: the past, households have been better protected from this one,

471
00:26:45,596 --> 00:26:48,196
Speaker 1: even though it's a much deeper recession, and have been

472
00:26:48,236 --> 00:26:51,916
Speaker 1: better protected even than households in Europe have been. And

473
00:26:52,116 --> 00:26:54,316
Speaker 1: that's a good thing. We should pause for a second

474
00:26:54,356 --> 00:26:58,196
Speaker 1: to celebrate that success, but only for a second because

475
00:26:58,196 --> 00:27:00,596
Speaker 1: all of that ends at the end of July, and

476
00:27:00,676 --> 00:27:04,036
Speaker 1: so a lot more is needed to continue with that success.

477
00:27:05,076 --> 00:27:08,116
Speaker 1: Thank you very much for that very cogent analysis. I

478
00:27:08,156 --> 00:27:10,236
Speaker 1: can see why they you're in charge of teaching a

479
00:27:10,316 --> 00:27:13,676
Speaker 1: thousand students economics every year. You're a spectacularly a great explainer.

480
00:27:13,716 --> 00:27:18,036
Speaker 1: Thank you very much. Maybe because Jason Furman has such

481
00:27:18,036 --> 00:27:20,636
Speaker 1: a calming voice, when you listen to him, you start

482
00:27:20,676 --> 00:27:23,076
Speaker 1: to think that very extreme things are actually going to

483
00:27:23,156 --> 00:27:26,516
Speaker 1: be all right. I certainly hope that that turns out

484
00:27:26,556 --> 00:27:30,076
Speaker 1: to be the case. Listening to Jason, I was very

485
00:27:30,116 --> 00:27:34,196
Speaker 1: struck by his suggestion that any amount of money that

486
00:27:34,236 --> 00:27:38,236
Speaker 1: we borrow is rational provided we can make a credible

487
00:27:38,356 --> 00:27:40,996
Speaker 1: prediction that borrowing that money will lead to what he

488
00:27:41,036 --> 00:27:44,796
Speaker 1: called a multiplier of one or close to one, that is,

489
00:27:44,836 --> 00:27:48,076
Speaker 1: the opportunity eventually to pay it back by virtue of

490
00:27:48,116 --> 00:27:51,876
Speaker 1: the effects of the borrowing. That sounds sensible logically, but

491
00:27:51,916 --> 00:27:54,116
Speaker 1: of course the devil is in the details, because it

492
00:27:54,196 --> 00:27:57,476
Speaker 1: raises the question of just whether we can get our

493
00:27:57,476 --> 00:28:01,236
Speaker 1: money back over time. Jason emphasized that when it comes

494
00:28:01,276 --> 00:28:03,796
Speaker 1: to borrowing, there isn't actually such a thing as a

495
00:28:03,836 --> 00:28:06,556
Speaker 1: true free lunch, because the money will have to be

496
00:28:06,596 --> 00:28:10,476
Speaker 1: paid back eventually. But as he said, given that it

497
00:28:10,556 --> 00:28:13,036
Speaker 1: is possible for the government right now to borrow money

498
00:28:13,076 --> 00:28:17,556
Speaker 1: at negative interest rates under current conditions, even the trillions

499
00:28:17,556 --> 00:28:20,876
Speaker 1: of dollars of borrowing and the potentially trillions of dollars

500
00:28:20,916 --> 00:28:25,036
Speaker 1: of debt that we're taking on may actually be affordable

501
00:28:25,156 --> 00:28:28,916
Speaker 1: and capable of being paid back in the future. With

502
00:28:28,956 --> 00:28:31,996
Speaker 1: respect to MMT, Jason was pretty clear that he thinks

503
00:28:32,196 --> 00:28:34,516
Speaker 1: it's just a clock that's right twice a day, which

504
00:28:34,556 --> 00:28:37,876
Speaker 1: is to say that MMT doesn't express correct principles of

505
00:28:37,876 --> 00:28:41,716
Speaker 1: economics that are generalizable, but rather might, under certain circumstances,

506
00:28:41,716 --> 00:28:46,716
Speaker 1: describe events that are the circumstances that exist now. Ultimately,

507
00:28:46,756 --> 00:28:50,036
Speaker 1: the consensus that currently exists among mainstream economists suggest that

508
00:28:50,076 --> 00:28:53,196
Speaker 1: we're going to go on borrowing, possibly a lot more,

509
00:28:53,476 --> 00:28:55,196
Speaker 1: and that more of that will have to take place

510
00:28:55,476 --> 00:28:59,196
Speaker 1: in July when the current bailout money begins to run out.

511
00:28:59,756 --> 00:29:02,916
Speaker 1: We will continue to follow the question of borrowing and

512
00:29:02,996 --> 00:29:06,796
Speaker 1: our economy and its relationship to employment going forward. I

513
00:29:06,956 --> 00:29:09,916
Speaker 1: promise to come back to you soon with a new analysis.

514
00:29:10,556 --> 00:29:13,876
Speaker 1: Until the next time we speak, be careful, be safe,

515
00:29:14,076 --> 00:29:17,076
Speaker 1: and be well. Deep background is brought to you by

516
00:29:17,116 --> 00:29:21,116
Speaker 1: Pushkin Industries. Our producer is Lydia gene Cott, with research

517
00:29:21,156 --> 00:29:24,396
Speaker 1: help from zooe Win and mastering by Jason Gambrell and

518
00:29:24,476 --> 00:29:28,956
Speaker 1: Martin Gonzalez. Our showrunner is Sophie McKibben. Our theme music

519
00:29:29,036 --> 00:29:32,396
Speaker 1: is composed by Luis Garat special thanks to the Pushkin Brass,

520
00:29:32,716 --> 00:29:37,036
Speaker 1: Malcolm Gladwell, Jacob Weisberg, and Mia Loebell. I'm Noah Feldman.

521
00:29:37,396 --> 00:29:40,356
Speaker 1: I also write a regular column for Bloomberg Opinion, which

522
00:29:40,356 --> 00:29:44,076
Speaker 1: you can find at Bloomberg dot com slash Feldman. To

523
00:29:44,156 --> 00:29:47,716
Speaker 1: discover Bloomberg's original slate of podcasts, go to Bloomberg dot

524
00:29:47,716 --> 00:29:51,996
Speaker 1: com slash Podcasts. And one last thing. I just wrote

525
00:29:51,996 --> 00:29:55,316
Speaker 1: a book called The Arab Winter, a tragedy I would

526
00:29:55,316 --> 00:29:57,356
Speaker 1: be delighted if you checked it out. You can always

527
00:29:57,396 --> 00:29:59,796
Speaker 1: let me know what you think on Twitter about this episode,

528
00:29:59,916 --> 00:30:03,516
Speaker 1: or the book, or anything else. My handle is Noah R. Feldman.

529
00:30:04,036 --> 00:30:09,756
Speaker 1: This is deep background. I'd like to s