1 00:00:10,840 --> 00:00:14,680 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:14,760 --> 00:00:19,600 Speaker 1: I'm Joe Was and I'm Tracy Halloway. So Tracy, today 3 00:00:19,680 --> 00:00:23,159 Speaker 1: we are going to have the fastest follow up to 4 00:00:23,280 --> 00:00:26,240 Speaker 1: a past guest that we've ever had, I think, because 5 00:00:26,239 --> 00:00:28,280 Speaker 1: of course we've had some guests a few times or 6 00:00:28,280 --> 00:00:30,680 Speaker 1: at least twice, but this time we were talking to 7 00:00:30,720 --> 00:00:33,800 Speaker 1: someone that we talked to literally just a few weeks ago. Yeah. 8 00:00:33,960 --> 00:00:36,960 Speaker 1: I think that's kind of a marker of how much 9 00:00:37,200 --> 00:00:40,960 Speaker 1: has changed in markets and the economy in that short time, 10 00:00:41,040 --> 00:00:44,480 Speaker 1: because when we spoke to this particular person, I think 11 00:00:44,520 --> 00:00:48,559 Speaker 1: it was either late January or early February. Obviously the 12 00:00:48,560 --> 00:00:52,880 Speaker 1: coronavirus was a concern, especially in China, but it had 13 00:00:53,040 --> 00:00:56,760 Speaker 1: yet to really take off in places like Europe and 14 00:00:56,800 --> 00:00:59,560 Speaker 1: the US. Now all of that is changing. People are 15 00:00:59,560 --> 00:01:01,880 Speaker 1: worried abou out the economy, and of course we've seen 16 00:01:02,040 --> 00:01:05,960 Speaker 1: a massive sell off in markets. Right since that discussion, 17 00:01:06,480 --> 00:01:09,720 Speaker 1: we've had a de facto stock market crash, one of 18 00:01:09,760 --> 00:01:14,280 Speaker 1: the fastest declines ever, breathtaking moves day after day, and 19 00:01:14,360 --> 00:01:19,880 Speaker 1: now extremely serious and legitimate worries that a recession could 20 00:01:19,920 --> 00:01:22,640 Speaker 1: be imminent. So we're talking about a recession as a 21 00:01:22,720 --> 00:01:25,039 Speaker 1: sort of theoretical thing that at some point was likely 22 00:01:25,120 --> 00:01:28,040 Speaker 1: to come. But now we're talking about a possible recession 23 00:01:28,360 --> 00:01:31,880 Speaker 1: right here and right now, really globally, but also you know, 24 00:01:31,920 --> 00:01:35,160 Speaker 1: specifically in the West and in the US right and 25 00:01:35,200 --> 00:01:37,880 Speaker 1: of course, because we are talking about a potential recession, 26 00:01:37,959 --> 00:01:41,280 Speaker 1: that means people inevitably are talking about what we can 27 00:01:41,360 --> 00:01:44,280 Speaker 1: do to stop it. We've already seen the Federal Reserve 28 00:01:44,720 --> 00:01:47,440 Speaker 1: do an emergency rate cut, but a lot of the 29 00:01:47,480 --> 00:01:50,880 Speaker 1: focus is on fiscal stimulums. Right That's the big question 30 00:01:50,960 --> 00:01:54,320 Speaker 1: is whether DC can get it together in a way 31 00:01:54,360 --> 00:01:59,320 Speaker 1: that it rarely can to spend money to blunt the 32 00:01:59,400 --> 00:02:02,400 Speaker 1: impact of these of this virus, which is expected to 33 00:02:02,400 --> 00:02:06,440 Speaker 1: be traumatic. So without further introduction. A few weeks ago, 34 00:02:06,560 --> 00:02:09,840 Speaker 1: we spoke to Claudia Psam, she's the director of macroeconomic 35 00:02:09,919 --> 00:02:14,280 Speaker 1: policy at the Washington Center for Equitable Growth, and our 36 00:02:14,320 --> 00:02:17,080 Speaker 1: discussion was, again it was theoretical, is what do you 37 00:02:17,120 --> 00:02:21,239 Speaker 1: do to hold the recession if you see one coming? 38 00:02:21,639 --> 00:02:24,760 Speaker 1: How should spending get out the door in a timely manner. 39 00:02:25,080 --> 00:02:27,959 Speaker 1: We were not thinking of the discussion at that time 40 00:02:28,240 --> 00:02:31,880 Speaker 1: as something like, oh, here's an imminent playbook that we need. 41 00:02:32,160 --> 00:02:35,320 Speaker 1: But really we are in that position now. So without 42 00:02:35,520 --> 00:02:38,600 Speaker 1: further ado, let's get right to it. Claudia, thank you 43 00:02:38,720 --> 00:02:40,960 Speaker 1: very much for coming back on the podcast. Yeah, thank 44 00:02:41,000 --> 00:02:43,160 Speaker 1: you for having me back. I appreciate it. So, just 45 00:02:43,240 --> 00:02:47,680 Speaker 1: in your view, how serious are the recession risks right 46 00:02:47,680 --> 00:02:50,080 Speaker 1: now for the US economy. I think the risks are 47 00:02:50,320 --> 00:02:55,600 Speaker 1: incredibly serious. Uh, the events are fast moving right So 48 00:02:55,639 --> 00:02:58,280 Speaker 1: if we were talking this time last week, I would 49 00:02:58,360 --> 00:03:01,720 Speaker 1: not I've been say we should, we should be really concerned. 50 00:03:01,720 --> 00:03:05,120 Speaker 1: This is not looking good as last week went on, 51 00:03:05,880 --> 00:03:07,880 Speaker 1: I think, especially for me, I felt like we know 52 00:03:07,919 --> 00:03:10,080 Speaker 1: how to do this, We know the fiscal tools that 53 00:03:10,200 --> 00:03:12,359 Speaker 1: need to be deployed when we face a risk to 54 00:03:12,400 --> 00:03:15,560 Speaker 1: the economy. Coronavirus is unique in many ways, but in 55 00:03:15,560 --> 00:03:17,679 Speaker 1: a lot of ways it isn't. It's just something that's 56 00:03:17,720 --> 00:03:20,880 Speaker 1: threatening on the economic side, something that's threatening the ability 57 00:03:20,880 --> 00:03:22,400 Speaker 1: of people to go to work. People do want to 58 00:03:22,400 --> 00:03:24,480 Speaker 1: go buy stuff Like this is what a threat to 59 00:03:24,520 --> 00:03:27,240 Speaker 1: the U. S economy looks like. We know how to 60 00:03:27,280 --> 00:03:29,720 Speaker 1: fight that. We've got the tools, we have experience from 61 00:03:29,720 --> 00:03:32,360 Speaker 1: the last decade, but we need fiscal policy. And I'm 62 00:03:32,360 --> 00:03:34,840 Speaker 1: sure we'll talk a lot about why monetary isn't enough. 63 00:03:34,960 --> 00:03:39,960 Speaker 1: But to see, um, Larry Cudlo do the interview on 64 00:03:39,960 --> 00:03:43,560 Speaker 1: Friday where he essentially said, yeah, we don't we don't 65 00:03:43,560 --> 00:03:45,960 Speaker 1: really need the fiscal or it just there wasn't a 66 00:03:46,040 --> 00:03:49,680 Speaker 1: really forceful we're going to do all it takes on 67 00:03:49,720 --> 00:03:52,920 Speaker 1: the fiscal side, and between that and then the markets 68 00:03:53,120 --> 00:03:55,480 Speaker 1: and you know, the Sunday night was really bad and 69 00:03:55,520 --> 00:03:57,680 Speaker 1: the treasury. So all of this has just made me 70 00:03:58,880 --> 00:04:01,600 Speaker 1: really concerned and concerned to the point not that oh, 71 00:04:01,720 --> 00:04:04,680 Speaker 1: recession looks like it's you know, could happen that like 72 00:04:04,720 --> 00:04:07,800 Speaker 1: if we do not act fast, like it is going 73 00:04:07,840 --> 00:04:11,160 Speaker 1: to be a recession, Like I just um, and it 74 00:04:11,200 --> 00:04:12,800 Speaker 1: doesn't have to I think this was so hard for 75 00:04:12,800 --> 00:04:15,000 Speaker 1: me is it does not have to happen at all. 76 00:04:15,640 --> 00:04:19,680 Speaker 1: Like if we were to act now, then this is 77 00:04:19,720 --> 00:04:21,480 Speaker 1: this is gonna be painful. It's gonna be painful that 78 00:04:21,520 --> 00:04:23,760 Speaker 1: people that get sick, some people will lose their job. 79 00:04:23,800 --> 00:04:25,479 Speaker 1: We're not gonna be able to act fast enough and 80 00:04:25,520 --> 00:04:28,160 Speaker 1: be able to help everybody. But it does not have 81 00:04:28,200 --> 00:04:30,640 Speaker 1: to take the US economy down, and we're in such 82 00:04:30,680 --> 00:04:33,560 Speaker 1: a good place right now. It's just it's tragic to 83 00:04:33,640 --> 00:04:37,559 Speaker 1: like cut off this expansion. So Claudia, on that note, 84 00:04:37,720 --> 00:04:41,680 Speaker 1: why do you think there is this resistance to fiscal 85 00:04:41,920 --> 00:04:45,800 Speaker 1: stimulus stuff so far? So, like I said, we have 86 00:04:45,880 --> 00:04:48,440 Speaker 1: all the economic tools. This is just a matter of 87 00:04:48,480 --> 00:04:52,000 Speaker 1: political will or physical policy makers have all the tools 88 00:04:52,000 --> 00:04:55,880 Speaker 1: they need, you know, that's that's not my lane the politics. 89 00:04:55,920 --> 00:04:57,960 Speaker 1: But I will say having been a forecaster, I mean 90 00:04:58,000 --> 00:05:01,279 Speaker 1: I worked on all of the a stimulus from two 91 00:05:01,320 --> 00:05:06,040 Speaker 1: thousand and eight, especially stimulustracted a household, so I stimulus 92 00:05:06,080 --> 00:05:08,360 Speaker 1: payments two thousand nine, two thousand tend making work paid 93 00:05:08,360 --> 00:05:10,720 Speaker 1: two thousand eleven and twelve, payroll tax cut. I mean 94 00:05:10,760 --> 00:05:13,000 Speaker 1: I followed all those. I've had to analyze them for 95 00:05:13,080 --> 00:05:16,000 Speaker 1: the staffs macro forecast. I did research on every single 96 00:05:16,040 --> 00:05:20,320 Speaker 1: one of those. I know the research and I I 97 00:05:20,320 --> 00:05:23,160 Speaker 1: mean I cried at the end of like they didn't 98 00:05:23,200 --> 00:05:27,159 Speaker 1: extend anything like that's the payroll tax cut expired. That 99 00:05:27,240 --> 00:05:29,760 Speaker 1: was the last of the stimulus. The unemployment rate was 100 00:05:29,800 --> 00:05:33,440 Speaker 1: still high, like way too high, and there was all 101 00:05:33,440 --> 00:05:36,719 Speaker 1: the discussions of austerity. And this doesn't just hit on 102 00:05:36,720 --> 00:05:39,479 Speaker 1: one side of the political spectrum. And we had very 103 00:05:39,520 --> 00:05:44,800 Speaker 1: senior macro economists who were in positions of leadership in 104 00:05:45,160 --> 00:05:48,920 Speaker 1: various organizations saying yeah, we just we got too much debt, 105 00:05:49,279 --> 00:05:51,560 Speaker 1: we gotta we gotta pull back, tighten the belt straps, 106 00:05:51,839 --> 00:05:56,400 Speaker 1: and it I mean, it was um unconscionable what that 107 00:05:56,440 --> 00:05:59,200 Speaker 1: meant to the people who really already had their belts 108 00:05:59,240 --> 00:06:04,120 Speaker 1: their belts tightened as much as they could. So I like, 109 00:06:04,160 --> 00:06:06,479 Speaker 1: I'm not as naive now because like they did it 110 00:06:06,520 --> 00:06:10,240 Speaker 1: when it was so bad that like I just anyways, 111 00:06:10,240 --> 00:06:12,160 Speaker 1: but it's you know, you you'd hope that there were 112 00:06:12,240 --> 00:06:15,359 Speaker 1: lessons learned, Like we learned last time. We should have 113 00:06:15,440 --> 00:06:17,680 Speaker 1: learned is that you have to act fast, and when 114 00:06:17,680 --> 00:06:19,599 Speaker 1: you act fast, you gotta go big. You gotta go 115 00:06:19,680 --> 00:06:21,279 Speaker 1: big to start with because that might be the only 116 00:06:21,279 --> 00:06:24,080 Speaker 1: bite at the apple, and then you've got to stick 117 00:06:24,120 --> 00:06:27,600 Speaker 1: with it because if you don't like there, there are 118 00:06:27,760 --> 00:06:32,360 Speaker 1: long term costs for everyone in the economy. So yeah, 119 00:06:32,520 --> 00:06:34,640 Speaker 1: that's like something I mean, Ay, what you say is 120 00:06:34,640 --> 00:06:36,760 Speaker 1: like something that I've been thinking a lot about, which 121 00:06:36,800 --> 00:06:39,320 Speaker 1: is I thought, you know, we had learned some of 122 00:06:39,360 --> 00:06:43,560 Speaker 1: these lessons after the Great Financial Crisis that like, it 123 00:06:43,640 --> 00:06:46,960 Speaker 1: doesn't pay to weight, it doesn't pay to be particularly cautious. 124 00:06:47,320 --> 00:06:49,840 Speaker 1: The game is to go big and prevent it, and 125 00:06:49,880 --> 00:06:52,680 Speaker 1: then you have the same old cast of characters all 126 00:06:52,839 --> 00:06:55,040 Speaker 1: saying the same thing like, oh, worried about how we're 127 00:06:55,040 --> 00:06:56,520 Speaker 1: going to pay for it, and we have the fiscal 128 00:06:56,560 --> 00:06:59,680 Speaker 1: space and maybe we'll do something small and targeted. But 129 00:06:59,760 --> 00:07:02,880 Speaker 1: as you note, uh, you know, the recovery from the 130 00:07:02,920 --> 00:07:06,680 Speaker 1: crisis was shockingly slow, and I didn't realize it up 131 00:07:06,760 --> 00:07:09,120 Speaker 1: until yesterday. I was looking at the chart how we 132 00:07:09,160 --> 00:07:12,360 Speaker 1: didn't return to pre crisis levels of unemployment rate till 133 00:07:14,160 --> 00:07:16,240 Speaker 1: that's in my mind. Maybe I would have thought it was. 134 00:07:18,200 --> 00:07:23,880 Speaker 1: There's incredibly long lasting scars from the crisis. But we've 135 00:07:23,920 --> 00:07:26,800 Speaker 1: been talking about fiscal stimulised. One of the things that 136 00:07:26,840 --> 00:07:29,320 Speaker 1: we talked about when you were on the podcast a 137 00:07:29,320 --> 00:07:31,200 Speaker 1: few weeks ago, and everyone should go listen to that 138 00:07:31,240 --> 00:07:34,360 Speaker 1: because that really like sort of gives your whole body 139 00:07:34,360 --> 00:07:37,000 Speaker 1: of work or a lot more of It is the 140 00:07:37,000 --> 00:07:40,360 Speaker 1: importance of just getting cash into people's hands. That that's 141 00:07:40,400 --> 00:07:42,360 Speaker 1: the key thing that we need to do right now. 142 00:07:42,480 --> 00:07:45,720 Speaker 1: So talk about the importance of just putting money in 143 00:07:45,760 --> 00:07:48,200 Speaker 1: peoples on bank accounts right here. Yeah, So when I 144 00:07:48,240 --> 00:07:51,520 Speaker 1: talk about this fiscal response, so in a recession, I 145 00:07:51,520 --> 00:07:54,040 Speaker 1: think there's two principles that we should be working on. 146 00:07:54,040 --> 00:07:57,000 Speaker 1: One is we should go wide. So that's this idea 147 00:07:57,000 --> 00:08:00,000 Speaker 1: of giving money to everybody, like give every man, woman, 148 00:08:00,000 --> 00:08:02,680 Speaker 1: and child, United States five find a way to do it. 149 00:08:03,040 --> 00:08:06,280 Speaker 1: So that's that's covering the breadth. I think it is important, 150 00:08:06,280 --> 00:08:08,200 Speaker 1: and you're going to hear a lot more people talking 151 00:08:08,240 --> 00:08:12,600 Speaker 1: about targeted stimulus, so I think that can. I think 152 00:08:12,640 --> 00:08:14,840 Speaker 1: we should have that. People who get sick right now, 153 00:08:14,880 --> 00:08:18,320 Speaker 1: people who are quarantined, they should get money. They should 154 00:08:18,360 --> 00:08:21,120 Speaker 1: get more money because they're they're the ones that are sick, 155 00:08:21,120 --> 00:08:24,400 Speaker 1: they're they're suffering the most. Give them more. But I 156 00:08:24,440 --> 00:08:29,200 Speaker 1: think if we bypass the give something to everyone, we 157 00:08:29,360 --> 00:08:32,880 Speaker 1: are going to really amp up the risk that this 158 00:08:32,920 --> 00:08:38,000 Speaker 1: spreads and becomes a recession because right now, well right now, 159 00:08:38,040 --> 00:08:41,040 Speaker 1: people are freaking out right because they don't because they 160 00:08:41,120 --> 00:08:44,200 Speaker 1: don't know if they are going to get sick, They 161 00:08:44,200 --> 00:08:45,920 Speaker 1: don't know if someone their family is going to get sick. 162 00:08:46,000 --> 00:08:49,760 Speaker 1: And the vast majority, like way up into the income distribution, 163 00:08:50,360 --> 00:08:54,120 Speaker 1: people they spend what they make, right so you're there 164 00:08:54,120 --> 00:08:57,280 Speaker 1: are many people who are one paycheck even some cut 165 00:08:57,320 --> 00:09:01,600 Speaker 1: hours away from serious financial district as. So if you 166 00:09:01,679 --> 00:09:04,719 Speaker 1: know that about yourself and you don't know if you're 167 00:09:04,720 --> 00:09:06,480 Speaker 1: going to get the virus, and you don't know if 168 00:09:06,520 --> 00:09:08,360 Speaker 1: you're gonna be out for two weeks from work and 169 00:09:08,360 --> 00:09:11,400 Speaker 1: you won't get paid. If you're out, then you're not 170 00:09:11,480 --> 00:09:15,280 Speaker 1: going to go out and buy like the new washing machine, 171 00:09:15,640 --> 00:09:19,440 Speaker 1: or put the offer on the house, or you know, 172 00:09:19,600 --> 00:09:21,800 Speaker 1: by go out to the rest. There's just so many 173 00:09:21,840 --> 00:09:23,839 Speaker 1: things that you'll do right now to cut back because 174 00:09:23,840 --> 00:09:29,319 Speaker 1: you don't know if Americans across the country do that 175 00:09:29,480 --> 00:09:33,840 Speaker 1: all at once in the next couple of months. Like that, 176 00:09:33,840 --> 00:09:35,800 Speaker 1: that's how you take an economy with a three and 177 00:09:35,840 --> 00:09:40,240 Speaker 1: a half percent unemployment rate, really solid GDP growth and 178 00:09:40,240 --> 00:09:42,920 Speaker 1: turn it into a recession because like that, once that 179 00:09:43,000 --> 00:09:46,440 Speaker 1: dynamic gets going, it doesn't matter how much you give 180 00:09:46,559 --> 00:09:49,439 Speaker 1: to the like you know, five percent of the population 181 00:09:49,520 --> 00:09:54,240 Speaker 1: that becomes severely ill. We could get past the virus 182 00:09:54,320 --> 00:09:57,480 Speaker 1: itself and have the economy already be into a tailspin 183 00:09:57,600 --> 00:10:01,480 Speaker 1: that you can't then arrested easily as you could right 184 00:10:01,800 --> 00:10:04,880 Speaker 1: now if you just told people we got your back, 185 00:10:05,240 --> 00:10:08,720 Speaker 1: like we're on this. What do you say to critics 186 00:10:08,760 --> 00:10:11,800 Speaker 1: who make the point that given the uncertainty that you 187 00:10:11,880 --> 00:10:14,319 Speaker 1: just described, so people don't know if they're going to 188 00:10:14,440 --> 00:10:16,840 Speaker 1: have a job in the next few weeks. They don't 189 00:10:16,840 --> 00:10:18,920 Speaker 1: know if they can go outside of their houses. Just 190 00:10:19,120 --> 00:10:23,240 Speaker 1: massive uncertainty for households at the moment. So if there's 191 00:10:23,280 --> 00:10:25,559 Speaker 1: that level of uncertainty, how do you know people are 192 00:10:25,600 --> 00:10:30,040 Speaker 1: actually going to spend the additional money that you give them? 193 00:10:30,080 --> 00:10:32,200 Speaker 1: And I should just mention that here in Hong Kong 194 00:10:32,520 --> 00:10:36,200 Speaker 1: we already have this happening. Hong kongers are getting cash 195 00:10:36,280 --> 00:10:39,600 Speaker 1: handouts of a little over a thousand U S dollars 196 00:10:39,600 --> 00:10:43,400 Speaker 1: paid directly into their bank accounts. And the joke over here, 197 00:10:43,440 --> 00:10:47,200 Speaker 1: although clearly it's not very funny given the situation, is 198 00:10:47,200 --> 00:10:50,440 Speaker 1: that everyone is just going to either save it or 199 00:10:50,920 --> 00:10:53,040 Speaker 1: use it to buy, you know, a few rolls of 200 00:10:53,080 --> 00:10:56,040 Speaker 1: toilet paper and some face masks. Yeah. So this this 201 00:10:56,120 --> 00:11:02,760 Speaker 1: has been the longstanding critique of these stimulus payments, tax rebates, uh, 202 00:11:03,160 --> 00:11:06,360 Speaker 1: the the difference. So, and I think they make for 203 00:11:06,400 --> 00:11:09,800 Speaker 1: a good story, right And and a lot of times 204 00:11:09,880 --> 00:11:12,560 Speaker 1: people telling the story like maybe it fits them, like 205 00:11:12,640 --> 00:11:14,800 Speaker 1: I don't like every dollar that comes into me. I 206 00:11:14,800 --> 00:11:16,520 Speaker 1: don't just go out and spend it because I've got 207 00:11:16,559 --> 00:11:18,800 Speaker 1: I've got a cushion. The fact that matters in the 208 00:11:18,880 --> 00:11:21,200 Speaker 1: United States, and this is different than a lot of 209 00:11:21,200 --> 00:11:25,240 Speaker 1: other developed countries. We do not have a good safety net. 210 00:11:25,600 --> 00:11:29,959 Speaker 1: We do not have financial buffers, Like a huge fraction 211 00:11:30,040 --> 00:11:34,440 Speaker 1: of US households do not have a paychecks worth, let 212 00:11:34,440 --> 00:11:37,720 Speaker 1: alone like five worth of money just sitting around that 213 00:11:37,760 --> 00:11:40,520 Speaker 1: they can access quickly. So we're in a much more 214 00:11:41,040 --> 00:11:45,120 Speaker 1: fragile place than other countries. And then on top of that, 215 00:11:45,480 --> 00:11:49,160 Speaker 1: there is research. There is incredibly good research from the 216 00:11:49,200 --> 00:11:51,880 Speaker 1: two thousand one tax rebates and the two eight stimulus 217 00:11:51,880 --> 00:11:55,200 Speaker 1: payments that says people will spend it, like I just 218 00:11:55,760 --> 00:11:58,320 Speaker 1: but but this this trope will not go away, like 219 00:11:58,440 --> 00:12:01,040 Speaker 1: this is I have talking to someone who's been a 220 00:12:01,080 --> 00:12:06,960 Speaker 1: lot of conversations with um Republican economic staff, and time 221 00:12:07,000 --> 00:12:08,599 Speaker 1: and again they say, well, but they're just going to 222 00:12:08,720 --> 00:12:11,480 Speaker 1: save it, you know, the wonky term of Riccardian equivalence, 223 00:12:11,760 --> 00:12:13,720 Speaker 1: like if I give you a dollar, but you know 224 00:12:13,840 --> 00:12:15,840 Speaker 1: sometimes the government's going to take it back when you 225 00:12:15,960 --> 00:12:18,400 Speaker 1: save it. Or I was talking to someone who does 226 00:12:18,480 --> 00:12:22,040 Speaker 1: the like permanent income hypothesis, like I give you a 227 00:12:22,080 --> 00:12:24,400 Speaker 1: dollar and I'm going to calculate the annuity value of 228 00:12:24,400 --> 00:12:26,240 Speaker 1: it over the rest of my life and spend it 229 00:12:26,320 --> 00:12:29,200 Speaker 1: like those are just wonderful, like theoretical models, but like 230 00:12:29,240 --> 00:12:32,480 Speaker 1: those people don't exist well, I mean Riccardian equivalent people 231 00:12:32,480 --> 00:12:34,720 Speaker 1: just like there's like ten of them in the world. Um, 232 00:12:34,760 --> 00:12:37,520 Speaker 1: but the you know, the permanent income hypothesis, there are 233 00:12:37,520 --> 00:12:41,400 Speaker 1: people who have more money that they really do smooth 234 00:12:41,400 --> 00:12:44,840 Speaker 1: it out. But there are a lot of US households 235 00:12:44,920 --> 00:12:47,560 Speaker 1: that for various reasons, and there's a lot of different 236 00:12:47,559 --> 00:12:50,640 Speaker 1: models kind of thinking about why this happens. They keep 237 00:12:50,679 --> 00:12:54,160 Speaker 1: their spending and their income really closely tied, so it 238 00:12:54,280 --> 00:12:57,400 Speaker 1: is very and a lot of them like they don't 239 00:12:57,440 --> 00:12:59,840 Speaker 1: have a lot of income, right, may mean wage growth 240 00:13:00,000 --> 00:13:02,439 Speaker 1: has not been good. Like if you give them money, 241 00:13:02,480 --> 00:13:04,920 Speaker 1: they will spend it. And this is something that as 242 00:13:05,000 --> 00:13:07,760 Speaker 1: economists we get wrapped into this with our models. Or 243 00:13:07,840 --> 00:13:09,800 Speaker 1: if you don't want to do this, you come you 244 00:13:09,840 --> 00:13:13,680 Speaker 1: grab a defunct economist model and say that's the truth. 245 00:13:14,240 --> 00:13:16,040 Speaker 1: But like if you just went out and grabbed ten 246 00:13:16,080 --> 00:13:17,640 Speaker 1: people in front of the White House instead, if I 247 00:13:17,640 --> 00:13:19,559 Speaker 1: gave you five bucks, what would you do with it? 248 00:13:20,760 --> 00:13:23,200 Speaker 1: I mean they'd say they'd spend it, Like it's not 249 00:13:23,280 --> 00:13:26,400 Speaker 1: a I don't know, and and I have heard discussions 250 00:13:26,400 --> 00:13:28,080 Speaker 1: about well, you know, we don't want people to go 251 00:13:28,160 --> 00:13:30,240 Speaker 1: out to the store, and we don't want them to spend. 252 00:13:30,280 --> 00:13:32,960 Speaker 1: And I'm like, first of all, this is why I 253 00:13:32,960 --> 00:13:35,080 Speaker 1: think you should go broadly. Right, there are parts of 254 00:13:35,120 --> 00:13:38,160 Speaker 1: the country right now. It's not like the just the 255 00:13:38,280 --> 00:13:40,480 Speaker 1: virus isn't there yet, Like let's get ahead of this. 256 00:13:40,600 --> 00:13:42,360 Speaker 1: Let people spend, and frankly, like you can do a 257 00:13:42,400 --> 00:13:45,480 Speaker 1: lot of spending sitting in your living room, right. This 258 00:13:45,559 --> 00:13:48,600 Speaker 1: is I just it's like we want to talk ourselves 259 00:13:48,640 --> 00:13:52,440 Speaker 1: out of doing something, which totally reminds me of like 260 00:13:52,520 --> 00:13:55,400 Speaker 1: two thousand and seven, Like we knew things were going 261 00:13:55,400 --> 00:13:57,360 Speaker 1: wrong in the housing market. We knew, but we just 262 00:13:57,480 --> 00:14:00,679 Speaker 1: kept saying, well, but it's okay because look at this 263 00:14:00,720 --> 00:14:04,840 Speaker 1: other good data, Like we're getting such a clear early warning, 264 00:14:05,000 --> 00:14:07,400 Speaker 1: like we get to watch the train coming at us 265 00:14:07,840 --> 00:14:10,599 Speaker 1: Italy shut down the country, Like but we have the 266 00:14:10,679 --> 00:14:12,480 Speaker 1: train coming at us and we're like, oh, it's gonna 267 00:14:12,480 --> 00:14:15,800 Speaker 1: be okay, It's I'll be okay, Like, oh, get out 268 00:14:15,800 --> 00:14:32,280 Speaker 1: of the wake. Yeah, it's really amazing to see the 269 00:14:32,320 --> 00:14:35,320 Speaker 1: stuff that's happening in Italy now because it's very similar 270 00:14:35,360 --> 00:14:38,360 Speaker 1: to the stuff we saw happen in China in January 271 00:14:38,400 --> 00:14:41,240 Speaker 1: and February, and I think back then, no one thought 272 00:14:41,360 --> 00:14:45,080 Speaker 1: that democracy in the West was ever going to be 273 00:14:45,160 --> 00:14:47,920 Speaker 1: able to shut down its population in the way that 274 00:14:48,000 --> 00:14:52,720 Speaker 1: China did. Um just on the notion of safety nets 275 00:14:52,880 --> 00:14:55,720 Speaker 1: in the US, you mentioned this idea that the safety 276 00:14:55,720 --> 00:14:58,120 Speaker 1: net just isn't quite there in the same way it 277 00:14:58,240 --> 00:15:02,600 Speaker 1: is for some other developed country ease would expanding that 278 00:15:02,760 --> 00:15:07,200 Speaker 1: so that safety net be a preferable option here as 279 00:15:07,200 --> 00:15:10,960 Speaker 1: opposed to handouts, if you could do it, would replacement 280 00:15:11,000 --> 00:15:16,120 Speaker 1: wages or expanded unemployment insurance or something like that be 281 00:15:16,120 --> 00:15:20,240 Speaker 1: better than payouts. So I think there's a way to 282 00:15:20,280 --> 00:15:23,040 Speaker 1: answer that question on the economics, and I think there's 283 00:15:23,040 --> 00:15:26,360 Speaker 1: a way to answer it on the politics. I I 284 00:15:26,440 --> 00:15:30,360 Speaker 1: advocate for this going wide and giving everyone money, not 285 00:15:30,480 --> 00:15:34,600 Speaker 1: because I think everyone needs FI Okay, I do it 286 00:15:34,640 --> 00:15:36,640 Speaker 1: because I think that's something you can do the fastest, 287 00:15:37,080 --> 00:15:40,520 Speaker 1: and I think it's the most politically feasible. I mean, 288 00:15:40,520 --> 00:15:42,840 Speaker 1: nothing is really politically feasible right now, but it feels 289 00:15:42,840 --> 00:15:46,080 Speaker 1: to me like that is because everybody gets it. Once 290 00:15:46,080 --> 00:15:50,600 Speaker 1: you get into targeting unemployment insurance, food stamps, any of 291 00:15:50,600 --> 00:15:52,800 Speaker 1: these are a good example, there can be this feeling 292 00:15:52,840 --> 00:15:58,520 Speaker 1: of well, I saved up. I worked hard so that 293 00:15:58,560 --> 00:16:00,600 Speaker 1: when there was a tough time in my I didn't 294 00:16:00,600 --> 00:16:03,120 Speaker 1: have to go get food stamps. Why should I, as 295 00:16:03,120 --> 00:16:05,520 Speaker 1: a taxpayer, pay for somebody else to go get food 296 00:16:05,520 --> 00:16:08,080 Speaker 1: stamps when I know they were out, you know, taking 297 00:16:08,080 --> 00:16:11,080 Speaker 1: their kids out to dinner before they got laid off. 298 00:16:11,640 --> 00:16:15,240 Speaker 1: So I think there's this aspect of if we make 299 00:16:15,280 --> 00:16:18,840 Speaker 1: sure that everybody knows we the government is here, we're 300 00:16:18,840 --> 00:16:21,360 Speaker 1: going to help all of you, then it might give 301 00:16:21,400 --> 00:16:23,320 Speaker 1: some space to be like, Okay, well, now that we've 302 00:16:23,320 --> 00:16:25,960 Speaker 1: helped everybody, we really do need to especially help those 303 00:16:26,280 --> 00:16:29,120 Speaker 1: who get hit hard. But I think if you just 304 00:16:29,240 --> 00:16:31,640 Speaker 1: targeted to the ones who really need it, the United 305 00:16:31,640 --> 00:16:37,160 Speaker 1: States hesitive um a very troubling history of those people 306 00:16:37,160 --> 00:16:39,000 Speaker 1: who need to help the most, we are the least 307 00:16:39,080 --> 00:16:42,400 Speaker 1: likely to give it to them. So like, I don't 308 00:16:42,560 --> 00:16:45,120 Speaker 1: if you know, in a perfect world, i'd want the 309 00:16:45,120 --> 00:16:47,720 Speaker 1: safety net to be better. I'd want the money, like 310 00:16:47,960 --> 00:16:50,760 Speaker 1: serious amounts of money to go to the people who 311 00:16:50,800 --> 00:16:53,040 Speaker 1: need it most. But I'm afraid that if we don't 312 00:16:53,080 --> 00:16:56,240 Speaker 1: do something broad, if they won't get anything. When we 313 00:16:56,320 --> 00:16:59,960 Speaker 1: talk to you before, the focus of our discussion was 314 00:17:00,040 --> 00:17:03,440 Speaker 1: not merely the sort of theoretical how to stop a 315 00:17:03,440 --> 00:17:05,920 Speaker 1: recession from happening one day. But some of the work 316 00:17:06,000 --> 00:17:09,440 Speaker 1: that you've done, what's that? What you what's called the 317 00:17:09,520 --> 00:17:12,680 Speaker 1: some rule named after you, which is, Okay, the unemployment 318 00:17:12,760 --> 00:17:15,920 Speaker 1: rate rises to above a certain threshold, it tends to 319 00:17:15,960 --> 00:17:19,480 Speaker 1: be a good recession indicator. That's when the checks should 320 00:17:19,480 --> 00:17:23,040 Speaker 1: go out again. People should listen to that episode. We're 321 00:17:23,040 --> 00:17:25,760 Speaker 1: not there yet in the actual data. And as you 322 00:17:25,880 --> 00:17:30,720 Speaker 1: said yourself, um, your perception of the recession risks has 323 00:17:30,840 --> 00:17:34,879 Speaker 1: massively heightened even since this time last week. So in 324 00:17:34,880 --> 00:17:38,879 Speaker 1: a way, this some rule would almost be probably too slow, 325 00:17:39,000 --> 00:17:43,320 Speaker 1: given how quickly this crisis is coming upon us in 326 00:17:43,359 --> 00:17:46,480 Speaker 1: the stock market crash and so forth. So in light 327 00:17:46,560 --> 00:17:50,960 Speaker 1: of that, what would what is the ideal? Um A, 328 00:17:51,440 --> 00:17:53,879 Speaker 1: what's the well, you know, just like what is the 329 00:17:53,880 --> 00:17:57,800 Speaker 1: basis or what is the best approach right now? Given 330 00:17:57,840 --> 00:18:01,080 Speaker 1: the uniqueness of the situation, the severe to speed, the 331 00:18:01,160 --> 00:18:04,399 Speaker 1: unexpectedness to get the cash out the door? Right, So 332 00:18:04,480 --> 00:18:08,080 Speaker 1: I think we should hit go now. Right, As you said, 333 00:18:08,119 --> 00:18:11,720 Speaker 1: there's no there's no reason to wait for the unemployment 334 00:18:11,800 --> 00:18:15,280 Speaker 1: rate to jump noted noticeably, so like the sombarle isn't 335 00:18:15,280 --> 00:18:19,040 Speaker 1: going to trigger for months, right, we could start seeing 336 00:18:19,119 --> 00:18:22,359 Speaker 1: unemployment begin to rise, but we're we're starting in a 337 00:18:22,440 --> 00:18:26,040 Speaker 1: really good place, right, But unemployment rate, once it gets going, 338 00:18:26,280 --> 00:18:30,439 Speaker 1: it doesn't stop. And like again, we can see unlike 339 00:18:30,440 --> 00:18:33,840 Speaker 1: two thousand eight, where we were the epicenter of the disruption, 340 00:18:34,160 --> 00:18:38,160 Speaker 1: the recession, the financial crisis, we got an advanced warning 341 00:18:38,800 --> 00:18:41,480 Speaker 1: like this is happening overseas, like it starts in China 342 00:18:41,520 --> 00:18:44,320 Speaker 1: and Asian But you know, so like this is different 343 00:18:44,359 --> 00:18:48,000 Speaker 1: because um, we don't need the unemployment rate to tell 344 00:18:48,080 --> 00:18:50,600 Speaker 1: us that something bad is working its way through the 345 00:18:50,640 --> 00:18:54,120 Speaker 1: global economy, right, So the thing so I wouldn't wait 346 00:18:54,160 --> 00:18:57,399 Speaker 1: until the sowar triggers. I do think one of the 347 00:18:57,440 --> 00:19:00,080 Speaker 1: benefits of the recession ready volume. So that was and 348 00:19:00,200 --> 00:19:03,000 Speaker 1: I had the proposal in there's several others. There's been 349 00:19:03,040 --> 00:19:06,840 Speaker 1: other discussions in the past year about automatic stabilizers in 350 00:19:06,920 --> 00:19:09,320 Speaker 1: a lot of circles, which is which is really heartening. 351 00:19:09,640 --> 00:19:14,200 Speaker 1: So that means there is legislative text ready to go 352 00:19:15,200 --> 00:19:18,680 Speaker 1: or very close, right, So it might have been being 353 00:19:18,760 --> 00:19:22,879 Speaker 1: prepared for automatic stabilizers. And frankly, a lot of this 354 00:19:23,119 --> 00:19:25,600 Speaker 1: the recession ready volume, Every single one of the proposals 355 00:19:25,600 --> 00:19:28,199 Speaker 1: we did was something that had been implemented in some 356 00:19:28,320 --> 00:19:32,560 Speaker 1: form before, right, So that legislative text literally is sitting 357 00:19:32,600 --> 00:19:36,320 Speaker 1: on the shelf somewhere, so you can just take that structure, 358 00:19:36,480 --> 00:19:39,760 Speaker 1: like we thought, Like I thought really hard myself and 359 00:19:39,920 --> 00:19:41,720 Speaker 1: looking at the research about, Okay, if I want to 360 00:19:41,720 --> 00:19:44,199 Speaker 1: get money out to people a lot of people quickly, 361 00:19:44,560 --> 00:19:46,880 Speaker 1: what's the best way to do that? And I came 362 00:19:46,920 --> 00:19:52,359 Speaker 1: down on one time payment dollars, one time check, electronic 363 00:19:52,400 --> 00:19:56,920 Speaker 1: payment as opposed to doing a change, you know, the 364 00:19:56,960 --> 00:19:59,280 Speaker 1: payroll tax cut. Like that was one that I looked 365 00:19:59,280 --> 00:20:01,840 Speaker 1: at because that had and done in the Great Recession. 366 00:20:02,119 --> 00:20:04,280 Speaker 1: So like that's a decision point of like, Okay, you 367 00:20:04,280 --> 00:20:07,120 Speaker 1: want to get money out, correspons gets money out. It's like, okay, 368 00:20:07,160 --> 00:20:08,800 Speaker 1: how can we do that best? And I'm like, okay, here, 369 00:20:08,800 --> 00:20:10,600 Speaker 1: based on the data and the research and the evidence, 370 00:20:11,000 --> 00:20:13,840 Speaker 1: do a one time payment right. And there's like in 371 00:20:13,880 --> 00:20:16,720 Speaker 1: each of the different the Unemployment Insurance Chapter had a 372 00:20:16,800 --> 00:20:20,520 Speaker 1: lot of really thoughtful ideas about how to strengthen that program. 373 00:20:20,640 --> 00:20:23,600 Speaker 1: I think right now, the the f maps of the 374 00:20:23,600 --> 00:20:27,000 Speaker 1: federal share of funding that goes to Medicaid would be 375 00:20:27,040 --> 00:20:31,520 Speaker 1: an excellent way to push out a lot of money fast. Um, 376 00:20:31,560 --> 00:20:34,080 Speaker 1: So there's all these structures. I think, one, well, there's 377 00:20:34,080 --> 00:20:35,679 Speaker 1: a lot of things that are unfortunate we're in the 378 00:20:35,720 --> 00:20:38,960 Speaker 1: situation we are today. Uh. Some of the things that 379 00:20:39,280 --> 00:20:42,959 Speaker 1: was specifically like what I had proposed, Uh, we are 380 00:20:43,480 --> 00:20:46,000 Speaker 1: the idea of doing things making automatic stabilizers. Then you 381 00:20:46,040 --> 00:20:49,119 Speaker 1: can build the logistics so the one time payments they 382 00:20:49,119 --> 00:20:52,680 Speaker 1: have only gone out on a discretionary basis, So it's 383 00:20:52,720 --> 00:20:55,240 Speaker 1: not like unemployment insurance where we already have this program 384 00:20:55,240 --> 00:20:57,560 Speaker 1: set up. So one of the things that I have 385 00:20:57,640 --> 00:21:00,520 Speaker 1: been racking my brain over is, Okay, I want to 386 00:21:00,520 --> 00:21:04,639 Speaker 1: get people to everybody, how would I do that logistically 387 00:21:05,000 --> 00:21:07,680 Speaker 1: so that like money could start coming out right away 388 00:21:08,240 --> 00:21:11,600 Speaker 1: and that it gets It's tricky, like you can't do 389 00:21:11,680 --> 00:21:13,639 Speaker 1: what you did in two thousand eight with the stimulus 390 00:21:13,640 --> 00:21:16,879 Speaker 1: payments because the I R S can't there in the 391 00:21:16,880 --> 00:21:19,960 Speaker 1: middle of tax season. They can't process anything on the fly. 392 00:21:20,880 --> 00:21:23,720 Speaker 1: I mean, money can't go out until May, so and 393 00:21:23,760 --> 00:21:26,399 Speaker 1: I would I don't want to wait until May for 394 00:21:26,520 --> 00:21:28,560 Speaker 1: people to get five. So I've spent a lot of 395 00:21:28,600 --> 00:21:29,960 Speaker 1: time thinking about what you could do it this way, 396 00:21:29,960 --> 00:21:32,760 Speaker 1: and you could do it that way, and um, but 397 00:21:32,920 --> 00:21:35,280 Speaker 1: that's but I'm not sure anybody wants to do it 398 00:21:35,320 --> 00:21:38,639 Speaker 1: at all. So, like in some options, you start losing 399 00:21:38,640 --> 00:21:43,720 Speaker 1: the window if you don't move. So so let's say, okay, 400 00:21:43,760 --> 00:21:47,200 Speaker 1: somehow mechanically we get that check out to every individual 401 00:21:48,160 --> 00:21:51,000 Speaker 1: UH in the country that checkout. But one of the 402 00:21:51,080 --> 00:21:54,320 Speaker 1: scary things about this virus, it's a virus, it grows 403 00:21:54,400 --> 00:21:57,200 Speaker 1: viral e. Right now we might have a thousand cases 404 00:21:57,280 --> 00:22:00,480 Speaker 1: in the US measure probably way more net next week 405 00:22:00,800 --> 00:22:03,960 Speaker 1: we could have multiples of that. We don't know how 406 00:22:04,000 --> 00:22:06,879 Speaker 1: long it's going to take at all. There's for the 407 00:22:06,880 --> 00:22:10,320 Speaker 1: health response to be effective at curbing this. So is 408 00:22:10,440 --> 00:22:15,879 Speaker 1: a one time check enough or would it be in 409 00:22:15,920 --> 00:22:18,560 Speaker 1: this kind of situation where you don't really know the 410 00:22:18,600 --> 00:22:21,040 Speaker 1: severity and the intensity and the duration of the threat 411 00:22:21,400 --> 00:22:24,280 Speaker 1: something where there's like a check every month until we 412 00:22:24,760 --> 00:22:29,359 Speaker 1: hit some level. Yeah, So at first I'd say, like 413 00:22:29,440 --> 00:22:31,960 Speaker 1: the one time payments regardless off there once a month 414 00:22:32,119 --> 00:22:34,440 Speaker 1: or once a year, like they're not going to be enough. 415 00:22:34,760 --> 00:22:38,120 Speaker 1: Like a policy response has to come on multiple fronts. 416 00:22:38,680 --> 00:22:42,400 Speaker 1: So I think there's an aspect of helping households broadly, 417 00:22:42,600 --> 00:22:46,000 Speaker 1: like get everybody five. There's an aspect of helping the 418 00:22:46,040 --> 00:22:49,679 Speaker 1: households who get really sick um and I think you know, 419 00:22:49,880 --> 00:22:53,000 Speaker 1: you know, to back up the coronavirus. This is an illness. 420 00:22:53,080 --> 00:22:56,959 Speaker 1: This is a public health emergency first and foremost. So 421 00:22:57,040 --> 00:22:59,960 Speaker 1: I think one of the most important things that Congress 422 00:23:00,040 --> 00:23:02,280 Speaker 1: could do, and I think they could move this a 423 00:23:02,280 --> 00:23:03,880 Speaker 1: lot fashion than figure out how to get to check 424 00:23:03,920 --> 00:23:08,960 Speaker 1: money in everybody's pockets is really push money to states 425 00:23:09,480 --> 00:23:12,480 Speaker 1: so that they can do State and local governments know 426 00:23:12,600 --> 00:23:17,320 Speaker 1: their public health uh infrastructure better than anybody in the 427 00:23:17,359 --> 00:23:20,640 Speaker 1: federal government. Give those states money, tell them. I mean 428 00:23:21,119 --> 00:23:24,280 Speaker 1: the f MAP goes through Medicaid, I mean Medicaid itself 429 00:23:24,320 --> 00:23:27,560 Speaker 1: because it's a public health emergency, is going to need 430 00:23:27,680 --> 00:23:30,600 Speaker 1: more fun like at the state level forum as people 431 00:23:30,640 --> 00:23:33,119 Speaker 1: need to claim go to the hospital and pay for 432 00:23:33,200 --> 00:23:36,960 Speaker 1: the emergency care. But that's a place where you know 433 00:23:37,040 --> 00:23:39,160 Speaker 1: you can get the money out for the health system. 434 00:23:39,240 --> 00:23:42,119 Speaker 1: I think a creative idea. I'm not sure. I mean 435 00:23:42,160 --> 00:23:45,080 Speaker 1: this hasn't been done, but you basically take areas that 436 00:23:45,240 --> 00:23:48,960 Speaker 1: have mass outbreaks and maybe of Seattle becomes this and 437 00:23:49,040 --> 00:23:52,800 Speaker 1: you declared a nastural disaster relief area. So do something 438 00:23:53,000 --> 00:23:55,240 Speaker 1: very akin to a hurricane hits an area and the 439 00:23:55,440 --> 00:23:58,080 Speaker 1: FEMA just comes in, they bring in you know, the 440 00:23:58,160 --> 00:24:00,840 Speaker 1: portable housing units. I mean, we could verywell need those 441 00:24:00,880 --> 00:24:04,600 Speaker 1: for quarantines. Uh. And you know the equivalent of in 442 00:24:04,600 --> 00:24:06,679 Speaker 1: the hurricane. It's like if your house gets flattened and 443 00:24:06,680 --> 00:24:08,639 Speaker 1: you need money to revite, you can make a claim 444 00:24:08,680 --> 00:24:11,120 Speaker 1: and you get money from the federal government. You can 445 00:24:11,160 --> 00:24:15,080 Speaker 1: make a claim. If the coronavirus flattens you financially, you 446 00:24:15,119 --> 00:24:17,080 Speaker 1: can go get a claim and get help. So I 447 00:24:17,119 --> 00:24:19,480 Speaker 1: think there are structures. I mean the f MAP like 448 00:24:19,560 --> 00:24:21,720 Speaker 1: has been used in this way to get money to states. 449 00:24:21,800 --> 00:24:24,400 Speaker 1: I think thinking hard about how you could take um 450 00:24:24,800 --> 00:24:28,199 Speaker 1: FEMA and turn that into trees as a disaster. Like 451 00:24:28,280 --> 00:24:31,639 Speaker 1: to me, that's like first order is like help people 452 00:24:31,760 --> 00:24:34,639 Speaker 1: not die. But you know on this like helping people 453 00:24:34,680 --> 00:24:37,120 Speaker 1: not die. That one of the benefits of getting money 454 00:24:37,160 --> 00:24:41,680 Speaker 1: to everyone is it is a totally sad fact in 455 00:24:41,680 --> 00:24:45,199 Speaker 1: the United States, but there are individuals who do not 456 00:24:45,280 --> 00:24:49,160 Speaker 1: seek medical care because they because of the cost. So 457 00:24:50,119 --> 00:24:53,119 Speaker 1: over ten percent of US adults last year said that 458 00:24:53,160 --> 00:24:55,640 Speaker 1: they didn't go see a position when they were sick 459 00:24:55,760 --> 00:24:58,240 Speaker 1: because they didn't think they know, because of the cost 460 00:24:58,320 --> 00:25:01,040 Speaker 1: not to pay for it. Now, this is like the 461 00:25:01,160 --> 00:25:03,359 Speaker 1: last thing that we would want people to do is 462 00:25:03,400 --> 00:25:05,960 Speaker 1: to stay at home, you know, not go to the 463 00:25:06,000 --> 00:25:07,439 Speaker 1: doctor because I don't have the money to pay for 464 00:25:07,440 --> 00:25:09,800 Speaker 1: the care. I think what's even more likely is they're 465 00:25:09,800 --> 00:25:11,360 Speaker 1: going to say, well, if I go to the hospital 466 00:25:11,400 --> 00:25:13,639 Speaker 1: and I test positive, they're not going to let me 467 00:25:13,640 --> 00:25:17,360 Speaker 1: go to work. I need to go to work. So 468 00:25:17,480 --> 00:25:20,639 Speaker 1: the United States has this aspect of like, if we 469 00:25:20,720 --> 00:25:23,680 Speaker 1: don't get some extra financial support to people right now 470 00:25:24,320 --> 00:25:27,640 Speaker 1: the virus, this is going to be worse. It could 471 00:25:27,680 --> 00:25:29,359 Speaker 1: be worse here, despite the fact that we have this 472 00:25:29,480 --> 00:25:33,040 Speaker 1: incredible health system, and like we can save people in 473 00:25:33,040 --> 00:25:35,920 Speaker 1: the United States, but no other country can when they 474 00:25:35,960 --> 00:25:38,359 Speaker 1: get like really sick, but they got to go to 475 00:25:38,400 --> 00:25:41,280 Speaker 1: the doctor, right And I don't know, and this thing 476 00:25:41,320 --> 00:25:43,560 Speaker 1: is so infectious. So I think there's this very like 477 00:25:44,119 --> 00:25:48,119 Speaker 1: difficult interplay between the health aspects and the economic aspects 478 00:25:48,160 --> 00:25:51,000 Speaker 1: and just everything the way it's rolling together does not 479 00:25:51,480 --> 00:25:55,080 Speaker 1: look good. Yeah, in some ways, it's it's kind of 480 00:25:55,119 --> 00:25:58,879 Speaker 1: disappointing that we're talking about physical stimulus in the form 481 00:25:58,960 --> 00:26:02,680 Speaker 1: of pay out UH and tax reductions and that sort 482 00:26:02,680 --> 00:26:06,480 Speaker 1: of thing when probably the first line of defense um 483 00:26:06,520 --> 00:26:09,880 Speaker 1: to an economic hit pause from the coronavirus is health 484 00:26:09,880 --> 00:26:13,800 Speaker 1: care policy. And now having said that, I am going 485 00:26:13,840 --> 00:26:17,960 Speaker 1: to smoothly segue to asking you about monetary policy, which 486 00:26:18,000 --> 00:26:21,760 Speaker 1: is probably even less important on the scale of saving 487 00:26:21,800 --> 00:26:27,479 Speaker 1: people's lives. But I mentioned the federal reserves emergency interest 488 00:26:27,600 --> 00:26:31,480 Speaker 1: rate reduction. What do you think of that as one 489 00:26:31,560 --> 00:26:35,680 Speaker 1: way to sort of help out with the economic hit? Uh? 490 00:26:35,720 --> 00:26:37,919 Speaker 1: And we've seen a lot of stress in the markets, 491 00:26:38,280 --> 00:26:41,800 Speaker 1: tightening of financial conditions, things like that. So could the 492 00:26:41,880 --> 00:26:45,439 Speaker 1: right cut help with that sort of stress, even if 493 00:26:45,480 --> 00:26:51,920 Speaker 1: it doesn't necessarily immediately roll into the real economy. Okay, yeah, 494 00:26:52,040 --> 00:26:53,879 Speaker 1: so I will go to the FED. I wanted like 495 00:26:54,000 --> 00:26:57,520 Speaker 1: one less in your segue piece about the first response 496 00:26:57,520 --> 00:27:00,199 Speaker 1: here should be through the health care system, and I 497 00:27:00,240 --> 00:27:01,880 Speaker 1: just didn't want to point out, you know, last week 498 00:27:01,920 --> 00:27:05,080 Speaker 1: we did have the President signed Congress and acted a 499 00:27:05,240 --> 00:27:09,440 Speaker 1: eight point six billion dollar um legislation, and it was 500 00:27:09,520 --> 00:27:12,640 Speaker 1: largely for health fund like to hospitals work on the virus. 501 00:27:13,160 --> 00:27:14,639 Speaker 1: I think, you know, that's a good step, and that 502 00:27:14,720 --> 00:27:16,840 Speaker 1: was really the first piece of legislation that came out. 503 00:27:17,400 --> 00:27:20,280 Speaker 1: Eight point six billion dollars is an insult like that 504 00:27:20,440 --> 00:27:23,359 Speaker 1: is nowhere near the amount of money so I think 505 00:27:23,400 --> 00:27:25,200 Speaker 1: we kind of got the idea right that that's where 506 00:27:25,240 --> 00:27:26,800 Speaker 1: we need to go first. But I don't think people 507 00:27:26,800 --> 00:27:30,600 Speaker 1: have really like latched onto how big this needs to 508 00:27:30,680 --> 00:27:34,439 Speaker 1: be and which actually does segue very well into the 509 00:27:34,440 --> 00:27:39,600 Speaker 1: FED piece. So the so the Federal reserve to do 510 00:27:39,640 --> 00:27:41,479 Speaker 1: whatever it can do. You know, the FED has two 511 00:27:41,520 --> 00:27:44,400 Speaker 1: primary roles that the lender of last resort. I hope 512 00:27:44,400 --> 00:27:46,159 Speaker 1: we don't get there with this one, but you know 513 00:27:46,400 --> 00:27:50,320 Speaker 1: they'll be ready. Uh, and their monetary policy is there 514 00:27:50,320 --> 00:27:53,000 Speaker 1: to stabilize the business cycle. So this is exactly when 515 00:27:53,040 --> 00:27:55,200 Speaker 1: the economy looks like it's going south. The FED uses 516 00:27:55,240 --> 00:27:57,919 Speaker 1: the tools it has to the extent it can to 517 00:27:58,080 --> 00:28:01,680 Speaker 1: help shorten the reset. Shouldn't make it less severe, right, 518 00:28:02,160 --> 00:28:05,479 Speaker 1: So the and and I have full faith that the 519 00:28:05,480 --> 00:28:08,600 Speaker 1: FED officials are you know, will do their level best 520 00:28:08,640 --> 00:28:10,680 Speaker 1: and they will be creative. Like so I'm not worried 521 00:28:10,680 --> 00:28:13,439 Speaker 1: about hitting the zero lower bound. Anyone who says, oh, 522 00:28:13,480 --> 00:28:16,400 Speaker 1: we should save the ammunition so you know, we don't 523 00:28:16,400 --> 00:28:18,480 Speaker 1: go And I was like, what the ammunition is here 524 00:28:18,520 --> 00:28:23,200 Speaker 1: for this moment? Like fire away, um when they think 525 00:28:23,240 --> 00:28:28,240 Speaker 1: it's appropriate. Right. So, but the problem is the primary 526 00:28:28,240 --> 00:28:32,960 Speaker 1: transmission mechanism whether it's Federal funds rate or it's asset 527 00:28:33,040 --> 00:28:35,600 Speaker 1: back purchases, and you, I mean Rose and Grand wants 528 00:28:35,600 --> 00:28:38,719 Speaker 1: to purchase other assets, go for it. But at this point, 529 00:28:39,360 --> 00:28:43,280 Speaker 1: all of this is going through moving down the long 530 00:28:43,400 --> 00:28:47,760 Speaker 1: term interest rate, monking around with some financial asset. It's 531 00:28:47,800 --> 00:28:52,880 Speaker 1: just the interest rates are so low, Like the debt 532 00:28:52,960 --> 00:28:56,800 Speaker 1: was cheap before the Fed FED cut fifty basis points, 533 00:28:56,800 --> 00:28:59,160 Speaker 1: and it's cheap now. Actually it's really cheap now. I 534 00:28:59,160 --> 00:29:02,320 Speaker 1: mean tenure treasure reason are so low. I mean I 535 00:29:02,360 --> 00:29:04,480 Speaker 1: was joking with someone about like what's going to hit 536 00:29:04,520 --> 00:29:06,880 Speaker 1: the zero lower bound first, the tenure treasuries or the 537 00:29:06,920 --> 00:29:10,640 Speaker 1: Fed funds rate. I mean, it's just it's absurd. And 538 00:29:10,680 --> 00:29:14,720 Speaker 1: so what's happened is the primary way that the Fed 539 00:29:14,840 --> 00:29:18,760 Speaker 1: has to support an economy in time of trouble. It's 540 00:29:18,880 --> 00:29:24,520 Speaker 1: just not effective, like you so, But the upside there's 541 00:29:24,520 --> 00:29:29,160 Speaker 1: a silver lining to this, is it because treasury yields 542 00:29:29,160 --> 00:29:31,600 Speaker 1: are so like, it's so cheap to borrow right now, 543 00:29:31,840 --> 00:29:34,840 Speaker 1: there is an incredible demand for US treasuries, which are 544 00:29:34,840 --> 00:29:39,040 Speaker 1: the safest asset in the entire world, like borrow the 545 00:29:39,080 --> 00:29:41,920 Speaker 1: money like this, I mean, the markets are screaming at 546 00:29:41,960 --> 00:29:45,560 Speaker 1: Congress to do fiscal policy. So it's like the FED 547 00:29:45,640 --> 00:29:48,000 Speaker 1: doesn't have the tools they and I mean I'm sure 548 00:29:48,120 --> 00:29:51,080 Speaker 1: they will continue to cut um. You know, they will 549 00:29:51,120 --> 00:29:52,800 Speaker 1: open up. I mean, especially if it gets into any 550 00:29:52,880 --> 00:29:55,600 Speaker 1: kind of need for emergency lending. Like they'll do what 551 00:29:55,640 --> 00:29:58,080 Speaker 1: they can. I mean, they have some things I gotta 552 00:29:58,160 --> 00:30:01,600 Speaker 1: have signed off by Treasury. Now they didn't both or UM, 553 00:30:01,640 --> 00:30:05,080 Speaker 1: but like they there's no there's absolutely no way that 554 00:30:05,160 --> 00:30:07,280 Speaker 1: they are enough. And they know what they've been saying 555 00:30:07,320 --> 00:30:11,800 Speaker 1: for years fiscal policy. You have to help us, um, 556 00:30:11,840 --> 00:30:14,440 Speaker 1: you know. But I've gotten increasingly frustrated. I think over 557 00:30:14,480 --> 00:30:17,040 Speaker 1: the weekend, I was wrote a blog post trying that 558 00:30:17,120 --> 00:30:18,920 Speaker 1: was really like how can we get money out to people? 559 00:30:18,960 --> 00:30:21,960 Speaker 1: And I actually it was kicking around through this money 560 00:30:21,960 --> 00:30:25,200 Speaker 1: finance fiscal policy, which is actually the way the FED 561 00:30:25,360 --> 00:30:30,040 Speaker 1: could in theory get money out. UM. But it's you know, 562 00:30:30,360 --> 00:30:34,040 Speaker 1: derisively called like the helicopter money, and so Ben Bernik 563 00:30:34,040 --> 00:30:36,840 Speaker 1: you got his nickname. I refused to call it helicopter money. UM. 564 00:30:37,000 --> 00:30:40,800 Speaker 1: But like that's a tool has never been used. I mean, 565 00:30:40,840 --> 00:30:45,040 Speaker 1: it is absolutely ridiculous. But like that, it feels like 566 00:30:45,160 --> 00:30:47,920 Speaker 1: somehow the most hopeful because it doesn't involve a like 567 00:30:48,480 --> 00:30:49,920 Speaker 1: their potentially could be a way to do it that 568 00:30:49,960 --> 00:30:52,479 Speaker 1: the FED does it totally on its own. Like we 569 00:30:52,520 --> 00:30:56,560 Speaker 1: should never have a political system that is so dysfunctional 570 00:30:56,920 --> 00:31:00,200 Speaker 1: that it requires an unelected body to do it is 571 00:31:00,280 --> 00:31:03,960 Speaker 1: right for the country. And like this money based physical 572 00:31:04,200 --> 00:31:06,480 Speaker 1: like this is just absurd, Like we shouldn't be doing that, 573 00:31:06,520 --> 00:31:09,239 Speaker 1: We shouldn't even be talking about that. But let's just 574 00:31:09,440 --> 00:31:13,160 Speaker 1: re emphasized like physical policy has to happen, it cannot 575 00:31:13,200 --> 00:31:16,080 Speaker 1: be the FED. I think you make a really excellent 576 00:31:16,200 --> 00:31:18,680 Speaker 1: point there, because obviously we have come to rely so 577 00:31:18,760 --> 00:31:21,960 Speaker 1: much on monetary policy, and that is the first thing 578 00:31:21,960 --> 00:31:23,920 Speaker 1: that we heard out of the White House is not 579 00:31:24,080 --> 00:31:28,440 Speaker 1: a fiscal response but sort of browbeating Jerome Powell to 580 00:31:28,680 --> 00:31:32,400 Speaker 1: cut more and cut more aggressively. Uh. And but the 581 00:31:32,480 --> 00:31:35,160 Speaker 1: question that arises is how much is that because monetary 582 00:31:35,200 --> 00:31:39,920 Speaker 1: policy is the best tool versus how much our political 583 00:31:39,960 --> 00:31:42,959 Speaker 1: system is so broken that the only entity that we 584 00:31:43,000 --> 00:31:45,800 Speaker 1: can rely on to do anything is the unelected one 585 00:31:46,080 --> 00:31:49,640 Speaker 1: where the people at the FOMC don't have to answer 586 00:31:49,720 --> 00:31:52,080 Speaker 1: the voters. Worth noting to you used to be an 587 00:31:52,120 --> 00:31:55,240 Speaker 1: economist at the Federal Reserve for people who don't know 588 00:31:55,280 --> 00:31:58,680 Speaker 1: your background. So before we go, though, UM, let's just 589 00:31:59,000 --> 00:32:03,040 Speaker 1: uh sum it up. So President Trump, maybe he's listening 590 00:32:03,040 --> 00:32:04,800 Speaker 1: to the podcast, He's like, I really want to have 591 00:32:05,120 --> 00:32:07,920 Speaker 1: Claudia on. We need to or into the White House 592 00:32:08,120 --> 00:32:11,280 Speaker 1: to save the economy, just sort of real quickly, give 593 00:32:11,360 --> 00:32:14,880 Speaker 1: us your three bullet points. This is how we prevent 594 00:32:15,560 --> 00:32:18,800 Speaker 1: the coronavirus from ending the expansion. So they need to 595 00:32:18,840 --> 00:32:22,600 Speaker 1: act now. They need to go big, and they need 596 00:32:22,640 --> 00:32:25,520 Speaker 1: to be creative. Like I said, all the tools are there, 597 00:32:25,920 --> 00:32:28,360 Speaker 1: some of them to be able to act now and 598 00:32:28,400 --> 00:32:30,960 Speaker 1: to move really quickly, there will need to be some 599 00:32:31,000 --> 00:32:34,080 Speaker 1: creativity like I talked about thinking about FEMA natural disaster 600 00:32:34,480 --> 00:32:39,360 Speaker 1: areas with a lot of other uh policies. You just 601 00:32:39,960 --> 00:32:41,760 Speaker 1: the policies are there, you just got to do it. 602 00:32:41,800 --> 00:32:43,520 Speaker 1: I think right now it seems one of the biggest 603 00:32:43,600 --> 00:32:48,520 Speaker 1: hurdles is taking on debt and they just somehow that 604 00:32:48,600 --> 00:32:50,800 Speaker 1: wasn't okay a few years ago, but now it's not. 605 00:32:50,960 --> 00:32:53,000 Speaker 1: But I mean really like this is the time to 606 00:32:53,120 --> 00:32:57,000 Speaker 1: step up. And the only way that we are going 607 00:32:57,040 --> 00:33:01,360 Speaker 1: to avoid people getting to a painful place financially and 608 00:33:01,480 --> 00:33:05,320 Speaker 1: health wise is we need everybody working together, like we 609 00:33:05,360 --> 00:33:07,840 Speaker 1: need the FED cutting We need Congress pushing out money 610 00:33:07,840 --> 00:33:11,320 Speaker 1: to states. We need the administration supporting all of this. 611 00:33:11,400 --> 00:33:14,800 Speaker 1: There are things administration can do today to boost paychecks 612 00:33:14,840 --> 00:33:17,360 Speaker 1: for workers that don't even require Congress. So there's like 613 00:33:17,440 --> 00:33:19,760 Speaker 1: all these tools that are out there that we've used 614 00:33:19,800 --> 00:33:23,120 Speaker 1: in recessions past, and they're just there has to be 615 00:33:23,200 --> 00:33:26,080 Speaker 1: this political commitment to we're going to do it, and 616 00:33:26,080 --> 00:33:28,880 Speaker 1: we're going to do it together. Claudia, thank you very 617 00:33:28,960 --> 00:33:30,920 Speaker 1: much for taking the time to join us again. I 618 00:33:30,960 --> 00:33:34,200 Speaker 1: know you're in high demand because everybody is talking about 619 00:33:34,200 --> 00:33:36,720 Speaker 1: this urgent need for fiscal stimulus, and you're one of 620 00:33:36,760 --> 00:33:39,800 Speaker 1: the people who has been writing about and fleshing out 621 00:33:39,840 --> 00:33:42,880 Speaker 1: ideas for a while now. So appreciate you coming back 622 00:33:43,000 --> 00:33:46,680 Speaker 1: on the podcast and hopefully people listen to your ideas 623 00:33:46,720 --> 00:33:51,320 Speaker 1: and we don't have a completely unnecessary economic disaster on 624 00:33:51,440 --> 00:33:54,880 Speaker 1: top of the impending health business. I agree, Thank you, 625 00:33:55,640 --> 00:34:08,120 Speaker 1: Thanks Claudia, Tracy. I'm really glad we had Claudia back 626 00:34:08,160 --> 00:34:11,000 Speaker 1: on and what she articulated in terms of the sort 627 00:34:11,000 --> 00:34:16,280 Speaker 1: of sense of frustration, uh, watching policymakers act so slowly 628 00:34:16,360 --> 00:34:19,600 Speaker 1: both on the health front on the economic front, wanting 629 00:34:19,640 --> 00:34:22,480 Speaker 1: to go small it's like, what did we waste the 630 00:34:22,560 --> 00:34:27,480 Speaker 1: last ten years arguing about if that's still where we are. Yeah, 631 00:34:27,560 --> 00:34:31,319 Speaker 1: it's it's that lack of political will that always comes up, 632 00:34:31,920 --> 00:34:34,600 Speaker 1: you know, even when we have discussions about modern monetary 633 00:34:34,719 --> 00:34:37,600 Speaker 1: theory and stuff like that. But I also really liked 634 00:34:37,640 --> 00:34:41,560 Speaker 1: her point about the Federal Reserve and people sort of 635 00:34:41,600 --> 00:34:44,200 Speaker 1: relying on the Fed to make the first move and 636 00:34:44,320 --> 00:34:48,720 Speaker 1: essentially be the grown ups in the room in many ways. 637 00:34:48,920 --> 00:34:51,800 Speaker 1: And you know, we are talking about an unelected body 638 00:34:51,840 --> 00:34:57,239 Speaker 1: that should have a very limited mandate, but here we 639 00:34:57,280 --> 00:35:02,960 Speaker 1: are right. It is it's a depressing The reliance on 640 00:35:03,040 --> 00:35:06,960 Speaker 1: monetary policy, particularly in developed markets in the West, has 641 00:35:07,040 --> 00:35:11,799 Speaker 1: simultaneously been not particularly effective from a growth standpoint. We 642 00:35:11,880 --> 00:35:14,800 Speaker 1: know that the recovery after the crisis was too slow. 643 00:35:14,840 --> 00:35:17,320 Speaker 1: It took forever to get enough people back to work. 644 00:35:17,600 --> 00:35:21,160 Speaker 1: Wage growth has been mediocre, so A, it hasn't been 645 00:35:21,160 --> 00:35:26,200 Speaker 1: particularly effective, and B it does sort of indicate this 646 00:35:26,400 --> 00:35:28,359 Speaker 1: rot and it's not just in the U S event. 647 00:35:28,400 --> 00:35:31,840 Speaker 1: I mean, like, where are the political leaders in Europe? 648 00:35:31,840 --> 00:35:35,759 Speaker 1: Where's Angela Merkel? Whereas others who are sort of looking 649 00:35:35,760 --> 00:35:37,439 Speaker 1: at the same thing. I mean, they dealt with their 650 00:35:37,520 --> 00:35:40,080 Speaker 1: crisis they had the financial crisis, that they had the 651 00:35:40,120 --> 00:35:45,080 Speaker 1: Euro Area crisis, and yet it's like this weird paralysis 652 00:35:45,160 --> 00:35:49,920 Speaker 1: among elected leaders. So hopefully that changes, and again that 653 00:35:49,960 --> 00:35:53,319 Speaker 1: we don't have to have a you know, compound the 654 00:35:53,320 --> 00:35:56,200 Speaker 1: health disaster with the end of the recovery, but it 655 00:35:56,320 --> 00:35:59,040 Speaker 1: might happen with economic pain. I mean, I guess the 656 00:35:59,080 --> 00:36:02,800 Speaker 1: good news and I really hesitate to call this good news, 657 00:36:02,880 --> 00:36:06,400 Speaker 1: but certainly in some places, some parts of the world, 658 00:36:06,520 --> 00:36:10,320 Speaker 1: like Hong Kong, where they are giving out these cash 659 00:36:10,360 --> 00:36:13,719 Speaker 1: handouts a thousand dollars in Hong Kong, We're going to 660 00:36:13,840 --> 00:36:17,359 Speaker 1: have some data relatively soon on whether or not that 661 00:36:17,440 --> 00:36:20,360 Speaker 1: helped at all. And Hong Kong, of course is suffering 662 00:36:20,400 --> 00:36:23,080 Speaker 1: from twin shocks of the coronavirus as well as the 663 00:36:23,080 --> 00:36:27,440 Speaker 1: fallout from the protest last year, so on the plus side, 664 00:36:28,120 --> 00:36:31,080 Speaker 1: and I really hesitate to say that, we will get 665 00:36:31,360 --> 00:36:34,440 Speaker 1: some evidence of whether or not this kind of fiscal 666 00:36:34,440 --> 00:36:37,640 Speaker 1: stimulus can work well. Also in the meantime, with any 667 00:36:37,719 --> 00:36:41,879 Speaker 1: luck knock on wood, you in Hong Kong are sort 668 00:36:41,920 --> 00:36:43,759 Speaker 1: of coming out of the dark light at the end 669 00:36:43,800 --> 00:36:47,239 Speaker 1: of this tunnel of this crisis, whereas here in the 670 00:36:47,360 --> 00:36:49,640 Speaker 1: US it really has that feel of like we're just 671 00:36:50,120 --> 00:36:52,080 Speaker 1: we're just on the verge of going into it. So 672 00:36:52,560 --> 00:36:54,800 Speaker 1: we will. We will look to you in Hong Kong 673 00:36:54,880 --> 00:36:59,400 Speaker 1: hopefully hopefully your future is right there, and then hopefully 674 00:36:59,400 --> 00:37:03,319 Speaker 1: our future is bright here as well soon thereafter. Yeah, look, 675 00:37:03,360 --> 00:37:06,040 Speaker 1: I'll tell everyone when I start spending again. How about that. 676 00:37:06,880 --> 00:37:10,120 Speaker 1: This has been another episode of the All Thoughts Podcast. 677 00:37:10,239 --> 00:37:12,960 Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at 678 00:37:13,000 --> 00:37:16,480 Speaker 1: Tracy Alloway, and I'm Joe Wisantal. You can follow me 679 00:37:16,640 --> 00:37:19,439 Speaker 1: on Twitter at the Stalwart, and you should follow our 680 00:37:19,440 --> 00:37:23,719 Speaker 1: guests on Twitter. Claudia Sam She's at Claudia Underscore Some 681 00:37:24,600 --> 00:37:27,800 Speaker 1: s A h M. And you should follow our producer 682 00:37:27,880 --> 00:37:31,360 Speaker 1: on Twitter, Laura Carlson. She's at Laura M. Carlson. Follow 683 00:37:31,440 --> 00:37:35,040 Speaker 1: the Bloomberg head of podcast, Francesca Levi at Francesca Today, 684 00:37:35,520 --> 00:37:38,520 Speaker 1: and check out all of our podcasts under the handle 685 00:37:39,000 --> 00:38:00,640 Speaker 1: at podcast. Thanks for listening. Te