Speaker 1: Pushkin from Pushkin Industries. This is Deep Background, the show
Speaker 1: where we explore the stories behind the stories in the news.
Speaker 1: I'm Noah Feldman. Our country is facing a genuinely challenging
Speaker 1: historical moment. There are two major stories that are proceeding
Speaker 1: right now. The first is the protests, the demonstrations and
Speaker 1: in some instances looting triggered by the tragic death of
Speaker 1: George Floyd. We talked about that earlier this week with
Speaker 1: Finita Kupta, and we're going to continue to cover that story.
Speaker 1: The second story, which has not gone away, is the
Speaker 1: coronavirus pandemic and its consequences for the world. Today, we're
Speaker 1: going to focus on that story. The federal government has
Speaker 1: said that it's planning to borrow nearly three trillion dollars
Speaker 1: between a in June of this year to help businesses
Speaker 1: and workers affected by the coronavirus shutdown. That's a record
Speaker 1: breaking amount of money. Think of it this way. During
Speaker 1: the entirety of last year, the government borrowed one point
Speaker 1: to eight trillion dollars. That's compared to three trillion in
Speaker 1: three months. How worried do we need to be about
Speaker 1: the remarkable, indeed astonishing scope of our emerging national debt.
Speaker 1: In order to explore answers to this question, both mainstream
Speaker 1: and otherwise, I'm joined by Professor Jason Furman of the
Speaker 1: Harvard Kennedy School. Jason served as President Obama's Chairman of
Speaker 1: the Council of Economic Advisors from twenty thirteen to twenty seventeen,
Speaker 1: effectively serving as the president's chief economist and a member
Speaker 1: of the cabinet. He's also the best macroeconomist at explaining
Speaker 1: things that I have ever met. Jason, thank you so
Speaker 1: much for being here. We're obviously in an unprecedented situation
Speaker 1: of economic crisis, with forty million people unemployed, that's nearly
Speaker 1: a quarter of the workforce, and in that context, every
Speaker 1: economist that I know thinks that it's completely reasonable to
Speaker 1: spend the money that we're spending now on some combination
Speaker 1: of a bailout slash life support system for the economy.
Speaker 1: What I'm curious about is is there a limit? Is
Speaker 1: there any maximum point beyond which we cannot go? Well,
Speaker 1: it sounds like you have great taste in the economists
Speaker 1: that you hang out with, so congratulations on that. I
Speaker 1: don't think there is a limit to the amount of
Speaker 1: money that can be spent on effective measures. So I
Speaker 1: wouldn't think of it as a target, nor would I
Speaker 1: say this a ceiling. I would ask the question, is
Speaker 1: what I'm doing going to have a multiplier that's close
Speaker 1: to one or higher than one, in which case you
Speaker 1: can definitely do it because it means GDP will go
Speaker 1: up by more than debt and it will actually help
Speaker 1: your fiscal sustainability. And then if it doesn't have a
Speaker 1: multiplier more than one, you still might want to do
Speaker 1: it because you care about education, you care about protecting
Speaker 1: a family and need and the like. Don't put a
Speaker 1: budget constraint on it, but do ask real questions about
Speaker 1: whether what you're spending is useful, is likely to help
Speaker 1: the economy or not. When I spoke to Larry Summers,
Speaker 1: it's now probably almost six weeks ago. He said, Listen,
Speaker 1: nobody should get the idea that we're passing a stimulus.
Speaker 1: There's no stimulus here. There's just life support and people
Speaker 1: need to stay alive, and so you need to spend
Speaker 1: on life support. That's a little different than the idea
Speaker 1: that you know this will have a multiplier of one. Yeah,
Speaker 1: So there is some evidence in the last several weeks
Speaker 1: that the days that people got checks, for example, from
Speaker 1: the economic stimulus payments, spending went up at certain big
Speaker 1: box stores and the like. I think that will be
Speaker 1: even more true going forward when you're more able to
Speaker 1: spend money. So, to some degree economists is the nerdy
Speaker 1: term consumption smoothing. You don't want people to have to
Speaker 1: radically reduce their consumption and then radically raise it again.
Speaker 1: You want them to be able to smooth through shocks.
Speaker 1: If you're helping people smooth their consumption, you're helping them
Speaker 1: avoid unnaturally large reduction in it, and you're actually helping
Speaker 1: the economy relative to what would happen otherwise. So I
Speaker 1: do think unemployment insurance, nutritional assistance money for states and localities.
Speaker 1: The evidence on all of those is that they do
Speaker 1: add more than a dollar to GDP per dollar you spend. Now.
Speaker 1: Does a dollar to GDP get added six months from
Speaker 1: now rather than now? You know, that's certainly possible. I
Speaker 1: don't know exactly what the timing is. When does the
Speaker 1: bill come do for all of this? I mean, the
Speaker 1: theory behind a multiplier of one or a greater is
Speaker 1: that at some point the government, if it's the lender
Speaker 1: or the grant will get its money back. And if
Speaker 1: it's debt, I suppose it would ask for its debts
Speaker 1: to be repaid. If it's in the form of grants,
Speaker 1: there would be more GDP, so we could get tax
Speaker 1: money and then the government could pay itself back via
Speaker 1: the taxes. First of all, am I getting that process right?
Speaker 1: And second of all, is there any time frame on
Speaker 1: that that's logical or reasonable or do we just say, well,
Speaker 1: just wait until we can afford it. Yeah. There's two
Speaker 1: freeish lunch aspects to this, and both of these free
Speaker 1: ish lunches have constraints on them. The first is that
Speaker 1: for fiscal sustainability, what you care about is the debt
Speaker 1: relative to the size of the economy, and so it's
Speaker 1: debt divided by GDP. If you can do something that
Speaker 1: raises debt by less than it raises GDP, the denominator
Speaker 1: goes up more than the numerator and the debt to
Speaker 1: GDP ratio goes down. We're not in that situation now,
Speaker 1: though it appears, oh, debt is certainly rising. The question
Speaker 1: is would debt rise even more if we didn't do
Speaker 1: some of the fiscal measures we were doing. For some
Speaker 1: of the fiscal measures we're doing, especially some of the
Speaker 1: ones that are more effective, I think they're probably in that.
Speaker 1: The second is what is your interest rate after accounting
Speaker 1: for inflation. That's called the real interest rate, And right
Speaker 1: now the real interest rate is negative, which is to say,
Speaker 1: if the federal government borrows one hundred dollars today, a
Speaker 1: decade from now, it has to pay back about ninety
Speaker 1: five dollars adjusted for inflations worth of stuff. So the
Speaker 1: question you want to ask yourself in that environment is
Speaker 1: what would you rather have one hundred dollars today or
Speaker 1: ninety five dollars a decade from now. Most people would
Speaker 1: answer a hundred dollars today, especially given all the needs
Speaker 1: we have now, there's a limit on those. If you
Speaker 1: do things that are ineffective, you don't get that. You
Speaker 1: could drive up interest rates if you try to do
Speaker 1: too much, if you try to expand the economy beyond
Speaker 1: where it wants to be, you could get large and
Speaker 1: increasing amounts of inflation. So none of that is a
Speaker 1: blank and unlimited check, but for well designed policies within
Speaker 1: the regime, wherein there is a freish lunch aspect to
Speaker 1: what's being done with respect of the second freish lunch.
Speaker 1: The negative interest rate is that based on a projection
Speaker 1: of what inflation is likely to be over the next
Speaker 1: ten years, and if the rates were to change, if
Speaker 1: there was to be deflation or just much much lower
Speaker 1: or minimal inflation, would that turn out not to be
Speaker 1: the case, that lunch would not have been as freeish
Speaker 1: as it appears. So the government mostly issues what are
Speaker 1: called nominal bonds, which is they have an interest rate
Speaker 1: in the interest rate is just the way we normally
Speaker 1: understand the interest rate. Some of what the government issues
Speaker 1: are inflation index bonds, and they pay an interest rate,
Speaker 1: which is, will pay you the inflation rate plus blank
Speaker 1: or will play you the inflation rate minus blank. Right now,
Speaker 1: the interest rate on those inflation index bonds is negative.
Speaker 1: So quite literally, the government, no matter what happens to inflation,
Speaker 1: if it wanted to issue more of those bonds, and
Speaker 1: you know, might change the interest rate on them. If
Speaker 1: you tried to issue too many, but at least on
Speaker 1: those bonds right now, you could lock in negative interest rate.
Speaker 1: But I don't want to push this too far. You're
Speaker 1: certainly right, you know, interest rates could change in the future.
Speaker 1: You know the FED could stop trying to keep them low, etc.
Speaker 1: I've spent thirty five years watching every single interest rate
Speaker 1: forecast anyone has made has been too high, and interest
Speaker 1: rates have come in below it rather than above it.
Speaker 1: But that doesn't you know, just because my whole adult
Speaker 1: life has been like that doesn't mean it's the timeless
Speaker 1: truth that we should count on. How long does this
Speaker 1: large debt overhang have to last and how big does
Speaker 1: it have to be? The certain economic theory that says
Speaker 1: it's actually the standard one that when you get shock hits,
Speaker 1: your debt's going to be higher as a result of it,
Speaker 1: and you actually it's okay if you lock in at
Speaker 1: that new higher level of debt. In this case, I
Speaker 1: think it's completely plausible that a decade from now the
Speaker 1: United States would have a debt to GDP ratio of
Speaker 1: one hundred and fifty percent, which is higher than we've
Speaker 1: ever had in our history, but something that the UK
Speaker 1: had for centuries and centuries and centuries while it was
Speaker 1: the world's pre eminent power, And so one hundred and
Speaker 1: fifty percent of GDP may be okay, it may be
Speaker 1: something that we're able to get used to. It would
Speaker 1: depend on interest rates staying below the growth rate to
Speaker 1: make it at all feasible to stay at that level,
Speaker 1: there'd still need to be some adjustment, some additional revenue
Speaker 1: or spending cuts to even stabilize add one hundred and
Speaker 1: fifty percent of GDP. But I think we're going to
Speaker 1: find ourselves a decade from now that's going to probably
Speaker 1: look perfectly reasonable, when if you'd told people even a
Speaker 1: year ago, they would have thought it was nuts. The
Speaker 1: British Empire example, I have to say it makes me
Speaker 1: a bit nervous because it was at least the theory
Speaker 1: of the British Empire during this period of huge debt
Speaker 1: that the reason they were borrowing that money is they
Speaker 1: were in the process of conquering the known world, which
Speaker 1: they were in fact doing. You know, that was exactly
Speaker 1: the period in which the British Empire came to be
Speaker 1: the empire over which the sun didn't set, and the
Speaker 1: British were very explicit that the goal of their empire
Speaker 1: was to enhance their commercial opportunities and success. They took
Speaker 1: over a country or in one case, a whole subcontinent
Speaker 1: with a specific goal of exploiting it for its resources.
Speaker 1: In the case of India textiles. Roughly speaking, in the
Speaker 1: case of Africa, they didn't make it over the whole continent,
Speaker 1: but minerals they saw that debt as an engine of growth.
Speaker 1: I'm wondering if you think there's anything even slightly comparable
Speaker 1: for the US in this period. I mean, we wouldn't have,
Speaker 1: let's say, a business plan for very substantial growth that
Speaker 1: would justify borrowing that money. In our case, it seems
Speaker 1: more like we're borrowing that money now to overcome with
Speaker 1: the shock. Yeah, so first of all, lesson learned. Never
Speaker 1: bring up history with somebody that knows history. You know,
Speaker 1: the UK also had debt. Britain had debt, you know,
Speaker 1: often two fifty three fifty percent of GDP over that
Speaker 1: period of time, So this would even be a decent
Speaker 1: amount below it. But I certainly agree with you that
Speaker 1: adding to debt is much much more appealing when you're
Speaker 1: adding to debt in order to help economic growth than
Speaker 1: when you're adding to debt to, for example, give tax
Speaker 1: cuts to high income households so they can consume more
Speaker 1: in the present. We'll be back in a moment. I
Speaker 1: want to turn out to a topic which when I
Speaker 1: bring up with our economics colleagues at Harvard and MIT,
Speaker 1: people get red in the face, And I want to
Speaker 1: bring it up in a way so that nobody has
Speaker 1: to get red in the face. But I think it's
Speaker 1: important because it's in the public discourse now, and that's
Speaker 1: MMT or modern monetary theory now. As recently as a
Speaker 1: year or two ago, if it even came up in conversation,
Speaker 1: my anecdotal report is that people just rolled their eyes
Speaker 1: and said, this is a crackpot theory, no reason to
Speaker 1: worry about it too much. And yet now out in
Speaker 1: the public discourse there has become a kind of trope
Speaker 1: of people saying, oh, well, we're all MMT people now,
Speaker 1: we all think that the government can always print money
Speaker 1: to get itself out of any deck crisis that it's in.
Speaker 1: And that's a wildly oversimplified account of what the theory is.
Speaker 1: And even just saying that again makes our economist colleagues
Speaker 1: go a little crazy. So I wonder if you would
Speaker 1: do the flying for us. It's hard to ask somebody
Speaker 1: to summarize of you that he may think is completely wrong,
Speaker 1: but would you at least give us a caricatured version
Speaker 1: of what people mean when they say, oh, we can
Speaker 1: print money to get out of this, and would you
Speaker 1: give us some one oh one account of why that's wrong?
Speaker 1: If indeed it is sure, and I should say that,
Speaker 1: I personally think MMT is like a stopped clock that's
Speaker 1: right twice a day at this moment. It's roughly right.
Speaker 1: Lots of other theories would have gotten to us to
Speaker 1: the same place. But that's broadly speaking, my take. So
Speaker 1: what's the theory that's right twise a day? Number one?
Speaker 1: MMT says that rather than have the FED be the
Speaker 1: first line of defense in business cycles, the treasury should
Speaker 1: be the first line of defense in business cycles. That's
Speaker 1: one thing that MMT says. So if the treasury is
Speaker 1: the first line of defense, what should the treasury do
Speaker 1: in a business cycle downturn? The treasury should cut taxes
Speaker 1: in a downturn. The Treasury should increase spending in a downturn,
Speaker 1: and the treasury should keep doing that until it sees
Speaker 1: inflation rising. And then if inflation is rising where it
Speaker 1: above where it wants to go, then you stop that
Speaker 1: process and maybe even reverse it a little bit by
Speaker 1: raising taxes and cutting spending. So, you know, the thing
Speaker 1: we normally think of the FED raising and lowering interest
Speaker 1: rates in order to keep the economy on track. MMT
Speaker 1: has that primarily happening with the Treasury and the Congress
Speaker 1: raising and lowering taxes and spending. A second thing in
Speaker 1: MMT is the idea that there's no constraint on what
Speaker 1: the government does in terms of people being unwilling to
Speaker 1: lend to the government, because ultimately the central bank can
Speaker 1: always print the money if it wants to, and so
Speaker 1: you don't need to worry about will anyone lend. You
Speaker 1: don't need to worry about will government spending drive up
Speaker 1: interest rates? All the traditional concerns. Instead, the only thing
Speaker 1: you should worry about is that if you spend too much,
Speaker 1: you'll get inflation. That part is the part that sounds
Speaker 1: very counterintuitive to sort of the very simplified idea that
Speaker 1: when governments get into trouble because they owe too much
Speaker 1: money and try to print money to get out of
Speaker 1: it and pay their debts, that that then drives a
Speaker 1: cycle of hyperinflation that gives you Argentina or Germany between
Speaker 1: the wars. So their MMT is denying that intuition, right.
Speaker 1: I think one of the problems with MMT is it
Speaker 1: presents itself as a timeless truth, and a lot of
Speaker 1: the people that support it, you know, will point to
Speaker 1: all sorts of identities and equations and they're like the
Speaker 1: law of gravity, they should always hold. And the fact
Speaker 1: is they hold in certain countries at certain times. So
Speaker 1: if Argentina tried to do MMT, the results would be abysmal.
Speaker 1: You know, at various points in history when countries have
Speaker 1: tried to do it, the results have been abysmal. Maybe
Speaker 1: the United States can do it right now. But then
Speaker 1: that begs a question, you know, why is it In
Speaker 1: some circumstances you can borrow a lot. In other circumstances,
Speaker 1: you can't borrow a lot. And MMT doesn't have a
Speaker 1: whole lot to say an answer to that question, because
Speaker 1: it presents itself as a timeless truth. So you're coming
Speaker 1: to the third component. Yeah, And the third component of
Speaker 1: MMT is generally a belief that the economy is persistently,
Speaker 1: for very long periods of time, operating below its capacity,
Speaker 1: with excess slack, with excess unemployment. And so it's not
Speaker 1: just when you're in a recession or coming out of
Speaker 1: it that you can do fiscal stimulus, extra tax cuts,
Speaker 1: extra spending increases. But if you're planning a health system,
Speaker 1: you know, single pay or whatever it is for the
Speaker 1: next twenty years, you can even plan ten or fifteen
Speaker 1: years from now to do definite it's spending, because ten
Speaker 1: or fifteen years from now we're probably going to need
Speaker 1: fiscal stimulus. Also because the unemployment rate is almost always
Speaker 1: too high. Is there a single identifiable analytic error here,
Speaker 1: or is it a series of claims that aren't empirically
Speaker 1: born out. Is this the kind of thing where one
Speaker 1: can say MMT is wrong because and is the because
Speaker 1: in the nature of an analysis of the world, or
Speaker 1: is it in the nature of an analysis of economic principles?
Speaker 1: I mean, MMT shifts around a lot, so it's a
Speaker 1: little bit hard to pin down. Is not clear what
Speaker 1: evidence you could give to an mm tier that would
Speaker 1: cause her him to change their mind. And you know,
Speaker 1: just to go back to the three things I said,
Speaker 1: who should take the lead in fighting recessions? Think for
Speaker 1: a normal garden variety recession, the Fed. Actually it's okay
Speaker 1: for the central Bank to take the lead raising and
Speaker 1: lowering interest rates. Right now, interest rates are at zero,
Speaker 1: so you do need the Treasury and the Congress. So
Speaker 1: MMT is right for the moment, that doesn't mean it's
Speaker 1: always right. You know, we've already talked. MMT says no
Speaker 1: constraint on borrowing. Argentina faces a lot of constraints on borrowing,
Speaker 1: so that's not a timeless truth. That is something situational.
Speaker 1: And finally, the claim that we're below full employment, that's
Speaker 1: certainly true right now. I think that's going to be
Speaker 1: true to you from now. If you're making a health
Speaker 1: plan that's going to last for the next fifty years,
Speaker 1: I think it would be really rash to assume that's
Speaker 1: going to be the case for the next fifty years,
Speaker 1: since so you don't ever need to pay for that
Speaker 1: health plan. On the constraints on borrowing, which is also
Speaker 1: thematically where we began, I'm trying to understand from a
Speaker 1: conceptual standpoint, how we should think about constraints on borrowing.
Speaker 1: I mean, the ordinary intuition that people have is you
Speaker 1: can borrow as much money as people will rationally lend
Speaker 1: you if they have enough information to make the prediction
Speaker 1: that you'll pay it back. The intuition is that borrowing
Speaker 1: is not at all about a free lunch, because at
Speaker 1: some point it must be paid back under the terms
Speaker 1: of the lunch. You can get a really good deal,
Speaker 1: which makes it, as you said, a free ISSH lunch,
Speaker 1: but it's not a free lunch in the sense that
Speaker 1: something must be paid back, and that thing which must
Speaker 1: be paid back is essentially that which has been agreed
Speaker 1: to paid back upfront. In your view, is there any
Speaker 1: escape from that idea or is that closer to a
Speaker 1: law of gravity in the context of borrowing. I think
Speaker 1: that's broadly right, I tend to think. And this is
Speaker 1: not based on incredibly strong evidence. This is based on
Speaker 1: sort of common sense, and that's a little bit worrying
Speaker 1: to have to rely on that. It also depends on
Speaker 1: the circumstances. If every one of the rich countries in
Speaker 1: the world is borrowing more, then you know, people aren't
Speaker 1: going to say the United States is irresponsible. If the
Speaker 1: United States is the only country in the world doing it,
Speaker 1: they'll say, you know what, we don't want to buy
Speaker 1: US debt. We'd rather buy European debt, We'd rather buy
Speaker 1: Japanese debt. So there's a little bit of a strength
Speaker 1: in numbers, and this is what this is a constraint
Speaker 1: on individual countries. We actually do see an individual country
Speaker 1: in Europe has a harder time borrowing to get out
Speaker 1: of a downturn because people can shift away from lending
Speaker 1: to that country to another one. You see the same
Speaker 1: thing with US States. So it's a little bit of
Speaker 1: a safety in numbers. There's a little bit of you know,
Speaker 1: if it looks like you're borrowing because you needed to
Speaker 1: because something bad happen to you, or you needed to
Speaker 1: do someth think about something bad, that that's okay. Whereas
Speaker 1: if the United States had woken up there was no
Speaker 1: pandemic and we just went nuts and decided we're going
Speaker 1: to increase our debt two hundred and fifty percent of
Speaker 1: GDP to build a big monument to the leader or
Speaker 1: something like that, financial markets might have been more punishing
Speaker 1: of that type of debt and then finally a trajectory.
Speaker 1: If they knew we were stabilizing in one hundred and
Speaker 1: fifty percent of GDP for debt, maybe people would have
Speaker 1: patience with that. If they could see no end in
Speaker 1: sight and it was going to two hundred, three hundred,
Speaker 1: five hundred one thousand percent of GDP, maybe they wouldn't
Speaker 1: like it. So I do think borrowing is who's willing
Speaker 1: to lend to you. Who's willing to lend to you
Speaker 1: depends on circumstances. Are you in good company, are you
Speaker 1: doing it for good reason? And do you have some
Speaker 1: plausible exit strategy from all of it. The reason I
Speaker 1: asked this, even though maybe it sounds two elementary, is
Speaker 1: that it's sort of the back of my mind. I
Speaker 1: always have this desire not to be what the ordinary
Speaker 1: non economist would probably have been. When the world gradually
Speaker 1: went off the gold standard. The ordinary person, the non
Speaker 1: economists intuition was, well, this is just necessary. There has
Speaker 1: to be something of value, and unless everything is in
Speaker 1: reference to that thing of value, the whole system will
Speaker 1: break down. And of course that turned out just not
Speaker 1: to be true for me. One of the takeaways from
Speaker 1: that historical takeaway is the ordinary non economist should not
Speaker 1: completely trust intuitions about questions like this, which is exactly
Speaker 1: why I'm asking you about it. Is there on the
Speaker 1: horizon a similar kind of intuitive error that ordinary people
Speaker 1: are making about the economy, you know, similar to the
Speaker 1: old intuition that of course there had to be a
Speaker 1: gold standard or a sterling standard. Just the notion that
Speaker 1: when times are tough, you should tighten the belt. It's
Speaker 1: just a very very powerful one. President Obama used that
Speaker 1: line a few times in speeches in you know, maybe
Speaker 1: it was two thousand and nine or two ten. He
Speaker 1: understood these issues incredibly well, and you know, was doing
Speaker 1: or trying to do all of the right things. And
Speaker 1: were you there in the Council of Economic Advisors waving
Speaker 1: your arms in the air and saying, don't say that.
Speaker 1: So some of us were not thrilled with that vocabulary.
Speaker 1: And it just shows you how powerful the pull of
Speaker 1: the family. Analogies don't apply at the level of the government,
Speaker 1: because what the government is trying to do is take
Speaker 1: a set of people that aren't working instead of factories
Speaker 1: that aren't utilized, and reconnect them. And with that you
Speaker 1: go back to the Freish lunch type of stuff we
Speaker 1: were talking about before. That doesn't have an exact analog
Speaker 1: in the case of a household. Among mainstream economists or
Speaker 1: people you would consider mainstream economists, is there right now
Speaker 1: a very active debate or disagreement that you see about
Speaker 1: what should happen now and over the next several years,
Speaker 1: or do you think we're in a moment of relative consensus,
Speaker 1: And I'm after you answer that if you would compare
Speaker 1: that to the way things looked after the two thousand
Speaker 1: and eight crisis. So I talked to people who had
Speaker 1: the job I had under President Obama, under President Bush,
Speaker 1: and they have pretty similar views in terms of the
Speaker 1: need to provide large scale relief to families, the importance
Speaker 1: of relief for state and local governments, the need for
Speaker 1: large amounts of liquidity for businesses. My perception is there's
Speaker 1: more consensus now, and in part that's because it's just
Speaker 1: totally unambiguous that the economy shut down. You know, there's
Speaker 1: no debate over whether, you know, is growth going to
Speaker 1: be negative? Is it not going to be negative. There's
Speaker 1: no debate that the Fed by itself can't handle the problem.
Speaker 1: The federal Reserve is begging for more tax cuts or
Speaker 1: government spending increases. And you know, and insofar as there
Speaker 1: debates among economy now, they just go in lots of
Speaker 1: different directions. They're economists on the far left and the
Speaker 1: further right that like crants to businesses as a way
Speaker 1: to get businesses through. There's other economists that really don't
Speaker 1: so some of the debates are more scrambled ideologically than
Speaker 1: they have been in the past. As well. The grants
Speaker 1: to businesses debate is not breaking down along standard ideological lines.
Speaker 1: It's not Democrats say give it right to the workers
Speaker 1: and Republicans say give it to the businesses, or it
Speaker 1: doesn't roughly follow those lines. Bernie Sanders has co sponsored
Speaker 1: legislation in the Senate that, in its original version, would
Speaker 1: have given a lot of money to companies like Disney,
Speaker 1: not just to pay their furloughed employees, but to cover
Speaker 1: some of their operating expenses as well. So it is
Speaker 1: ideologically scrambled in a way that's reassuring. I mean, I
Speaker 1: suppose it's always challenging to the layman when the experts
Speaker 1: are disagreeing, but it's nice when they're not disagreeing along
Speaker 1: relatively familiar or expected partisan lines. That makes it look
Speaker 1: like it's not being driven by interest politics, but by
Speaker 1: genuine intellectual disagreement. I think there's a certain amount about that.
Speaker 1: And I think you know, this, in some ways is
Speaker 1: a very novel type of economic crisis, and there's some
Speaker 1: tools that are well trodden and well understood, and as
Speaker 1: others that people are trying to event to deal with
Speaker 1: this novel situation, and you know, they hate to say it,
Speaker 1: but it's sort of interesting at a time like this,
Speaker 1: And unfortunately, we'll only have a better idea when, you know,
Speaker 1: people write the wonderful papers about everything that was done
Speaker 1: a decade from now. What am I not asking you
Speaker 1: that I should be asking you. We've seen a larger
Speaker 1: fiscal response in the United States than we've seen in Europe.
Speaker 1: We've seen a very large one in Europe, but we've
Speaker 1: seen a very very large one in the United States.
Speaker 1: The response in the United States has been larger than
Speaker 1: we've ever done in our past. It's larger than what
Speaker 1: other countries are doing now. We've also seen a smaller
Speaker 1: reduction in economic activity in the United States than in Europe.
Speaker 1: Partly that's that we didn't do as effective a lockdown
Speaker 1: and we may end up getting bitten by that later
Speaker 1: on if there's too much virus out there. But in
Speaker 1: part the evidence is and we sort of hate to
Speaker 1: ever look at anything positive or good that we did.
Speaker 1: We must like to lament and talk about everything wrong
Speaker 1: and change. To date, we have done a decent job
Speaker 1: protecting American households from a fall and disposable personal income.
Speaker 1: Too many have fallen through the cracks. It's very, very
Speaker 1: far from perfect, but compared to almost any recession in
Speaker 1: the past, households have been better protected from this one,
Speaker 1: even though it's a much deeper recession, and have been
Speaker 1: better protected even than households in Europe have been. And
Speaker 1: that's a good thing. We should pause for a second
Speaker 1: to celebrate that success, but only for a second because
Speaker 1: all of that ends at the end of July, and
Speaker 1: so a lot more is needed to continue with that success.
Speaker 1: Thank you very much for that very cogent analysis. I
Speaker 1: can see why they you're in charge of teaching a
Speaker 1: thousand students economics every year. You're a spectacularly a great explainer.
Speaker 1: Thank you very much. Maybe because Jason Furman has such
Speaker 1: a calming voice, when you listen to him, you start
Speaker 1: to think that very extreme things are actually going to
Speaker 1: be all right. I certainly hope that that turns out
Speaker 1: to be the case. Listening to Jason, I was very
Speaker 1: struck by his suggestion that any amount of money that
Speaker 1: we borrow is rational provided we can make a credible
Speaker 1: prediction that borrowing that money will lead to what he
Speaker 1: called a multiplier of one or close to one, that is,
Speaker 1: the opportunity eventually to pay it back by virtue of
Speaker 1: the effects of the borrowing. That sounds sensible logically, but
Speaker 1: of course the devil is in the details, because it
Speaker 1: raises the question of just whether we can get our
Speaker 1: money back over time. Jason emphasized that when it comes
Speaker 1: to borrowing, there isn't actually such a thing as a
Speaker 1: true free lunch, because the money will have to be
Speaker 1: paid back eventually. But as he said, given that it
Speaker 1: is possible for the government right now to borrow money
Speaker 1: at negative interest rates under current conditions, even the trillions
Speaker 1: of dollars of borrowing and the potentially trillions of dollars
Speaker 1: of debt that we're taking on may actually be affordable
Speaker 1: and capable of being paid back in the future. With
Speaker 1: respect to MMT, Jason was pretty clear that he thinks
Speaker 1: it's just a clock that's right twice a day, which
Speaker 1: is to say that MMT doesn't express correct principles of
Speaker 1: economics that are generalizable, but rather might, under certain circumstances,
Speaker 1: describe events that are the circumstances that exist now. Ultimately,
Speaker 1: the consensus that currently exists among mainstream economists suggest that
Speaker 1: we're going to go on borrowing, possibly a lot more,
Speaker 1: and that more of that will have to take place
Speaker 1: in July when the current bailout money begins to run out.
Speaker 1: We will continue to follow the question of borrowing and
Speaker 1: our economy and its relationship to employment going forward. I
Speaker 1: promise to come back to you soon with a new analysis.
Speaker 1: Until the next time we speak, be careful, be safe,
Speaker 1: and be well. Deep background is brought to you by
Speaker 1: Pushkin Industries. Our producer is Lydia gene Cott, with research
Speaker 1: help from zooe Win and mastering by Jason Gambrell and
Speaker 1: Martin Gonzalez. Our showrunner is Sophie McKibben. Our theme music
Speaker 1: is composed by Luis Garat special thanks to the Pushkin Brass,
Speaker 1: Malcolm Gladwell, Jacob Weisberg, and Mia Loebell. I'm Noah Feldman.
Speaker 1: I also write a regular column for Bloomberg Opinion, which
Speaker 1: you can find at Bloomberg dot com slash Feldman. To
Speaker 1: discover Bloomberg's original slate of podcasts, go to Bloomberg dot
Speaker 1: com slash Podcasts. And one last thing. I just wrote
Speaker 1: a book called The Arab Winter, a tragedy I would
Speaker 1: be delighted if you checked it out. You can always
Speaker 1: let me know what you think on Twitter about this episode,
Speaker 1: or the book, or anything else. My handle is Noah R. Feldman.
Speaker 1: This is deep background. I'd like to s