Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Joe Wisn't Thal and I'm Tracy Alloway. Tracy, Obviously,
Speaker 1: as we talked about all the time, one of the
Speaker 1: most extraordinary moments in the economy that I think we've
Speaker 1: ever seen so many different debates. Obviously, inflation is elevated,
Speaker 1: the labor market is booming, growth is booming. The dispersion
Speaker 1: of views about how good things are, how bad things are,
Speaker 1: what to be done policy wise, I don't think I've
Speaker 1: ever seen it as wide as it is right now. No,
Speaker 1: it's funny. We talked about how you should never call
Speaker 1: a turning point um in the broader economy, or at
Speaker 1: least we used to, but it does actually feel like
Speaker 1: we entered a new environment over the past year or so.
Speaker 1: And of course the big questions here are to what
Speaker 1: agree our supply chain constraints coinciding with booming demand and
Speaker 1: and creating the inflationary pressures that we've seen recently. Well,
Speaker 1: we have a great guest to talk about what's going on,
Speaker 1: and of course the policy responds, and I want to
Speaker 1: jump right into it. We're gonna be speaking with Brian Deese.
Speaker 1: He is the director of the National Economic Council serving
Speaker 1: President Joe Biden is a top advisor on policy on
Speaker 1: getting things done. So, Briandes, thank you so much for
Speaker 1: coming on odd lots. Thank you for having me. So
Speaker 1: let me just start with like the simple first question,
Speaker 1: which is do you and or in the White House
Speaker 1: have a you on what's driving this elevated inflation. Well,
Speaker 1: I think in order to answer that question, we have
Speaker 1: to step back and look at their trajectory of the
Speaker 1: economic recovery to date, and as you noted, we are
Speaker 1: seeing a lot of historical first first in many years decade.
Speaker 1: Start of the macro side, we're seeing strongest growth in
Speaker 1: forty years. On the labor market side, we're seeing we
Speaker 1: saw in labor market outcomes that are the strongest on record,
Speaker 1: and in that context we're seeing it's in it's in
Speaker 1: that context that I think we have to understand the
Speaker 1: elevated price pressures that we have seen. So to to
Speaker 1: get to your question, I think that if you look
Speaker 1: at where we are in the economy, by most measures,
Speaker 1: the U. S economy is not running beyond its potential
Speaker 1: or capacity. If you look at you know, sort of
Speaker 1: the projection from pre pandemic levels. We're getting close to
Speaker 1: potential in a number of places, and we have moved
Speaker 1: back to that trajectory faster than most folks participated. What
Speaker 1: you have seen that particularly, I think breaking down the
Speaker 1: price story is a historic compositional impact on the demand side.
Speaker 1: So you know the shift the composition impact of significantly
Speaker 1: elevated demand for good, A lot of that shifted from services,
Speaker 1: and then a supply shock on the supply side, both
Speaker 1: to labor supply and also to the broader supply chain
Speaker 1: as well. And so you know, when we think about
Speaker 1: the drivers and the inputs into where elevated prices are,
Speaker 1: those are the two places we principally focus on, which
Speaker 1: is the compositional side on demand, and so that leads
Speaker 1: us to spend a lot of time thinking about looking
Speaker 1: at is as as everybody is these days, the questions
Speaker 1: of that, how that normalizes across time, and whether it's
Speaker 1: normalizing and trying to assess that um and then on
Speaker 1: the supply side, what we can be doing sector by
Speaker 1: sector and also in the in the aggregate to try
Speaker 1: to address those supply side issues, some of which operate
Speaker 1: very immediate, short term, near term and you guys spent
Speaker 1: a lot of time focused on issues like that, some
Speaker 1: of which are more medium and long term, but sooner
Speaker 1: we start to address them, like building semiconductor capacity in
Speaker 1: the US, the better positions we will be. So that's
Speaker 1: how we understand the dynamic. But in a more capstone way,
Speaker 1: we find ourselves in a place where what's unique about
Speaker 1: the United States right now is unlike almost any other
Speaker 1: G seven country, any other industrialized country, we are facing
Speaker 1: the challenges of elevated prices from a position of historic
Speaker 1: economic strength. So whether it's in GDP, or it's in
Speaker 1: labor market outcomes, or it's in real income outcomes for
Speaker 1: the economy, we are stronger. We're in a stronger position
Speaker 1: than almost ever any industrialized country to address elevated price
Speaker 1: issues that every country is addressed. So you mentioned going
Speaker 1: sector bi sector there, and of course one of the
Speaker 1: biggest components of inflation has to be higher energy costs,
Speaker 1: and we've seen oil prices shoot up recently. At the
Speaker 1: same time, despite those price increases, we haven't really seen
Speaker 1: much of a reaction from US shale in terms of
Speaker 1: boosting capacity. What's the White House's impression of what's going
Speaker 1: on in the energy space right now, Why won't producers
Speaker 1: actually increase production? And is there anything you can do
Speaker 1: to encourage them? And I guess also, how would you
Speaker 1: square that with the administration's clean energy goals? Well, I
Speaker 1: think in terms of the in terms of energy markets
Speaker 1: and impacts on consumers in the US, one piece of
Speaker 1: that is is obviously natural gas and home heating and
Speaker 1: otherwise where we've actually seen a bit of moderation and
Speaker 1: a reduction and projected cost impacts over the course of
Speaker 1: this winter. Some of that has to do with the
Speaker 1: market development, Some of that has to do with the
Speaker 1: weather um and being a bit moremer than other I expected.
Speaker 1: On the oil market side, I think this is where
Speaker 1: you are you're going. I guess I'd say a couple
Speaker 1: of things. Number One, we are now seeing and if
Speaker 1: you're following recounts, you're seeing significant uptick over the course
Speaker 1: of even the last couple of weeks, and most forward
Speaker 1: projections suggests a significant ramp up over the course of
Speaker 1: the first half of two in terms of US domestic production.
Speaker 1: I will leave to oil market analysts to really unpack that,
Speaker 1: but certainly from what we hear and what we see
Speaker 1: that reflects a market reaction from a market that pulled
Speaker 1: back in the face of getting historically chopped down during
Speaker 1: the pandemic, and a lot of pressure on capital discipline
Speaker 1: in that sector, and also a reflection of current prices
Speaker 1: leading to bring production back online. So there's a question
Speaker 1: of this sort of timing of that, but I think
Speaker 1: that the ramps certainly over the course of the last
Speaker 1: several weeks here is you're seeing that come online. But
Speaker 1: what's driving the price of oil is global developments, a
Speaker 1: commodity set on a global market. You know, we we
Speaker 1: have we have a market that doesn't clear competitively to
Speaker 1: have supply reflect demand. And one thing we've seen over
Speaker 1: of course of this the last half of is that
Speaker 1: the supply of oil on the global market was not
Speaker 1: being allowed to meet the strong recovery in demand globally,
Speaker 1: including in the United States. UM. And you know that
Speaker 1: the reason for that is because supply of oil globally
Speaker 1: is controlled and modulated by by OPEC. And so that's
Speaker 1: why the President has invested the time and the energy
Speaker 1: and our our entire administration and working diplomatically with oil
Speaker 1: producing and oil consuming countries to try to address those issues.
Speaker 1: And we obviously have you know, really pressing challenges that
Speaker 1: are affecting risk sentiment and the risk premium and global
Speaker 1: oil markets now around Russia, and it's provocative actions with
Speaker 1: respect to Ukraine. So all of those things are weighing.
Speaker 1: I think in terms of your final point, I think
Speaker 1: that what's going on in the US market right now
Speaker 1: is is the market responding to demand. And I bet
Speaker 1: the President's vision for a long term clean energy future
Speaker 1: is really the long term answer to this, to this
Speaker 1: issue that that gas prices are higher now than they
Speaker 1: than they should be, We're gonna work to try to
Speaker 1: do everything we can to try to bring them down.
Speaker 1: We recognize that, you know, in practice, that hits typical families,
Speaker 1: It hits their budgets, It makes people uncertain and uncomfortable
Speaker 1: about the economic environment. We're gonna do what we can
Speaker 1: in the very immediate term to try to address that.
Speaker 1: Over the long term, the right strategy is to put
Speaker 1: the United States in the leadership position of driving towards
Speaker 1: zero carbon, clean energy technologies and be the global innovation
Speaker 1: hub for innovation and exports of those technologies and of
Speaker 1: those capabilities. And whether that's on the the you know,
Speaker 1: the transportation side, which is driving most of oil consumption,
Speaker 1: around electric vehicles and the infanture to facilitate the transition
Speaker 1: to electric vehicles, or whether it's on the power sector
Speaker 1: side and driving the innovation around not only wind and solar,
Speaker 1: but carbon cap true sequestration, hydrogen other answers. In this context,
Speaker 1: the President's clean energy strategy is grounded in the idea
Speaker 1: that we can and must have a an industrial strategy
Speaker 1: that positions the United States as the locust of innovation
Speaker 1: on that front. And I think that that is a
Speaker 1: long term strategy where we need long term incentives to
Speaker 1: drive that transition. And it's absolutely the right thing to
Speaker 1: do and and and not inconsistent with an approach that
Speaker 1: also is looking at how we can take immediate measures
Speaker 1: to make sure supply and demand are aligning in the
Speaker 1: market today. Let's talk about supply chains. Is basically a
Speaker 1: year ago that the White House issued Executive Order on
Speaker 1: America's supply chains. Ay, are there speci civic things you
Speaker 1: can point to that have been done in the last
Speaker 1: year where you could say, yes, this is working better
Speaker 1: than it was prior to the EO, and be what
Speaker 1: can still meaningfully move the dial as people think about
Speaker 1: the economy, I guess at the shortened medium term. Yeah,
Speaker 1: So we are releasing, on the occasion of the one
Speaker 1: year anniversary of the President's executive order, a raft of
Speaker 1: longer term supply chain strategies across the federal government. This
Speaker 1: effort and the reason why, if we step back, the
Speaker 1: reason why the President prioritized signing an executive order on
Speaker 1: supply chain resilience a year ago was a recognition that
Speaker 1: the issues that the pandemic had exposed and highlighted were
Speaker 1: fundamental to national and economic security. And we're not going
Speaker 1: to be solved overnight, and and we're going to be
Speaker 1: through a different approach at the executive branch in federal
Speaker 1: level to this over time. So a year later, I
Speaker 1: would note a couple of things. This year has been
Speaker 1: has been a story of progression and adaptation. First in
Speaker 1: responding to real time, evolving supply chain challenges that reflect
Speaker 1: the unique and historic nature of this pandemic affected recovery.
Speaker 1: That's a lot about the work that we have done
Speaker 1: working with the logistics and transportation logistics supply chain to
Speaker 1: try to unstick bottlenecks at ports and freights and others.
Speaker 1: You guys have covered all of those issues. But that's
Speaker 1: one big piece of where we have learned a lot.
Speaker 1: We have made a lot of progress to your point
Speaker 1: about you know, we have, we can we can see
Speaker 1: that progress tangibly. There's a lot of different ways to
Speaker 1: think about that, but the way that I most think
Speaker 1: about that is how far have we been able to
Speaker 1: bring that dwell time down? Which your listeners are familiar with,
Speaker 1: but to those who aren't, what share of containers are
Speaker 1: sitting on ports on the dock for more than one days?
Speaker 1: That dwell time since we launched the port actually and
Speaker 1: efforts about five months ago that that twal times come down.
Speaker 1: So that's a sort of concrete manifestation significant increase in
Speaker 1: fluidity through the ports. But the second thing that we
Speaker 1: have been doing in the supply chain context is trying
Speaker 1: to demonstrate that we can actually build greater resilience in
Speaker 1: our industrial base here in the United States. And that
Speaker 1: is a longer term project, but I think if you
Speaker 1: look over the last year, we have really made historic
Speaker 1: progress on that front. You know, you can see that
Speaker 1: in the macro three sixty seven thousand manufacturing jobs created
Speaker 1: last year in the US. That's the highest in decades.
Speaker 1: But we can also see it in companies making decisions
Speaker 1: to build and expand domestically in sectors and at a
Speaker 1: scale that we haven't seen for some significant period of time,
Speaker 1: which reflects I think both you know, the policy environment,
Speaker 1: but also their wreck ignition that supply chain resilience takes
Speaker 1: on an increase importance. So you know, we've seen that
Speaker 1: in semiconductors, electric vehicles, aircraft batteries, We've seen that across
Speaker 1: the board. And third, we have a national national security
Speaker 1: strategy that now says we have long term things that
Speaker 1: we need to do as a country to protect core
Speaker 1: national security areas like pharmaceuticals and critical minerals, and now
Speaker 1: the the US government actually has a viable long term
Speaker 1: strategy to address those. Last point on your question, though,
Speaker 1: is where can we where can we continue to really
Speaker 1: make progress and move the dial. Absolutely, we have some
Speaker 1: very practical things we need in the short term. Semiconductors
Speaker 1: is a front end center. We've seen historic investments by
Speaker 1: the semiconductor and manufacturers to come to the United States.
Speaker 1: But what they're all saying is unless we move to
Speaker 1: have a long term public investment strategy to bist sector
Speaker 1: that is all going to be short lived. So we
Speaker 1: have we got to pass there's a bill that has
Speaker 1: asked the House and pass the Senate. We've got to
Speaker 1: get a version of that to the President's desk. That
Speaker 1: would give us a historic fifty two billion dollars in
Speaker 1: public and capital to invest to build that sector and
Speaker 1: build supply chain resilience in that sector across time. I
Speaker 1: belabor that on semiconductors because if you want to think
Speaker 1: about supply chains, you know they are component in everything,
Speaker 1: but they're also relevant to every supply chain. We've made
Speaker 1: a lot of progress on that front. We know what
Speaker 1: we need to do. We just have to get that done.
Speaker 1: So one big component of some of these supply chain
Speaker 1: strains has to be infrastructure, especially places like the ports.
Speaker 1: How is the administration actually regrouping when it comes to
Speaker 1: infrastructure spend and the build back better plan? Is there
Speaker 1: going to be another push and what might that actually
Speaker 1: look like? Your questions is absolutely on key because if
Speaker 1: we think about the areas where we can most affect
Speaker 1: ofaly operate on the supply side of this economy to
Speaker 1: actually increase capacity and give us the ability to actually
Speaker 1: move produce more goods and services with more fluidity and
Speaker 1: actually expand our productive capacity outside of the labor supply issues.
Speaker 1: Our investing in improving our physical infrastructure is right there
Speaker 1: at the top of the list. And the good news
Speaker 1: is that because of the infrastructure law that the President
Speaker 1: shurput through and we passed, you know, bipartisan why last fall,
Speaker 1: we now have a historic set of tools to actually
Speaker 1: make these infrastructure investments in the right way. This was
Speaker 1: a bill, and we have a strategy that is not
Speaker 1: about short term stimulus. It's not about shove already at
Speaker 1: the expense of other objectives. This is about how can
Speaker 1: we actually build a modern supply chain, physical transportation supplied
Speaker 1: chain across the economy, and how can we do that
Speaker 1: in a way that's comprehensive. So, you know, if you
Speaker 1: fix the ports, but you don't fix the roads and
Speaker 1: the bridges. If you you know, fix the airports, but
Speaker 1: you don't fix the uh, the interchanges, you don't actually
Speaker 1: create a new environment where there's it's more attractive to
Speaker 1: invest and build here. You don't create an environment where
Speaker 1: you actually get those benefits of reducing cost in terms
Speaker 1: of the whole supply chain. But we now have those
Speaker 1: tools right, So historic investment imports historic investment in in airports,
Speaker 1: in roads, in bridges, and also in areas where we
Speaker 1: know we are behind the game, like high speed internet.
Speaker 1: You know, getting high speed internet operating across the entire
Speaker 1: economy and bringing all segments of the country into the
Speaker 1: twenty one century economy of you know, strong internet able
Speaker 1: to economic activity is a huge potential way to expand
Speaker 1: our capacity to bring more people in to contributing to
Speaker 1: our economic capacity, and we now have the tools. So
Speaker 1: on that front are big focus is implementation, implementation, implementation.
Speaker 1: We need to demonstrate that we can do things well,
Speaker 1: and the President has been very clear and given us
Speaker 1: clear direction. We brought in Mitch Landrew as our partner
Speaker 1: in all of these efforts to try to demonstrate that
Speaker 1: we can do this effectively effective use of money. We
Speaker 1: can build things in the United States, again where we
Speaker 1: have to demonstrate that we can do things on time
Speaker 1: and under budget, and we also need to demonstrate that
Speaker 1: we can do these things in a way that actually
Speaker 1: brings all parts of the country and more people who
Speaker 1: have been left out of prior big public investment campaigns
Speaker 1: into that into that process. So we're bullish about the
Speaker 1: ability to do that. We often get the question of, well,
Speaker 1: you know, those investments are not going to happen overnight.
Speaker 1: You know, how does that affect people who are worried
Speaker 1: about you know, the cost of good for shipping right now?
Speaker 1: I think you guys know, But what we're seeing in
Speaker 1: real time is some of these things can actually have
Speaker 1: our real impact act really quickly. But some of these
Speaker 1: things are five or eight year undertakings that we want
Speaker 1: to do right. So we want to you know, we
Speaker 1: want to rebuild all the major bridges in America that
Speaker 1: are those bottlenecks for commerce and have a huge economic
Speaker 1: impact across time. But we want to do that right.
Speaker 1: This is a once in a generation opportunity to get
Speaker 1: that done and build back better. Yeah. So I think
Speaker 1: if you think about you think about the intersection between
Speaker 1: the theory of what we can get done that big
Speaker 1: public investment strategy around physical infrastructure, and we think about
Speaker 1: the economic challenge of the current moment. The other thing
Speaker 1: that we want to do, in addition to operating on
Speaker 1: the supply side to make our infrastructure ready made for
Speaker 1: the twenty century, is we also want to make things
Speaker 1: more affordable for typical families who are you know, on
Speaker 1: the one hand, benefiting from an economy that has a
Speaker 1: historically strong job market, but on the other hand are
Speaker 1: really having to deal with higher prices and the impact
Speaker 1: that that has of the grocery store or the gas pump.
Speaker 1: And so if you think about what are the best
Speaker 1: ways go right at making things more affordable for families,
Speaker 1: it is look at the bulk of what a family's
Speaker 1: typical budget is. So typical family in a month spends
Speaker 1: about six of their disposable income on healthcare, prescription drugs, childcare,
Speaker 1: and housing. We now have proposals that would go right
Speaker 1: at reducing costs for those for those families, reduce the
Speaker 1: cost of prescription drugs and cop out of pocket costs,
Speaker 1: reduced the cost of childcare, which will have a positive
Speaker 1: labor supply impact by helping more parents more women get
Speaker 1: back to work, and also reduce the cost of energy.
Speaker 1: Because to the question you were raising before, Tracy about
Speaker 1: our energy strategy, the clean energy tax credit provisions that
Speaker 1: we have been pushing for the principal impact that they
Speaker 1: would have would be to actually lower utility bills for consumers.
Speaker 1: We have of the CEOs of the largest utilities in
Speaker 1: recently to have a conversation about this, and to a
Speaker 1: single to a person, what they said was, if you
Speaker 1: pass these long term in centers, we will accelerate the
Speaker 1: transition to zero carbon energy. But the way we'll do it,
Speaker 1: both practically and legally, is will pass on those benefits
Speaker 1: to consumers, because those tax credits flow right through to
Speaker 1: consumers bottom line. So we view those core investments, which
Speaker 1: are the core components of the Build Back Better bill
Speaker 1: that passed the House, as meeting the current economic moment
Speaker 1: of making things more affordable for people. And we can
Speaker 1: do that in a way that won't add to inflationary
Speaker 1: pressure because it won't add to aggregate demand because it
Speaker 1: will be paid for and actually would reduce the deficit
Speaker 1: across time. So that's you know, we think there's a
Speaker 1: compelling economic logic. We think that for anyone who is
Speaker 1: of the view that high price now are the top
Speaker 1: priority and we need to focus on making things more affordable.
Speaker 1: We have these practical answers right now, healthcare, prescript and drugs, childcare, energy,
Speaker 1: We can we can we can act on that, and
Speaker 1: so we're gonna give a State of the Union here
Speaker 1: in a couple of days, we're gonna get through getting
Speaker 1: a funding bill hopefully done so we can fund its operations,
Speaker 1: and then we'renna try to make real progress on those
Speaker 1: policies and try to deliver on that other piece of
Speaker 1: making these more affordable for families. Bryan, Obviously, so much
Speaker 1: of the discussion and just this moment really is all
Speaker 1: about things going on on the supply side, in particular
Speaker 1: physical infrastructure, which we've been talking about, and when is
Speaker 1: this going to ease? There are a lot of people
Speaker 1: and even some of the market, and Tracy has written
Speaker 1: about this, pointing to corporate behavior and increased margins, and
Speaker 1: people probably within the White House who believe that it's
Speaker 1: greed and that we don't necessarily need to have the
Speaker 1: price increases we have right now, even with the disruptions,
Speaker 1: because a lot of it can be explained via corporate greed.
Speaker 1: Is that a factor in your mind, simply changing corporate behavior?
Speaker 1: And are their policies that theoretically could be put in
Speaker 1: place to discour ridge companies from trying to opportunistically expand margins.
Speaker 1: I'll tell you where our focus has been on that front,
Speaker 1: which is it's interesting the President has for some time,
Speaker 1: including before he, before he ran UM and before he
Speaker 1: before he won the presidency, has been focused on the
Speaker 1: question of the intersection between corporate consolidation and our economic
Speaker 1: potential UM and it's been concerned and compelled by the
Speaker 1: growing body of evidence that actually demonstrates that in many
Speaker 1: industries the trend of consolidation has actually had negative attended
Speaker 1: impacts for the economy that manifest in higher prices and
Speaker 1: less and fewer options for consumers, and also for negative
Speaker 1: outcomes in the labor market as well. And so that's technical,
Speaker 1: there's a there's a there's a study by an expert
Speaker 1: at n y U that tried to put that in
Speaker 1: dollar terms and basically said that consolidation over the course
Speaker 1: of the last couple of decades has basically reduced by
Speaker 1: about five thousand dollars a typical families economic outcomes. That
Speaker 1: takes into account both the impact on the price side
Speaker 1: and also the impact on the wage side as well.
Speaker 1: So that has been a persistent concern of the President
Speaker 1: and a persistent priority of the administration. That is separable
Speaker 1: from the question of whether consolidation and or corporate behavior
Speaker 1: is responsible for the current inflation. There you know. I
Speaker 1: think our view is that those issues of consolidation have
Speaker 1: been operating over the course of years and decades, and
Speaker 1: so they're not the principle of primary driver of current
Speaker 1: pricing trends. But we do believe that that by addressing
Speaker 1: those issues we can have a really positive impact on
Speaker 1: the supply side of the economy and actually produce better
Speaker 1: outcomes across time. So there's a nuance there, but I
Speaker 1: think it's an important one, which is no, are we're
Speaker 1: not out there making the argument that says, you know,
Speaker 1: that the dominant reason why we have high prices today
Speaker 1: is because we've seen corporate consolidation over the course of
Speaker 1: the last two decades. But at the same time, those
Speaker 1: who say this argument is all kind of you know,
Speaker 1: is all without merit, and therefore we should look through
Speaker 1: the negative attended impacts or the and the positive opportunity
Speaker 1: we have for more innovation, more economic growth, and lower
Speaker 1: prices for consumers by addressing these consolidation issues. We think
Speaker 1: that you're missing something very important. I mean, setting aside
Speaker 1: the longer term consolidation that you just described, we have
Speaker 1: seen a very wide variety of companies over the past
Speaker 1: earning season come out and say that they're raising prices
Speaker 1: to offset costs. And one of the things that could
Speaker 1: be worrying if you're concerned about an inflationary spiral is
Speaker 1: that the companies that have been doing that have been
Speaker 1: rewarded by shareholders. You know, obviously, the idea of raising
Speaker 1: prices to offset costs sounds great to people who are
Speaker 1: interested in profits, and if you can do that without
Speaker 1: actually getting pushback from consumers, then that would seem like
Speaker 1: a really great thing. Is that dynamic where you do
Speaker 1: start to see more and more companies raising prices? Is
Speaker 1: that concerning to the administration? And is that something that
Speaker 1: they would be looking into? Certainly, certainly it's a concern
Speaker 1: and it's something that we are paying attention to. At
Speaker 1: the same time, I think that if a company's strategy
Speaker 1: is to ignore or downplay long term investments in its
Speaker 1: own competitive positioning and and doesn't have a viable strategy
Speaker 1: for long term profitability, and it's trying to ride the
Speaker 1: wave of short term price increases at the expense of
Speaker 1: its stakeholders, it's unlikely that that's going to be a
Speaker 1: successful strategy across time. And you know, are that's certainly
Speaker 1: been how our capital markets have responded in the past,
Speaker 1: so certainly a concern. Absolutely. I think we're trying to
Speaker 1: look at the question of the underlying trends and where
Speaker 1: are there issues in our policy apparatus that have encouraged
Speaker 1: dynamics that actually end up producing worse outcomes for the economy.
Speaker 1: So the reason why I went to the point about
Speaker 1: consolidation is that that is a you know, a well
Speaker 1: documented problem that policy has actually exacerbated very significantly, and
Speaker 1: we need to do something about. If you look at
Speaker 1: the you know, the long term trend away from companies
Speaker 1: making more investment in in capital and R and D,
Speaker 1: you know, the troubling increase in buy backs for example,
Speaker 1: that's an issue that we think should be addressed by policy.
Speaker 1: And you know, we we have been pushing, for example,
Speaker 1: to try to normalize the tax treatment between buy backs
Speaker 1: and dividends, to try to eliminate the current implicit incentive
Speaker 1: for companies to you know, opt towards share buy backs.
Speaker 1: And so those are the kinds of issues that we
Speaker 1: have tried to zero in on where we think that
Speaker 1: policy can we have a problem in policy can make
Speaker 1: a important contribution, while at the same time thinking about
Speaker 1: how we can take concrete actions directly from a fiscal
Speaker 1: policy standpoint to make things more affordable and to operate
Speaker 1: on the supply side, like we're talking about before. So
Speaker 1: I want to pivot just a little bit. And I'm
Speaker 1: not going to ask you about monetary policy, because I
Speaker 1: know that no one at the Whitehouse would ever do
Speaker 1: such a thing as comments on the independence of monetary policy.
Speaker 1: But there is uh this widespread expectation, pretty obvious that
Speaker 1: we are going to have several rate hikes in at
Speaker 1: least on the current trajectory. Is there any concern about
Speaker 1: how this is going to be managed? And I'm thinking,
Speaker 1: particularly you said earlier that we're coming at the inflation
Speaker 1: problem in the US from a position of strength, good
Speaker 1: labor market outcomes high growth. Nonetheless, if you think about
Speaker 1: any sort of efforts at slowing the economy, not only
Speaker 1: could that impede growth the labor market, but we see
Speaker 1: things such as you know, the last hired often first fired,
Speaker 1: and the black white unemployment gap is often a casualty
Speaker 1: of slowing labor markets, and good labor markets obviously have
Speaker 1: a history of tightening. That is that a concern at
Speaker 1: the White House. Some of these second order effects of
Speaker 1: perhaps losing momentum on some of the social justice and
Speaker 1: other societal gains that come from a very robust and
Speaker 1: hot labor market. I was, I was, I was laughing
Speaker 1: to myself, but whether we were going we were going
Speaker 1: to engage the back and forth about you asking me
Speaker 1: about monetary policy and me not. No, I I know
Speaker 1: you would never come into such a thing, So that
Speaker 1: we can we can move right on by Look, joking aside,
Speaker 1: The President made the picks for the Federal Reserve Chair
Speaker 1: and members of the Federal Reserve intentionally. He has spoken
Speaker 1: to that, and I can speak to our confidence in
Speaker 1: share Powell and that team to make the right decisions,
Speaker 1: and the recalibration that they are actively engaged in right
Speaker 1: now is appropriate, and we fully expect and trust that
Speaker 1: they will continue that in a thoughtful and independent way. Look,
Speaker 1: I would I think you're raising an important point, and
Speaker 1: I guess I would just underscore I don't think that
Speaker 1: the issues that you are raising are about social justice
Speaker 1: or equity alone. They are about the strength and the
Speaker 1: durability of our macro econ onic recovery. And one of
Speaker 1: the things that I think has actually gotten lost in
Speaker 1: the debate about this economic recovery. What role has policy had,
Speaker 1: you know, we're needed spending a lot of time appropriately
Speaker 1: focused on inflation right now, is just what are the
Speaker 1: what are the conversations we're not having right now? We're
Speaker 1: not having a conversation about a protracted slow labor market
Speaker 1: leading to more and more people joining the ranks of
Speaker 1: the long term unemployee. We're not having a conversation about
Speaker 1: you know, elevated unemployment leading to scarring, which is a
Speaker 1: sort of you know, economic technical way of saying human
Speaker 1: suffering that extends and and and and calcifies and means
Speaker 1: that you know, millions of people across the country are
Speaker 1: robbed of the economic potential of working and moving up
Speaker 1: in that way, and it is striking, you know, I mean,
Speaker 1: just to put you know, one specific thing around it.
Speaker 1: You know, we pay a lot of attention to the
Speaker 1: question of the long term unemployed precisely because that issue
Speaker 1: of you know, scarring or history sists, you know, of
Speaker 1: making it really hard for people to get back into
Speaker 1: a position to get to economic outcomes, is a you know,
Speaker 1: long term uneployment is a proxy for that, right if
Speaker 1: you look back to prior recoveries. One of the you know,
Speaker 1: persistent drags on our economic potential as a country has
Speaker 1: been the slow plotting recovery of of of long term unemployment.
Speaker 1: In this recovery, we have seen that dramatically we were
Speaker 1: almost back to pre COVID levels in terms of long
Speaker 1: term unemployment. You know, if you go back to two right,
Speaker 1: there's a lot of there's a lot of analogies back
Speaker 1: to that period in terms of you know, last time
Speaker 1: we've seen a lot of these economic outcomes, growth and inflation,
Speaker 1: the long term unemployment that persisted in the years after.
Speaker 1: You know, there's there's a big body of economic research
Speaker 1: that has shown just that that had like a decade
Speaker 1: all negative impact for a lot of groups of people
Speaker 1: and a lot and geographies, and that is a macro
Speaker 1: impact for our economy as well. That's true for youth unemployment,
Speaker 1: it's true for black unemployment. To the point you said,
Speaker 1: any any the groups that are have been the most
Speaker 1: structurally or or excluded from our labor market are the
Speaker 1: most at risk when you have a weak labor market recovery.
Speaker 1: So we think that that's really important. We think it's
Speaker 1: important for the macro economy, and we think that the
Speaker 1: progress that we have made is part of what puts
Speaker 1: us in a good position. And you know, I'll end
Speaker 1: on your point. Am I worried about it? Look, yeah,
Speaker 1: we're worried about everything. We're worried about all manner of
Speaker 1: things that could go could go wrong. But what striking
Speaker 1: is we are in a better position than we have
Speaker 1: been in any modern recovery to actually demonstrate the benefits
Speaker 1: of that, you know, reverse history syst that pulling people
Speaker 1: having a strong labor market recovery actually pulling people into
Speaker 1: the labor market, giving them upward opportunity, and that's you know,
Speaker 1: that's something that we should all be we should all
Speaker 1: be worried about, but we should all be focused on
Speaker 1: in prioritizing as well. So I realized we don't have
Speaker 1: that much time left. But since you just mentioned, you know,
Speaker 1: stuff we should potentially be worried about, we'd be remiss
Speaker 1: if we didn't ask you whether or not you're thinking
Speaker 1: about the situation in Ukraine and with Russia and what
Speaker 1: the economic impacts or risks to the US might actually
Speaker 1: be if Russia did choose to invade. We're deeply concerned
Speaker 1: and we are very focused on the sustained diplomatic effort
Speaker 1: that the President has led across our allies and partners
Speaker 1: to underscore too to Putin and the the Russians the
Speaker 1: stakes and the costs associated with with their choices. In
Speaker 1: terms of the economic context, We've made very clear to
Speaker 1: the Russians that their decision, and President Putin's decision to invade,
Speaker 1: would be met with historically strong economic costs in the
Speaker 1: form of sanctions, financial market sanctions in the and in
Speaker 1: the form of export controls as well, in a way
Speaker 1: that will be unified from the United States and our allies.
Speaker 1: They will put the Russian economy in a very challenge situation. Now.
Speaker 1: The question then is how can we work to make
Speaker 1: sure that we impose those costs appropriately on the Russian
Speaker 1: economy while limiting the impact to the U. S economy
Speaker 1: and our allies as well. You know, on that front,
Speaker 1: in terms of direct impact, the United States does not
Speaker 1: have very much macro exposure at all to the impacts
Speaker 1: of these sanctions and export controls, which puts us In
Speaker 1: in a strong position to be able to move. The
Speaker 1: two places where we have been very focused are both
Speaker 1: in energy with respect to natural gas and working with
Speaker 1: our europe European allies to mitigate potential disruptions principally for
Speaker 1: access to to gas across Europe. We on the natural
Speaker 1: gas side, we will not be it would not be
Speaker 1: a major factor in terms of US prices or or supply.
Speaker 1: But then we've done a lot of work with our
Speaker 1: European allies to to work on mitigation measures on the
Speaker 1: on that front. And then to circle back to where
Speaker 1: you know, one of the first questions around oil markets,
Speaker 1: how we can work to mitigate the potential impact on
Speaker 1: oil markets. And the President mentioned on Monday that he
Speaker 1: has been working with allies and partners and oil producing
Speaker 1: countries to make sure that we are prepared to take
Speaker 1: any and all actions necessary to try to address the
Speaker 1: oil market issue in a way that can maximally mitigate
Speaker 1: those uh those impacts as well. So work on that
Speaker 1: front is actively underway. All options remain on the table
Speaker 1: on that front, and so that's that's where our principal
Speaker 1: focus has been in terms of mitigation. But you know,
Speaker 1: it's a very serious, very serious situation that will have
Speaker 1: serious economic consequences, and we continue to work on the
Speaker 1: diplomatic side in in every way that we can to
Speaker 1: to to avoid the worst outcomes. Brian ds, Director of
Speaker 1: the National Economic Council, thank you so much for coming
Speaker 1: on odline. Thanks thanks to both of you for having me.
Speaker 1: Thanks Brian, Thanks Brian, well Tracy. Obviously that was a
Speaker 1: real treat getting to speak with such a high up
Speaker 1: White House official on the economy. You know, actually the
Speaker 1: thing is, the area that struck me most, or one
Speaker 1: of the things was this sort of and we should
Speaker 1: probably talk about it more on the podcast is and
Speaker 1: I also know it's an interest of yours, this sort
Speaker 1: of threading the needle a bit on this sort of
Speaker 1: question of corporate behavior, greed, consolidation and the current tensions
Speaker 1: now and this idea of sort of anti monopoly or
Speaker 1: pro competitive practice as one factor, maybe not acute, but
Speaker 1: one factor that could drive pricing pressure down over the
Speaker 1: long term totally. And there's so much to say on that,
Speaker 1: and of course there's like there's a very large body
Speaker 1: of academic research on things like price controls um and
Speaker 1: it seems to be an issue, but also the solutions
Speaker 1: don't seem to work well. In fact, they often seem
Speaker 1: to backfire. The other thing that struck me was his
Speaker 1: response to your question. That wasn't on monetary policy, but
Speaker 1: it sort of was about it does feel like we
Speaker 1: are in this weird place at the moment where people
Speaker 1: are upset about the inflationary pressures, but on the other hand,
Speaker 1: the economy itself is in decent shape and there's this
Speaker 1: weird kind of tension there. And I think we've discussed
Speaker 1: this at one point or another recently, but it feels
Speaker 1: like one of the lessons we're learning is that in
Speaker 1: terms of politics, inflation seems to be a much bigger
Speaker 1: issue simply because it ends up affecting everyone in one
Speaker 1: way or another, Whereas when employment is at four percent,
Speaker 1: it's very hard to get the voting population to, you know,
Speaker 1: really care about that isn't care about inclusive employment and
Speaker 1: bringing in even more people at the margins to care
Speaker 1: about that as an issue. Yeah, And I think that's right,
Speaker 1: And I think it's one of the areas that I
Speaker 1: have had to sort of reforming my thinking a bit,
Speaker 1: because obviously post GFC, the story was the other way.
Speaker 1: And I guess I'm I'm surprised a little bit that
Speaker 1: the the sort of extremely rapid labor market recovery is
Speaker 1: not seen as a sort of as as a win
Speaker 1: publicly the same way. And I don't know, it's not
Speaker 1: obvious to me, like if the unemployment rate had sort
Speaker 1: of settled here at six percent but inflation were lower,
Speaker 1: six percent, employment is kind of high and well above
Speaker 1: where it was pre crisis. It would be interesting to
Speaker 1: know that that counterfactual we're inflation was a little bit lower,
Speaker 1: but we had unemployment six percent the assessment of the economy.
Speaker 1: But it definitely seems right now that inflation from a
Speaker 1: sort of the public's perspective, when you look at things
Speaker 1: like consumer sentiment, et cetera. In fact, that it's a
Speaker 1: bad time to buy a house, it's a bad time
Speaker 1: to buy a car, it's a bad time to buy
Speaker 1: a washing machine, it's a bad time to buy a
Speaker 1: vacuum cleaner. It feels like that is overwhelming lead the
Speaker 1: number one issue, and that most people are just the
Speaker 1: labor market is not top of mind. No, I would
Speaker 1: agree with that, But um, interesting times, you know, even
Speaker 1: setting aside Russia and Ukraine, which is a whole interesting
Speaker 1: time in and of itself. Interesting to see the administration unveiling, uh,
Speaker 1: some more measures on the supply chain front as well.
Speaker 1: Shall we leave it there. Let's leave it there, all right.
Speaker 1: This has been another episode of the All Thoughts podcast.
Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at
Speaker 1: Tracy Alloway and I'm Joe Wisntal. You could follow me
Speaker 1: on Twitter at The Stalwart. Follow our guest Brian Deese
Speaker 1: He's at Brian Deese n e C. Follow our producer
Speaker 1: Laura Carlson at Laura M. Carlson. Followed the Bloomberg head
Speaker 1: of podcast, Francesca Levy at Francesca Today, and check out
Speaker 1: all of our podcasts at Bloomberg under the handle at podcasts.
Speaker 1: Thanks for listening year to