1 00:00:11,200 --> 00:00:15,280 Speaker 1: Hello, and welcome to another episode of the Odd Lots podcast. 2 00:00:15,320 --> 00:00:20,159 Speaker 1: I'm Joe Wisenthal and I'm Tracy Alloway. So, Tracy, you know, 3 00:00:20,239 --> 00:00:23,560 Speaker 1: one of the big things that we've been talking about 4 00:00:23,680 --> 00:00:26,680 Speaker 1: maybe a little bit on the podcast, but I would say, uh, 5 00:00:26,880 --> 00:00:31,280 Speaker 1: finance media, ecomedia in general, is this idea of the 6 00:00:31,840 --> 00:00:37,080 Speaker 1: monetary to fiscal handoff. Oh yeah, that is the big theme, 7 00:00:37,120 --> 00:00:39,440 Speaker 1: and it's sort of the big thing that a lot 8 00:00:39,520 --> 00:00:42,280 Speaker 1: of people are hanging their hopes on for economic growth. 9 00:00:42,360 --> 00:00:45,440 Speaker 1: So the spiel that you've been hearing a lot is 10 00:00:45,520 --> 00:00:49,160 Speaker 1: that monetary policy has failed in various ways to lift 11 00:00:49,280 --> 00:00:52,800 Speaker 1: inflation and to boost economic growth in a significant way, 12 00:00:53,159 --> 00:00:56,280 Speaker 1: and so it is now up to the government side 13 00:00:56,360 --> 00:01:00,880 Speaker 1: to actually enact fiscal stimulus and do it that way. Right. 14 00:01:00,920 --> 00:01:02,800 Speaker 1: I think there's like a couple of things going on. 15 00:01:02,880 --> 00:01:05,720 Speaker 1: I mean, I think a there's the fact that people 16 00:01:05,880 --> 00:01:09,679 Speaker 1: have been pretty disappointed with the pace of growth in 17 00:01:09,720 --> 00:01:13,240 Speaker 1: the wake of the financial crisis. There's the fact that 18 00:01:13,440 --> 00:01:17,759 Speaker 1: in uh much of the developed world, there may literally, 19 00:01:18,000 --> 00:01:20,959 Speaker 1: according to some people, being no further scope for monetary 20 00:01:21,040 --> 00:01:24,000 Speaker 1: policy as rates are more or less pinned a zero. 21 00:01:24,160 --> 00:01:27,200 Speaker 1: So even if things are okay now there's this expectation 22 00:01:27,840 --> 00:01:30,759 Speaker 1: that central banks don't have a lot of Jews. And 23 00:01:31,000 --> 00:01:33,000 Speaker 1: you know something that we have talked about, just this 24 00:01:33,120 --> 00:01:35,959 Speaker 1: idea that um, you know, in the wake of the 25 00:01:36,000 --> 00:01:39,840 Speaker 1: financial crisis, growth aside, that all of the sort of 26 00:01:39,920 --> 00:01:44,960 Speaker 1: old rules and old frameworks are being questioned once again. Yeah, 27 00:01:45,120 --> 00:01:47,680 Speaker 1: I think that's right, But of course I guess the 28 00:01:47,760 --> 00:01:50,040 Speaker 1: key thing in all of this is that it's not 29 00:01:50,360 --> 00:01:52,720 Speaker 1: central banks you are going to be responsible for the 30 00:01:52,760 --> 00:01:56,640 Speaker 1: next phase. It's governments, right, And with governments you tend 31 00:01:56,680 --> 00:02:02,720 Speaker 1: to get a hecky dose of politics and often disagreement. Right. 32 00:02:02,840 --> 00:02:06,920 Speaker 1: That's the tricky part because one in theory nice thing, 33 00:02:07,040 --> 00:02:09,520 Speaker 1: and it's debatable whether it's nice, but one in theory 34 00:02:09,639 --> 00:02:13,200 Speaker 1: nice thing about relying on monetary policy is it can 35 00:02:13,280 --> 00:02:18,240 Speaker 1: be conducted by ostensibly independent institutions that don't have to 36 00:02:18,600 --> 00:02:21,080 Speaker 1: go so much by political whims or worry about getting 37 00:02:21,240 --> 00:02:26,519 Speaker 1: re elected. Whereas when you rely on fiscal policy, you 38 00:02:26,639 --> 00:02:30,120 Speaker 1: rely on elected officials, often who have who have counter 39 00:02:30,320 --> 00:02:34,240 Speaker 1: goals to each other. Maybe politicians don't want to boost 40 00:02:34,240 --> 00:02:38,760 Speaker 1: the economy when their opposition is in power. Things like that. Uh, 41 00:02:38,840 --> 00:02:43,320 Speaker 1: Fiscal policy arguably reacts much slower, so although it sounds 42 00:02:43,400 --> 00:02:47,640 Speaker 1: nice to have a handoff, so to speak, it's a 43 00:02:47,760 --> 00:02:50,080 Speaker 1: it's a lot trickier than just saying we need to 44 00:02:50,160 --> 00:02:53,680 Speaker 1: rely more on fiscal policy. Yeah, which is why it's 45 00:02:54,080 --> 00:02:58,359 Speaker 1: what is it now? And we're still talking about the 46 00:02:58,440 --> 00:03:02,360 Speaker 1: possibility of a big round of fiscal stimulus in a 47 00:03:02,400 --> 00:03:04,360 Speaker 1: lot of places, even though it feels like we've been 48 00:03:04,360 --> 00:03:07,280 Speaker 1: talking about it for a long time, right, and even 49 00:03:07,320 --> 00:03:10,880 Speaker 1: in places which every economist almost in the entire world 50 00:03:10,960 --> 00:03:13,919 Speaker 1: would say, yes, please spend more money. A good example 51 00:03:13,919 --> 00:03:16,680 Speaker 1: of that would say be Germany. It just doesn't matter. 52 00:03:16,800 --> 00:03:20,679 Speaker 1: It's so much more arbitrary and unpredictable when you're going 53 00:03:20,760 --> 00:03:25,800 Speaker 1: to get the fiscal response than uh than say monetary policy, 54 00:03:25,840 --> 00:03:29,440 Speaker 1: which can be adjusted extremely quickly. And this is something 55 00:03:29,480 --> 00:03:32,880 Speaker 1: that I remember we spoke about with Lord Robert Skidelski. 56 00:03:33,080 --> 00:03:35,680 Speaker 1: He was talking about the need for a sort of 57 00:03:35,800 --> 00:03:41,000 Speaker 1: automatic fiscal stabilizer that could kick in when the economy 58 00:03:41,400 --> 00:03:46,520 Speaker 1: was in trouble and sort of bypass whatever political gridlock 59 00:03:46,680 --> 00:03:51,960 Speaker 1: might otherwise stop it from happening. Well, that is a 60 00:03:52,200 --> 00:03:55,840 Speaker 1: perfect way to introduce our guest, because our guest has 61 00:03:55,880 --> 00:04:00,120 Speaker 1: been doing work on exactly this question. So how do 62 00:04:00,160 --> 00:04:03,640 Speaker 1: you get fiscal policy to work in a timely manner, 63 00:04:03,720 --> 00:04:07,240 Speaker 1: in a predictable manner, in a matter that's not as 64 00:04:07,320 --> 00:04:11,280 Speaker 1: much about the um the political cycles, in a manner 65 00:04:11,320 --> 00:04:16,040 Speaker 1: that's actually well targeted and time to avoid or mitigate 66 00:04:16,080 --> 00:04:18,720 Speaker 1: the effects of recession. And that is going to be 67 00:04:19,279 --> 00:04:23,440 Speaker 1: our discussion today. Great, I can't wait, all right, So, 68 00:04:23,560 --> 00:04:25,760 Speaker 1: without further ado, I want to bring in Claudia Psam. 69 00:04:25,880 --> 00:04:29,920 Speaker 1: She is the director of macroeconomic Policy at the Washington 70 00:04:30,120 --> 00:04:35,080 Speaker 1: Center for Equitable Growth. And Uh, Claudia, thank you very 71 00:04:35,120 --> 00:04:37,479 Speaker 1: much for joining us. Yeah, thank you for having me 72 00:04:37,520 --> 00:04:41,280 Speaker 1: on the show. I'm really excited. Awesome. Well, before we 73 00:04:41,360 --> 00:04:44,719 Speaker 1: get into your work, and uh, we've we've talked about 74 00:04:44,839 --> 00:04:48,640 Speaker 1: this work you've been doing in terms of improving the 75 00:04:48,760 --> 00:04:52,800 Speaker 1: speed and efficacy, UM and predictability of fiscal policy, just 76 00:04:52,839 --> 00:04:55,640 Speaker 1: tell us a little bit about your background. You were 77 00:04:55,680 --> 00:04:58,600 Speaker 1: at the Federal Reserve for a long time, right, Yes, 78 00:04:58,720 --> 00:05:02,200 Speaker 1: so I was at the Federal Reserve Board of Governors 79 00:05:02,200 --> 00:05:05,120 Speaker 1: in d C until last November. So I'm very new 80 00:05:05,160 --> 00:05:09,400 Speaker 1: being on the outside. And I think my education as 81 00:05:09,440 --> 00:05:12,880 Speaker 1: a macro economist at the FED so very much in 82 00:05:12,920 --> 00:05:18,000 Speaker 1: the monetary policy space was unique because I started in 83 00:05:18,040 --> 00:05:21,680 Speaker 1: the summer of two thousand and seven. My first forecast 84 00:05:21,920 --> 00:05:25,760 Speaker 1: as a consumption expert at the Board was in January 85 00:05:25,760 --> 00:05:29,680 Speaker 1: of two thousand eight. My first year learning how to 86 00:05:29,839 --> 00:05:34,440 Speaker 1: do macro forecasting was a birth by fire. As one 87 00:05:34,480 --> 00:05:37,040 Speaker 1: of my colleagues, did you get it right? No one 88 00:05:37,080 --> 00:05:39,719 Speaker 1: got it right. And I think for me it was 89 00:05:39,800 --> 00:05:42,240 Speaker 1: interesting because in my first year, just like a lot 90 00:05:42,320 --> 00:05:44,960 Speaker 1: of people out of grad school, I had an immense 91 00:05:45,000 --> 00:05:48,599 Speaker 1: amount of impostor syndrome. But at some point I realized 92 00:05:48,720 --> 00:05:52,239 Speaker 1: every single macro economist at that point in time should 93 00:05:52,279 --> 00:05:57,280 Speaker 1: be having impostor syndrome, because that first year I learned 94 00:05:57,279 --> 00:05:59,920 Speaker 1: how to do macro forecasting when none of the forecast 95 00:06:00,200 --> 00:06:03,400 Speaker 1: models worked. I mean, they never work in a recession. 96 00:06:03,440 --> 00:06:06,919 Speaker 1: It's just it's such a severe contraction. That's not no 97 00:06:06,960 --> 00:06:10,039 Speaker 1: one would ever forecast a recession like it happened next 98 00:06:10,120 --> 00:06:12,279 Speaker 1: year because we just we don't have a way to 99 00:06:12,440 --> 00:06:17,640 Speaker 1: predict that. They're very unpredictable by nature. So I, like 100 00:06:17,680 --> 00:06:21,360 Speaker 1: I said, I had a very different education in macro forecasting, 101 00:06:21,520 --> 00:06:24,560 Speaker 1: and frankly it has damaged me in terms of believing 102 00:06:25,120 --> 00:06:28,400 Speaker 1: that the economy always recovers and that we should trust 103 00:06:29,080 --> 00:06:34,839 Speaker 1: our models, our expertise, even among a really strong, hard 104 00:06:34,880 --> 00:06:38,960 Speaker 1: working group of economists, I think strongly we've missed it 105 00:06:39,000 --> 00:06:42,640 Speaker 1: before the recession, in the financial crisis, but frankly the recession, 106 00:06:42,680 --> 00:06:45,560 Speaker 1: how slow it was, how much we didn't understand that. 107 00:06:45,560 --> 00:06:48,840 Speaker 1: That was really my hardest time as a forecaster at 108 00:06:48,880 --> 00:06:51,240 Speaker 1: the board. Can I just say I had a really 109 00:06:51,240 --> 00:06:57,000 Speaker 1: similar experience because I got into really financial financial journalism 110 00:06:57,040 --> 00:07:00,880 Speaker 1: in September of two thousand eight, and I remember even 111 00:07:00,960 --> 00:07:04,080 Speaker 1: financial journalists that have been doing this for ten years 112 00:07:04,160 --> 00:07:07,600 Speaker 1: were really confused about everything that was happening, and I 113 00:07:07,640 --> 00:07:09,679 Speaker 1: was just writing about it, and I felt a little 114 00:07:09,680 --> 00:07:12,320 Speaker 1: bit uncomfortable. But then I realized that actually no one 115 00:07:12,440 --> 00:07:14,640 Speaker 1: had any idea what was going on at that time, 116 00:07:14,680 --> 00:07:18,520 Speaker 1: so everyone was pretty much starting from ground zero. So 117 00:07:19,080 --> 00:07:21,600 Speaker 1: I kind of wanted to ask you when you saw 118 00:07:21,640 --> 00:07:25,520 Speaker 1: the health of the consumer actually start to deteriorate before 119 00:07:25,640 --> 00:07:28,440 Speaker 1: the Great Recession, But obviously, since you made your first 120 00:07:28,480 --> 00:07:32,320 Speaker 1: forecast in January two eight, that doesn't really apply. So 121 00:07:32,440 --> 00:07:35,440 Speaker 1: let me ask instead, when did you see the health 122 00:07:35,440 --> 00:07:40,400 Speaker 1: of the consumer start to really pick up after that recession. 123 00:07:40,840 --> 00:07:44,440 Speaker 1: So I think as background to this my research, my dissertation, 124 00:07:45,240 --> 00:07:50,840 Speaker 1: I used household survey data, responses from household to major 125 00:07:50,920 --> 00:07:56,560 Speaker 1: surveys like the Michigan Survey, Healthy Retirement Survey, Healthy Retirement Study. 126 00:07:56,880 --> 00:08:01,320 Speaker 1: This is an unusual background. I am a macro economist, 127 00:08:01,360 --> 00:08:03,960 Speaker 1: I was trained to be a macro economist, but my 128 00:08:04,080 --> 00:08:09,920 Speaker 1: research has primarily been applied microeconomics. So studying household behavior 129 00:08:10,920 --> 00:08:13,440 Speaker 1: by looking at household behavior is opposed to just it 130 00:08:13,480 --> 00:08:17,640 Speaker 1: all aggregated up. And I remember late in two thousand 131 00:08:17,680 --> 00:08:20,200 Speaker 1: and seven because I started to go to briefings and 132 00:08:20,240 --> 00:08:22,840 Speaker 1: get a sense of where I had landed, and there 133 00:08:22,920 --> 00:08:26,720 Speaker 1: was a discussion about consumer sentiment from the Michigan Survey 134 00:08:27,000 --> 00:08:31,160 Speaker 1: and how it had really started to deteriorate. And it 135 00:08:31,240 --> 00:08:34,840 Speaker 1: was puzzling given all the other macroeconomic data that was 136 00:08:34,880 --> 00:08:40,280 Speaker 1: coming in, like consumer spending personally, it just didn't quite connect. 137 00:08:40,320 --> 00:08:43,400 Speaker 1: And I can remember being in a boardroom briefing. There 138 00:08:43,440 --> 00:08:46,880 Speaker 1: was an exchange between the governors and the staff saying, well, 139 00:08:46,880 --> 00:08:50,319 Speaker 1: what's up with consumers? And you know our best well, 140 00:08:50,360 --> 00:08:53,920 Speaker 1: we don't know, and then it went into oh, this 141 00:08:54,080 --> 00:08:56,920 Speaker 1: is fusehold. We should call him up and see what's 142 00:08:56,960 --> 00:09:00,120 Speaker 1: going on. And no one shut down this conversation, And 143 00:09:00,200 --> 00:09:02,440 Speaker 1: I was just about ready to crawl under my chair 144 00:09:02,559 --> 00:09:05,880 Speaker 1: because those five household and having worked on a lot 145 00:09:05,920 --> 00:09:10,960 Speaker 1: of household surveys, they are chosen to be representative of 146 00:09:11,040 --> 00:09:14,120 Speaker 1: all adults, all households in the United States. So the 147 00:09:14,160 --> 00:09:17,200 Speaker 1: idea that we were brushing it off is some inconvenient 148 00:09:17,280 --> 00:09:19,640 Speaker 1: data point that didn't set in with the rest. That 149 00:09:19,720 --> 00:09:22,960 Speaker 1: really caused some alarm bells. But I was really knew. 150 00:09:23,040 --> 00:09:25,120 Speaker 1: I wasn't, you know, in a place to jump up 151 00:09:25,160 --> 00:09:28,600 Speaker 1: in the boardroom and correct governor and you know, staff 152 00:09:28,600 --> 00:09:32,000 Speaker 1: that were senior to me. But in hindsight, and this 153 00:09:32,080 --> 00:09:34,240 Speaker 1: was a project I worked on when I was at 154 00:09:34,240 --> 00:09:38,360 Speaker 1: the Council of Economic Advisors and and sixteen I did 155 00:09:38,360 --> 00:09:42,560 Speaker 1: a retrospective for the senior staff there. Jason Furman was 156 00:09:42,640 --> 00:09:46,160 Speaker 1: the chair, and it was about how we can look 157 00:09:46,200 --> 00:09:50,800 Speaker 1: back on the consumer sentiment data the both the expectations 158 00:09:50,920 --> 00:09:52,880 Speaker 1: and then the recovery. I paid a lot of attention 159 00:09:52,920 --> 00:09:57,000 Speaker 1: to the income expectations and you can see how households 160 00:09:57,280 --> 00:10:01,000 Speaker 1: were they got it and not because they're excellent forecast 161 00:10:01,120 --> 00:10:04,440 Speaker 1: they were living this right. And so I spent a 162 00:10:04,520 --> 00:10:08,080 Speaker 1: lot of time with the Michigan Survey thinking hard. I mean, 163 00:10:08,120 --> 00:10:10,079 Speaker 1: these data are hard to work with. There are there 164 00:10:10,160 --> 00:10:13,439 Speaker 1: is some noise, you know it. You know, the people 165 00:10:13,480 --> 00:10:17,839 Speaker 1: answer questions and it's not clear what they intend by 166 00:10:17,880 --> 00:10:20,960 Speaker 1: what they're saying. But you put it all together, there's 167 00:10:21,000 --> 00:10:23,280 Speaker 1: a lot there to learn. So I feel like they 168 00:10:23,280 --> 00:10:25,800 Speaker 1: were telling us early on, which makes sense. It was 169 00:10:25,800 --> 00:10:29,000 Speaker 1: a consumption lead recession. The housing markets started to turn 170 00:10:29,080 --> 00:10:34,120 Speaker 1: south before it was showing up in the whole economy clearly, 171 00:10:34,800 --> 00:10:38,640 Speaker 1: and frankly you saw early in two thousand eleven two 172 00:10:38,960 --> 00:10:43,640 Speaker 1: tents we broke them. The income expectations series moved in 173 00:10:43,679 --> 00:10:48,120 Speaker 1: a way from Americans are by nature optimistic, they had 174 00:10:48,320 --> 00:10:53,520 Speaker 1: a discreete shift in becoming much more pessimistic about their 175 00:10:53,559 --> 00:10:58,120 Speaker 1: income ex expectations. I talked with Richard Kurtin at the time, 176 00:10:58,240 --> 00:11:00,800 Speaker 1: who has run the Michigan Survey since year I was born, 177 00:11:01,679 --> 00:11:05,240 Speaker 1: so back, you know, forty plus years, and he agreed 178 00:11:05,280 --> 00:11:08,320 Speaker 1: with me, there's basically only other two series, the interest 179 00:11:08,440 --> 00:11:12,320 Speaker 1: rate expectations around the time of vulcre In, these income 180 00:11:12,360 --> 00:11:15,680 Speaker 1: expectations after the Great Recession, those are the only two 181 00:11:15,679 --> 00:11:18,120 Speaker 1: series you can point to, and just there is a 182 00:11:18,240 --> 00:11:23,200 Speaker 1: level shift, very abrupt, and that that meant something, and 183 00:11:23,240 --> 00:11:26,520 Speaker 1: that was something I spent a lot of time repeatedly 184 00:11:26,880 --> 00:11:31,000 Speaker 1: in forecast meetings among staff pointing to you know, and 185 00:11:31,040 --> 00:11:33,760 Speaker 1: it was one of many things that were considered. There 186 00:11:33,840 --> 00:11:36,480 Speaker 1: was a lot to learn from households. Now when we 187 00:11:36,520 --> 00:11:39,400 Speaker 1: look back, we can see they were they were right. 188 00:11:39,880 --> 00:11:43,680 Speaker 1: That was a big part of my life as a 189 00:11:43,720 --> 00:11:48,080 Speaker 1: forecaster over a decade at the FED, and it was 190 00:11:48,120 --> 00:11:52,319 Speaker 1: where I was bringing my research, expertise, my passions about 191 00:11:52,320 --> 00:11:55,280 Speaker 1: the fact that economists really need to listen to people 192 00:11:55,320 --> 00:11:57,160 Speaker 1: and we need to be creative about a way to 193 00:11:57,240 --> 00:12:00,480 Speaker 1: take what people are telling us one by one or 194 00:12:00,559 --> 00:12:03,000 Speaker 1: community by community, and figure out how to roll it 195 00:12:03,080 --> 00:12:05,920 Speaker 1: up in a way that the Federal Reserve, who really 196 00:12:05,960 --> 00:12:08,400 Speaker 1: does need to make policy for the country as a whole, 197 00:12:09,000 --> 00:12:13,120 Speaker 1: how they can integrate those voices and when they're especially 198 00:12:13,160 --> 00:12:17,720 Speaker 1: when they're puzzling, into our frameworks and use that to 199 00:12:17,800 --> 00:12:22,040 Speaker 1: guide monetary policy. I already feel like we could do 200 00:12:22,280 --> 00:12:25,120 Speaker 1: a massive to our discussion on just what that's like 201 00:12:25,480 --> 00:12:28,200 Speaker 1: being a staffer at the FED, and I I hope 202 00:12:28,240 --> 00:12:29,640 Speaker 1: you write a book on it, because now I just 203 00:12:29,640 --> 00:12:32,520 Speaker 1: have a million more questions on that alone. But in 204 00:12:32,559 --> 00:12:36,400 Speaker 1: the interest of time and everything, I want to skip 205 00:12:36,400 --> 00:12:38,200 Speaker 1: ahead a little bit, and I feel like when we 206 00:12:38,240 --> 00:12:42,839 Speaker 1: get to discussing the structure of how to do fiscal stimulus, 207 00:12:42,840 --> 00:12:46,400 Speaker 1: your work on household consumption is going to be very 208 00:12:46,440 --> 00:12:49,600 Speaker 1: relevant to that. But before we get to that, this 209 00:12:49,720 --> 00:12:55,000 Speaker 1: idea now today that okay, we need some sort of handoff, 210 00:12:55,120 --> 00:12:58,720 Speaker 1: that we need to put more emphasis on fiscal policy, 211 00:12:58,760 --> 00:13:00,920 Speaker 1: that we can't just have this central bank be the 212 00:13:00,960 --> 00:13:05,360 Speaker 1: economic stabilizer of last resort. Where do you think that's 213 00:13:05,400 --> 00:13:07,600 Speaker 1: mostly coming from. Do you think it's coming from the 214 00:13:07,600 --> 00:13:10,319 Speaker 1: slow pace of recovery? Is that the fact that rates 215 00:13:10,360 --> 00:13:13,720 Speaker 1: are zero and there's there's perception that central banks are 216 00:13:13,720 --> 00:13:16,680 Speaker 1: out of AMMO? Or is it kind of what you're 217 00:13:16,720 --> 00:13:21,079 Speaker 1: saying in terms of the soul searching among economists that 218 00:13:21,800 --> 00:13:25,440 Speaker 1: just the models, the basic models that have been used 219 00:13:25,440 --> 00:13:28,600 Speaker 1: for so long, just don't work as as people thought. 220 00:13:29,200 --> 00:13:33,120 Speaker 1: So I would point to a number of factors. I'll 221 00:13:33,240 --> 00:13:35,760 Speaker 1: keep it brief in terms of sticking to what I 222 00:13:35,800 --> 00:13:39,360 Speaker 1: think are the three main ones, and starting with the 223 00:13:39,400 --> 00:13:42,240 Speaker 1: idea of economist soul searching, which was your last point. 224 00:13:42,320 --> 00:13:44,280 Speaker 1: I do think that's a piece of it. I have 225 00:13:44,440 --> 00:13:50,280 Speaker 1: been discouraged by how limited the soul searching among economists 226 00:13:50,280 --> 00:13:56,880 Speaker 1: macroeconomists has been over the last decade. I don't, Well, 227 00:13:56,920 --> 00:13:59,040 Speaker 1: I have reasons for that, but we'll set those aside, 228 00:13:59,520 --> 00:14:03,160 Speaker 1: and I think where the soul searching has begun and 229 00:14:03,360 --> 00:14:06,200 Speaker 1: I'll take whatever we can get is in terms of 230 00:14:06,200 --> 00:14:11,160 Speaker 1: monetary policy. So the zero lower bound has complicated to 231 00:14:11,480 --> 00:14:18,600 Speaker 1: how economists, how the Federals Reserve approaches their mandate from Congress. 232 00:14:18,679 --> 00:14:21,680 Speaker 1: So and right now the Federal Reserve is undergoing a 233 00:14:21,720 --> 00:14:27,560 Speaker 1: framework review. I do not have high hopes for those 234 00:14:27,560 --> 00:14:31,160 Speaker 1: outcomes this summer, but I am so happy that we 235 00:14:31,200 --> 00:14:36,200 Speaker 1: are having that discussion in a very serious, model based way. 236 00:14:36,280 --> 00:14:38,360 Speaker 1: So I think that is great. So that's one piece, 237 00:14:38,640 --> 00:14:41,560 Speaker 1: because it be hard not to have a rethink. I 238 00:14:41,600 --> 00:14:46,640 Speaker 1: think the rethink is coming from monetary policy itself. Now, 239 00:14:47,120 --> 00:14:51,520 Speaker 1: a second factor that I personally think is why we 240 00:14:51,600 --> 00:14:56,960 Speaker 1: are having this debate is fiscal policy did not show 241 00:14:57,080 --> 00:15:01,120 Speaker 1: up in the way it has in previous recessions. In 242 00:15:01,200 --> 00:15:03,840 Speaker 1: the beginnings, you had Bush passing the tax cuts, you 243 00:15:03,960 --> 00:15:08,480 Speaker 1: had the American Recovery and Reinvestment Act, as you know, 244 00:15:08,640 --> 00:15:12,920 Speaker 1: Obama's first big economic policy in two thousand nine. So 245 00:15:13,000 --> 00:15:17,640 Speaker 1: on the front end, we saw some aggressive fiscal policy 246 00:15:17,760 --> 00:15:24,600 Speaker 1: responses completely on target. Now, what we didn't see is 247 00:15:24,640 --> 00:15:28,920 Speaker 1: that as the recovery went on, Congress pulled back on 248 00:15:29,040 --> 00:15:33,120 Speaker 1: fiscal policy support to the economy in a way that 249 00:15:33,600 --> 00:15:40,120 Speaker 1: was markedly different than past recessions. So and again I 250 00:15:40,160 --> 00:15:43,440 Speaker 1: studied consumer behavior. I followed very closely because of my 251 00:15:43,560 --> 00:15:47,880 Speaker 1: job as a consumption forecaster, each of these stimulus packages 252 00:15:47,920 --> 00:15:51,040 Speaker 1: that went out broadly to households. So what we saw 253 00:15:51,240 --> 00:15:54,480 Speaker 1: at the end of twenty twelve, the payroll tax cut, 254 00:15:54,520 --> 00:15:57,440 Speaker 1: which was the last of these big stimulus two households. 255 00:15:57,800 --> 00:16:03,680 Speaker 1: It ended the unemployment rate was still notably elevated, and 256 00:16:03,720 --> 00:16:06,920 Speaker 1: they just they pulled back for for reasons. There were 257 00:16:06,920 --> 00:16:10,920 Speaker 1: discussions about debt that to me is a big problem. 258 00:16:11,040 --> 00:16:14,000 Speaker 1: And then because they did that, and this was an 259 00:16:14,000 --> 00:16:18,600 Speaker 1: important part of the automatic stabilization direct payments to households 260 00:16:18,600 --> 00:16:20,920 Speaker 1: that I'm sure we'll get to talking about in a 261 00:16:20,960 --> 00:16:25,080 Speaker 1: few minutes. The reason that I had the automatic piece, 262 00:16:25,080 --> 00:16:27,080 Speaker 1: and it wasn't just about when it turns on. It 263 00:16:27,200 --> 00:16:30,440 Speaker 1: was a commitment to keep doing the payments until the 264 00:16:30,520 --> 00:16:34,800 Speaker 1: unemployment rate came down. That is very specifically a reaction 265 00:16:35,280 --> 00:16:37,840 Speaker 1: from the fact that when Congress had to get together 266 00:16:37,840 --> 00:16:40,000 Speaker 1: and do it in a discretionary way, like they had 267 00:16:40,040 --> 00:16:44,560 Speaker 1: to vote on it in real time. They didn't do it. 268 00:16:44,960 --> 00:16:47,680 Speaker 1: They pulled back on the economic support. So I think 269 00:16:47,720 --> 00:16:51,080 Speaker 1: that's the second one. The third one is the economy 270 00:16:51,360 --> 00:16:54,840 Speaker 1: told us we are not We did not approach this 271 00:16:55,360 --> 00:16:58,760 Speaker 1: in a way that was sufficient. The tools that we 272 00:16:58,880 --> 00:17:04,000 Speaker 1: had going into recession and the recovery just didn't didn't 273 00:17:04,000 --> 00:17:07,879 Speaker 1: do it. This was a slow and long recovery. The 274 00:17:07,960 --> 00:17:11,359 Speaker 1: unemployment rate stayed high for way too long. Both of 275 00:17:11,359 --> 00:17:15,600 Speaker 1: these are destructive. They hurt people, they hurt businesses, they 276 00:17:15,640 --> 00:17:18,800 Speaker 1: hurt the economy, I mean productivity ground, They're just there 277 00:17:18,840 --> 00:17:22,720 Speaker 1: are so many bad consequences that we have seen in 278 00:17:22,720 --> 00:17:27,040 Speaker 1: the economy that this has forced a discussion about, Okay, 279 00:17:27,200 --> 00:17:29,240 Speaker 1: what more can we do? What are the tools that 280 00:17:29,280 --> 00:17:32,399 Speaker 1: we haven't put on the table that we have to 281 00:17:32,440 --> 00:17:35,439 Speaker 1: think hard about right now? So just before we get 282 00:17:35,520 --> 00:17:38,280 Speaker 1: to the automatic stabilizer bit, I just want to dig 283 00:17:38,280 --> 00:17:41,960 Speaker 1: in a little bit more, but like, why the focus 284 00:17:42,800 --> 00:17:47,639 Speaker 1: on fiscal policy specifically as a way of um of 285 00:17:47,760 --> 00:17:50,240 Speaker 1: boosting the economy. And I know that sounds I know 286 00:17:50,320 --> 00:17:52,760 Speaker 1: that sounds like a weird question, but I just remember 287 00:17:52,920 --> 00:17:57,399 Speaker 1: after the financial crisis, there was so much emphasis on 288 00:17:57,520 --> 00:18:01,960 Speaker 1: monetary policies. So why did you, as a researcher decide 289 00:18:02,040 --> 00:18:04,640 Speaker 1: to look more at the fiscal side of things instead 290 00:18:04,640 --> 00:18:07,000 Speaker 1: of talking about, you know, how the fet should be 291 00:18:07,040 --> 00:18:10,040 Speaker 1: calibrating its rates, or maybe if we went to negative 292 00:18:10,080 --> 00:18:12,800 Speaker 1: interest rates that would help, or maybe we should do 293 00:18:12,880 --> 00:18:15,800 Speaker 1: more QWI or a different form of kuwi. How did 294 00:18:15,840 --> 00:18:19,280 Speaker 1: you settle on fiscal So it was my job. So 295 00:18:19,480 --> 00:18:21,920 Speaker 1: as one of the experts at the board, and keep 296 00:18:21,920 --> 00:18:24,639 Speaker 1: in mind there are five hundred economists at the Federal 297 00:18:24,720 --> 00:18:28,720 Speaker 1: Reserve Board who are working on supporting the board in 298 00:18:28,720 --> 00:18:34,280 Speaker 1: in many different dimensions, my job was to understand consumers, 299 00:18:34,560 --> 00:18:38,359 Speaker 1: their behavior, how they were reacting to many things in 300 00:18:38,400 --> 00:18:43,479 Speaker 1: the economy, income changing, their wealth being decimated. Uh So 301 00:18:43,520 --> 00:18:45,240 Speaker 1: I had to think about a lot of dimensions, but 302 00:18:45,280 --> 00:18:51,440 Speaker 1: an important dimension was how is the government supporting these households. Now, 303 00:18:51,440 --> 00:18:55,840 Speaker 1: it may seem counterintuitive, Federal Reserve officials do not go 304 00:18:56,080 --> 00:18:58,880 Speaker 1: to the Hill, or at least the very rare occasion, 305 00:18:58,960 --> 00:19:01,520 Speaker 1: do not go to the Hill and tell Congress how 306 00:19:01,520 --> 00:19:05,679 Speaker 1: to do their job. You can point to episodes where 307 00:19:05,920 --> 00:19:09,320 Speaker 1: Bernanky as the chair went and in some sense, in 308 00:19:09,400 --> 00:19:13,000 Speaker 1: a very macro button down way, begged Congress to do more, 309 00:19:13,800 --> 00:19:17,560 Speaker 1: but that isn't the federal and they certainly won't comment 310 00:19:17,760 --> 00:19:22,040 Speaker 1: on exactly what do we think that whatever fiscal program 311 00:19:22,080 --> 00:19:24,239 Speaker 1: is doing to the economy, what you know, what are 312 00:19:24,280 --> 00:19:27,480 Speaker 1: the effects? They will never say that in public, but 313 00:19:27,600 --> 00:19:31,840 Speaker 1: in private we have to know that because monetary policy 314 00:19:31,920 --> 00:19:35,960 Speaker 1: needs to work around the edges, so to speak. So 315 00:19:36,240 --> 00:19:40,600 Speaker 1: my research program right my first forecast in two thousand 316 00:19:40,640 --> 00:19:44,320 Speaker 1: eight was when we put the Bush stimulus payments into 317 00:19:44,359 --> 00:19:46,960 Speaker 1: the forecast, so right out of the gate, I was 318 00:19:47,000 --> 00:19:51,520 Speaker 1: working on research. I was fortunate that my adviser, Matthew 319 00:19:51,520 --> 00:19:55,240 Speaker 1: Shapiro at Michigan and his colleague Joel Slimrod had a 320 00:19:55,320 --> 00:20:00,600 Speaker 1: research program already going on measuring household responses the spending 321 00:20:00,640 --> 00:20:05,160 Speaker 1: response to fiscal stimulus, and the board was more than 322 00:20:05,200 --> 00:20:09,359 Speaker 1: happy to put the financial resources into continuing to run 323 00:20:09,400 --> 00:20:11,359 Speaker 1: these household surveys. And again they were done on the 324 00:20:11,400 --> 00:20:16,280 Speaker 1: Michigan Survey, and uh, Matthew and Joel were generous to 325 00:20:16,400 --> 00:20:20,000 Speaker 1: let me join in on the project and that measuring 326 00:20:20,040 --> 00:20:23,520 Speaker 1: fiscal stimulus. We worked on the stimulus payments in two 327 00:20:23,560 --> 00:20:26,000 Speaker 1: thousand eight, we worked on making work pay in two 328 00:20:26,040 --> 00:20:29,240 Speaker 1: thousand nine and ten the payroll tax cut in two thousands, 329 00:20:29,480 --> 00:20:32,040 Speaker 1: eleven and twelve. So this was a huge part of 330 00:20:32,080 --> 00:20:35,919 Speaker 1: my research program, and at every stage I was presenting 331 00:20:36,040 --> 00:20:40,040 Speaker 1: in the boardroom the results from those findings those surveys. 332 00:20:40,080 --> 00:20:42,760 Speaker 1: In addition to this thing about the board, we don't 333 00:20:42,760 --> 00:20:44,359 Speaker 1: march in there and just say well, this is my 334 00:20:44,520 --> 00:20:47,879 Speaker 1: view and my research. As a staff member, I was 335 00:20:48,119 --> 00:20:51,480 Speaker 1: doing very serious study of the other papers that were 336 00:20:51,520 --> 00:20:55,600 Speaker 1: being written at the time. Jonathan Parker and Nick Alaylis, 337 00:20:55,600 --> 00:20:58,679 Speaker 1: with very different co authors at different points in time, 338 00:20:59,520 --> 00:21:04,639 Speaker 1: did the research that economists, they can't deny it was 339 00:21:04,680 --> 00:21:07,320 Speaker 1: a gold standard research. Ben Bernankee was clear to let 340 00:21:07,320 --> 00:21:09,080 Speaker 1: me know that their work was gold standard. In my 341 00:21:09,520 --> 00:21:13,720 Speaker 1: mind was not that's okay, but they had for various reasons. 342 00:21:13,800 --> 00:21:16,840 Speaker 1: I won't get into the wonky economist details, but they 343 00:21:16,840 --> 00:21:20,520 Speaker 1: were able to run a study that was everything economists 344 00:21:20,600 --> 00:21:23,520 Speaker 1: want to see in terms of evidence, and they showed 345 00:21:23,760 --> 00:21:28,280 Speaker 1: very clearly that households, when you send them the money, 346 00:21:28,640 --> 00:21:33,000 Speaker 1: they spend it. Now, to normal non economist people, this 347 00:21:33,080 --> 00:21:36,880 Speaker 1: will seem obvious to economists. They believe that you give 348 00:21:36,920 --> 00:21:40,199 Speaker 1: people money and then they calculate the annuity value and 349 00:21:40,280 --> 00:21:43,520 Speaker 1: they like spend it out in five dollar increments over 350 00:21:43,560 --> 00:21:46,399 Speaker 1: the rest of their life, and so that if that 351 00:21:46,560 --> 00:21:49,680 Speaker 1: is the truth, then fiscal stimulus giving money to households 352 00:21:49,720 --> 00:21:52,919 Speaker 1: is not going to be effective. Monetary policy is the 353 00:21:52,960 --> 00:21:55,439 Speaker 1: only game in town according to a lot of the 354 00:21:55,480 --> 00:21:59,639 Speaker 1: models we went into before the Great Recession, and frankly, 355 00:21:59,680 --> 00:22:03,440 Speaker 1: they is they couldn't not send out money. And Congress 356 00:22:03,480 --> 00:22:05,720 Speaker 1: has done this often. This is a way for Congress 357 00:22:05,760 --> 00:22:08,840 Speaker 1: to show the American people like we're doing something to 358 00:22:09,000 --> 00:22:12,880 Speaker 1: help you. After the stimulus payments that Bush sent out, 359 00:22:13,000 --> 00:22:16,480 Speaker 1: after we've been able to study and see it. Economists 360 00:22:16,600 --> 00:22:21,720 Speaker 1: understand the vast majority of them except the fact that 361 00:22:21,800 --> 00:22:27,560 Speaker 1: this works. People spent. So that's a big reason why 362 00:22:27,600 --> 00:22:31,080 Speaker 1: we can have this conversation now, because there's a view 363 00:22:31,119 --> 00:22:34,639 Speaker 1: that there's efficacy behind these policies. I I you know, 364 00:22:34,640 --> 00:22:37,159 Speaker 1: I don't want to do too much economist bashing, but 365 00:22:37,200 --> 00:22:39,280 Speaker 1: at some point we should just do a serious tracy 366 00:22:39,320 --> 00:22:44,240 Speaker 1: of things that are obvious to literally everyone else accept economists, 367 00:22:44,280 --> 00:22:46,479 Speaker 1: such as the fact that if you give people cash 368 00:22:46,880 --> 00:22:49,080 Speaker 1: that's a good thing, that they'll spend it and that 369 00:22:49,080 --> 00:22:51,520 Speaker 1: that will help them. Whereas if you look at it 370 00:22:51,520 --> 00:22:54,280 Speaker 1: through a model, somehow it doesn't happen, but that's a 371 00:22:54,560 --> 00:22:58,040 Speaker 1: that's an aside. So we have these different models for 372 00:22:58,160 --> 00:23:01,840 Speaker 1: how to give households money directly. There's the form that 373 00:23:01,920 --> 00:23:03,960 Speaker 1: bushed it a couple of times, like just cut everyone 374 00:23:03,960 --> 00:23:07,359 Speaker 1: to check. There's payroll tax cuts so that suddenly after 375 00:23:07,400 --> 00:23:09,520 Speaker 1: the tax cut, each paycheck you get a little more 376 00:23:09,560 --> 00:23:13,760 Speaker 1: than you had before. There is there's an employment or 377 00:23:13,840 --> 00:23:17,040 Speaker 1: unemployment insurance so that people lose their job they get 378 00:23:17,080 --> 00:23:19,120 Speaker 1: some sort of money from the government to keep them going. 379 00:23:19,200 --> 00:23:23,080 Speaker 1: So various programs, and we'll get to um the best 380 00:23:23,119 --> 00:23:25,320 Speaker 1: way to design that in a second. But before we 381 00:23:25,359 --> 00:23:29,120 Speaker 1: do that, I want to get to something that has 382 00:23:29,640 --> 00:23:34,399 Speaker 1: made our guest semi famous, I would say, and that 383 00:23:34,560 --> 00:23:36,960 Speaker 1: is helping to answer the question of when, Because it's 384 00:23:36,960 --> 00:23:40,760 Speaker 1: one thing to say, okay, government should give households money, 385 00:23:40,800 --> 00:23:44,560 Speaker 1: but we all know the political problems and uh so 386 00:23:44,600 --> 00:23:46,159 Speaker 1: then you have to arise. So if it's going to 387 00:23:46,240 --> 00:23:50,120 Speaker 1: be done automatically in a downturn or before a downturn, 388 00:23:50,160 --> 00:23:52,720 Speaker 1: you need some sort of trigger so that the payments 389 00:23:52,720 --> 00:23:55,879 Speaker 1: start and they don't and too soon. Claudia, you have 390 00:23:55,960 --> 00:23:58,360 Speaker 1: done work directly on this to the point that there 391 00:23:58,400 --> 00:24:02,200 Speaker 1: now exists the some rule which is now this thing 392 00:24:02,280 --> 00:24:04,560 Speaker 1: out there in the world, which is a rule that 393 00:24:04,680 --> 00:24:09,960 Speaker 1: exists for guiding the government for when to start uh 394 00:24:10,080 --> 00:24:14,080 Speaker 1: spending money to support household So talk to us about 395 00:24:14,240 --> 00:24:17,680 Speaker 1: that part first, this sort of framework that you've developed 396 00:24:17,800 --> 00:24:21,960 Speaker 1: or indicator that you've developed to tell to design a 397 00:24:22,040 --> 00:24:24,920 Speaker 1: program for when the checks start to go out. Yes, 398 00:24:25,080 --> 00:24:28,000 Speaker 1: so that what's been referred to as the SOM rule. 399 00:24:28,160 --> 00:24:31,760 Speaker 1: I have been blown away by the response. I but 400 00:24:31,880 --> 00:24:37,520 Speaker 1: I understand why. So when you spoke with Lord Robert 401 00:24:37,520 --> 00:24:43,000 Speaker 1: Skodowski in the in the conversation mentioned the importance of 402 00:24:43,119 --> 00:24:47,639 Speaker 1: having fiscal rules. So this is not an area that 403 00:24:47,720 --> 00:24:51,159 Speaker 1: economists have had a robust discussion. There has been a 404 00:24:51,280 --> 00:24:55,200 Speaker 1: robust discussion about there being monetary policy rules of various 405 00:24:55,280 --> 00:24:58,959 Speaker 1: kinds that would guide the Fed in some cases central 406 00:24:58,960 --> 00:25:01,720 Speaker 1: banks being held ac ounable to following a rule or 407 00:25:01,720 --> 00:25:05,280 Speaker 1: at least explaining when they deviate from it. So the 408 00:25:05,359 --> 00:25:08,840 Speaker 1: idea that we'd have a fiscal rule, and this is 409 00:25:08,880 --> 00:25:12,800 Speaker 1: absolutely essential for doing anything that's an automatic stabilizer, because 410 00:25:12,800 --> 00:25:15,240 Speaker 1: you have to know when to hit go in a 411 00:25:15,400 --> 00:25:18,440 Speaker 1: responsible way, so you're not blowing a hundred billion dollars 412 00:25:18,840 --> 00:25:23,159 Speaker 1: when there's no reason to so. First to describe the 413 00:25:23,240 --> 00:25:28,040 Speaker 1: SO rule. So what it is is, I look at 414 00:25:28,040 --> 00:25:33,119 Speaker 1: the monthly unemployment rate. This is the statistic on the 415 00:25:33,119 --> 00:25:37,760 Speaker 1: economy that we want. I know several economists that if 416 00:25:37,800 --> 00:25:39,919 Speaker 1: you ask them, if you were stuck on a desert island, 417 00:25:39,920 --> 00:25:43,320 Speaker 1: you could only have one data series to understand the economy. 418 00:25:43,400 --> 00:25:46,800 Speaker 1: That's it. They want the unemployment rate. Totally makes sense. 419 00:25:46,920 --> 00:25:49,600 Speaker 1: I agree. So what I do is I take the 420 00:25:49,600 --> 00:25:53,280 Speaker 1: monthly unemployment rate. I take this three month moving average. 421 00:25:53,800 --> 00:25:57,400 Speaker 1: Is important. Monthly data bumps around, and you don't want 422 00:25:57,400 --> 00:26:00,440 Speaker 1: to overreact to some wiggle in the data, so we 423 00:26:00,560 --> 00:26:04,080 Speaker 1: smooth it out, look at three month moving averages. And 424 00:26:04,080 --> 00:26:06,440 Speaker 1: then what I do is in every month, and keep 425 00:26:06,440 --> 00:26:10,320 Speaker 1: in mind the unemployment rate comes out very soon after 426 00:26:10,640 --> 00:26:12,720 Speaker 1: the month ends, so this is a very quick read 427 00:26:12,760 --> 00:26:16,840 Speaker 1: on the economy. I compare my figure the three month 428 00:26:16,880 --> 00:26:19,560 Speaker 1: average in a month has just come out, and I 429 00:26:19,720 --> 00:26:23,199 Speaker 1: look back over the prior twelve months. And what I 430 00:26:23,280 --> 00:26:26,440 Speaker 1: do is I compare the current month to that low 431 00:26:26,520 --> 00:26:29,800 Speaker 1: over the prior twelve months. I calculate the change. When 432 00:26:30,119 --> 00:26:33,200 Speaker 1: that change is a half a percentage point or more, 433 00:26:33,640 --> 00:26:37,320 Speaker 1: this is a small increase. It's a half a percentage 434 00:26:37,320 --> 00:26:41,159 Speaker 1: point or more. We are in a recession. So I 435 00:26:41,200 --> 00:26:45,119 Speaker 1: look back at recessions in the past, specifically from nineteen 436 00:26:45,280 --> 00:26:49,840 Speaker 1: seventy on. The some rule turns on in every single 437 00:26:49,880 --> 00:26:52,920 Speaker 1: recession two to four months in and there are no 438 00:26:53,119 --> 00:26:57,440 Speaker 1: false positives, so it doesn't turn on outside of a recession. 439 00:26:58,760 --> 00:27:01,840 Speaker 1: And that's a big deal when you're when you need 440 00:27:01,880 --> 00:27:07,080 Speaker 1: a rule to turn on fiscal policy. Now, there there 441 00:27:07,080 --> 00:27:10,800 Speaker 1: are some alternative measures that people have turned to. Economists 442 00:27:10,840 --> 00:27:15,000 Speaker 1: and market watchers look at for a recession, and they 443 00:27:15,080 --> 00:27:17,240 Speaker 1: you can't use them for fiscal rules or they would 444 00:27:17,240 --> 00:27:22,400 Speaker 1: be very substandard. So one that the there is a 445 00:27:22,480 --> 00:27:27,679 Speaker 1: recession dating committee. Their job is to look at a 446 00:27:27,760 --> 00:27:30,640 Speaker 1: whole host of data and they are the ones who 447 00:27:30,920 --> 00:27:35,399 Speaker 1: call the recession. They will specify the quarter, the month 448 00:27:35,760 --> 00:27:38,879 Speaker 1: in which the economy peaked, so that's its highest point 449 00:27:39,520 --> 00:27:42,120 Speaker 1: downhill from there, so they call the peak, which that's 450 00:27:42,160 --> 00:27:46,560 Speaker 1: the beginning of the recession. That announcement comes from them 451 00:27:46,600 --> 00:27:50,919 Speaker 1: often a year after the recession is begun, okay, So 452 00:27:50,960 --> 00:27:54,080 Speaker 1: we can't wait a year to send the checks out, okay, 453 00:27:54,080 --> 00:27:57,240 Speaker 1: because that's just you've lost an opportunity to move quickly 454 00:27:57,760 --> 00:28:00,359 Speaker 1: in a recession. Okay, so that's not going to work. 455 00:28:01,080 --> 00:28:04,600 Speaker 1: The next rule of thumb that's often talked about is 456 00:28:04,680 --> 00:28:09,880 Speaker 1: two quarters of a negative a decline in GDP. Okay, 457 00:28:09,960 --> 00:28:13,080 Speaker 1: this is also not going to work because GDP, unlike 458 00:28:13,080 --> 00:28:15,520 Speaker 1: the unemployment rate, comes out with more of a lag. 459 00:28:15,680 --> 00:28:17,520 Speaker 1: You have to get past the end of the quarter 460 00:28:18,160 --> 00:28:21,400 Speaker 1: about a month afterwards you get a read on GDP growth. 461 00:28:22,040 --> 00:28:25,080 Speaker 1: You'd have to get you know, more than six months 462 00:28:25,080 --> 00:28:29,320 Speaker 1: into a recession to see this, and GDP growth revises 463 00:28:29,359 --> 00:28:31,639 Speaker 1: a lot. There's a lot of source data that comes 464 00:28:31,640 --> 00:28:36,280 Speaker 1: in later that if you look at the GDP growth 465 00:28:36,359 --> 00:28:40,040 Speaker 1: data through the recession, if you look at the annual revisions, 466 00:28:40,080 --> 00:28:43,000 Speaker 1: which is a forecaster. I did look at those very carefully. 467 00:28:43,600 --> 00:28:49,080 Speaker 1: According to that data, our first read was not negative enough. Right, 468 00:28:49,200 --> 00:28:52,280 Speaker 1: So there's both a delay and not as clear of 469 00:28:52,320 --> 00:28:55,520 Speaker 1: a picture as you would want to do stimulus. So 470 00:28:55,560 --> 00:28:59,480 Speaker 1: the rule that I developed could be used, like you 471 00:28:59,520 --> 00:29:04,320 Speaker 1: could use is this to kick on fiscal stimulus. And 472 00:29:04,760 --> 00:29:08,160 Speaker 1: I think even to myself, it was a surprise at 473 00:29:08,160 --> 00:29:12,000 Speaker 1: the response because and I mean I have many FED 474 00:29:12,040 --> 00:29:17,320 Speaker 1: colleagues and former FED even officials who have no They 475 00:29:17,320 --> 00:29:20,040 Speaker 1: are not impressed. They were like, well, we knew this 476 00:29:20,280 --> 00:29:22,920 Speaker 1: a small increase in the unemployment rate, it's bad news. 477 00:29:23,760 --> 00:29:26,360 Speaker 1: After the Sum rule became big, I checked with my 478 00:29:26,440 --> 00:29:28,960 Speaker 1: former boss, Andrew Figura, and I'm like, please tell me 479 00:29:29,040 --> 00:29:32,440 Speaker 1: I did not scoop our internal rule, and he said no. 480 00:29:32,960 --> 00:29:34,600 Speaker 1: But we use as a rule of thumb as a 481 00:29:34,680 --> 00:29:39,160 Speaker 1: three tense increase an unemployment rate. And that's for the FED. Remember, 482 00:29:39,160 --> 00:29:42,480 Speaker 1: the Fed can move faster. If the Fed cuts a 483 00:29:42,560 --> 00:29:46,400 Speaker 1: quarter point, it's not like the deficit blows up. So 484 00:29:46,600 --> 00:29:50,560 Speaker 1: they actually use something a little faster. It has false positives. 485 00:29:50,960 --> 00:29:54,120 Speaker 1: Remember I was really looking for something accurate. So but 486 00:29:54,160 --> 00:29:56,719 Speaker 1: it's in the spirit small rising the unemployment rate or 487 00:29:56,720 --> 00:30:00,640 Speaker 1: bad news. What was shocking to me. And this is 488 00:30:00,680 --> 00:30:03,160 Speaker 1: one of my complaints with the Fed. We bring in 489 00:30:03,200 --> 00:30:05,200 Speaker 1: a lot of information, we think hard about it. We 490 00:30:05,280 --> 00:30:07,440 Speaker 1: know a lot of stuff about the economy, and we 491 00:30:07,520 --> 00:30:10,880 Speaker 1: often don't share it. And so I knew a small 492 00:30:10,880 --> 00:30:13,520 Speaker 1: increase in the unemployee rate was bad news. I frankly 493 00:30:13,600 --> 00:30:16,360 Speaker 1: knew the Sam rule, which I did not name it 494 00:30:16,400 --> 00:30:19,320 Speaker 1: the Sam rule. It was a recession indicator in my chapter. 495 00:30:19,400 --> 00:30:21,239 Speaker 1: I knew it was going to work. I mean I 496 00:30:21,280 --> 00:30:24,640 Speaker 1: spent a lot of Saturday afternoons with the spreadsheet, and 497 00:30:24,720 --> 00:30:27,000 Speaker 1: in the end I pulled all the real time data, 498 00:30:27,320 --> 00:30:30,040 Speaker 1: which is a little extra wonky flourish at the end, 499 00:30:30,320 --> 00:30:32,479 Speaker 1: so I was looking at the unemployment rate as we 500 00:30:32,520 --> 00:30:36,240 Speaker 1: would have seen it in the that actual time. The 501 00:30:36,280 --> 00:30:40,479 Speaker 1: unemployee rate does revise a little bit um, but this 502 00:30:40,600 --> 00:30:45,280 Speaker 1: was important for my approach. It worked. I was blown 503 00:30:45,400 --> 00:30:49,240 Speaker 1: away by the response. My series with my name attached 504 00:30:49,280 --> 00:30:53,040 Speaker 1: to the variable is in Haveor and Bloomberg and then 505 00:30:53,080 --> 00:30:55,480 Speaker 1: it's in FRED. They gave me a FRED T shirt. 506 00:30:55,520 --> 00:30:58,480 Speaker 1: It's like my favorite piece of clothing for those For 507 00:30:58,560 --> 00:31:01,640 Speaker 1: those who don't know, the FRED is the St. Louis 508 00:31:01,680 --> 00:31:05,520 Speaker 1: Federal Reserve Database website charting tool. And if you're like, 509 00:31:05,640 --> 00:31:08,560 Speaker 1: if you don't have a Bloomberg, of course the Bloomberg 510 00:31:08,600 --> 00:31:09,640 Speaker 1: is the best thing in the world. But if you 511 00:31:09,680 --> 00:31:12,800 Speaker 1: don't have a Bloomberg, it is the best website in 512 00:31:12,800 --> 00:31:18,600 Speaker 1: the world for playing around with analyzing economic data. And 513 00:31:18,680 --> 00:31:22,120 Speaker 1: the fact that your indicator got in there is extremely 514 00:31:22,200 --> 00:31:24,240 Speaker 1: cool and I just want to say that. But yeah, 515 00:31:24,360 --> 00:31:27,920 Speaker 1: and an important piece of FRED again, Bloomberg is great. 516 00:31:27,960 --> 00:31:32,800 Speaker 1: The terminals is that it's free. Anybody can get on 517 00:31:32,920 --> 00:31:36,640 Speaker 1: FRED and download the series take a look at it, 518 00:31:37,120 --> 00:31:42,040 Speaker 1: understand what it is. I've been contacted by individuals in 519 00:31:42,160 --> 00:31:46,200 Speaker 1: state governments who are thinking about how could we integrate 520 00:31:46,280 --> 00:31:49,520 Speaker 1: this into It's time to bump up our food stamps. 521 00:31:50,280 --> 00:31:53,800 Speaker 1: It's time to do something at the state level. It 522 00:31:53,840 --> 00:31:56,480 Speaker 1: was then clear to me, and actually I had reactions 523 00:31:56,520 --> 00:31:59,080 Speaker 1: from people who work follow economic policy in d C, 524 00:31:59,360 --> 00:32:03,160 Speaker 1: not monitor terry policy, who told me, they said, Claudie, 525 00:32:03,160 --> 00:32:06,760 Speaker 1: I can't believe this works. And so I realized that 526 00:32:06,760 --> 00:32:09,880 Speaker 1: while at the FED we got this and frankly, like 527 00:32:10,000 --> 00:32:15,120 Speaker 1: financial people who uh do economic forecasting on Wall Street, 528 00:32:15,520 --> 00:32:17,760 Speaker 1: a lot of them have come from the FED and training. 529 00:32:18,040 --> 00:32:20,480 Speaker 1: They knew this. To their clients, knew this, this has 530 00:32:20,520 --> 00:32:25,120 Speaker 1: been a newsletters. But the people in state governments, the 531 00:32:25,200 --> 00:32:28,920 Speaker 1: people doing fiscal policy in d C, they didn't know. 532 00:32:29,840 --> 00:32:35,600 Speaker 1: So that really opens up a whole avenue for policy, 533 00:32:36,000 --> 00:32:40,360 Speaker 1: especially policy rules, fiscal policy rules to be put in place, 534 00:32:40,440 --> 00:32:43,440 Speaker 1: and that could be huge. So I'm proud of this. 535 00:32:43,640 --> 00:32:47,000 Speaker 1: I have a teenage daughter. She about a month ago, 536 00:32:47,160 --> 00:32:49,160 Speaker 1: looked at me in the car and she's like, Mom, 537 00:32:49,240 --> 00:32:52,040 Speaker 1: are you afraid that you've peaked with the somb rule? 538 00:32:52,560 --> 00:32:54,640 Speaker 1: And I was like, oh my gosh, teenagers are the 539 00:32:54,680 --> 00:32:57,520 Speaker 1: best to keep your ego and check UM. But I 540 00:32:57,560 --> 00:32:59,080 Speaker 1: told her, I said, you know, if I'm going to 541 00:32:59,160 --> 00:33:01,800 Speaker 1: be a one trick Onny, this is the trick I 542 00:33:01,880 --> 00:33:04,600 Speaker 1: want like this. This is big and can help people. 543 00:33:24,920 --> 00:33:28,560 Speaker 1: So your idea, though, basically solves two big problems when 544 00:33:28,560 --> 00:33:31,480 Speaker 1: it comes to physical stimulus. So it allows people to 545 00:33:31,800 --> 00:33:36,240 Speaker 1: recognize that a recession is coming. And your idea about 546 00:33:36,400 --> 00:33:41,520 Speaker 1: direct stimulus payments to individuals that allows everyone to pre 547 00:33:41,760 --> 00:33:47,520 Speaker 1: agree on a method too combat that recession. And you 548 00:33:47,600 --> 00:33:51,320 Speaker 1: mentioned some state governments talking about ways that they might 549 00:33:51,360 --> 00:33:57,520 Speaker 1: incorporate it. How hopeful are you that your idea gets 550 00:33:57,560 --> 00:34:01,480 Speaker 1: sort of integrated on UM an official level or maybe 551 00:34:01,520 --> 00:34:04,960 Speaker 1: even a federal level in the US. So I think 552 00:34:05,000 --> 00:34:08,799 Speaker 1: it's really important, right because what I've developed right now 553 00:34:08,840 --> 00:34:11,640 Speaker 1: and what's gotten a lot of attention, is how to 554 00:34:11,680 --> 00:34:15,799 Speaker 1: say we're in a recession. Okay, if that's not paired 555 00:34:16,160 --> 00:34:21,640 Speaker 1: with a policy response that is swift and vigorous, I 556 00:34:21,760 --> 00:34:28,680 Speaker 1: worry about negative responses from consumers, businesses, and markets. Right. 557 00:34:28,800 --> 00:34:31,719 Speaker 1: So I had a friend joke with me the other day. 558 00:34:31,960 --> 00:34:34,400 Speaker 1: It wasn't funny, but joked with me that, oh, the 559 00:34:34,480 --> 00:34:37,160 Speaker 1: next recession, it could be the PSALM recession, and I 560 00:34:37,239 --> 00:34:40,240 Speaker 1: was like, oh, don't, don't do this to me. Because 561 00:34:40,400 --> 00:34:43,480 Speaker 1: there is an aspect of recessions, and again having studied 562 00:34:43,560 --> 00:34:48,480 Speaker 1: consumer expectations, is often referred to as animal spirits. There's 563 00:34:48,480 --> 00:34:51,799 Speaker 1: a part of recessions that get into a very negative 564 00:34:52,239 --> 00:34:55,960 Speaker 1: downward spiral. So if you think there's a recession coming, 565 00:34:56,440 --> 00:34:59,759 Speaker 1: or frankly, households look around and they see people in 566 00:34:59,800 --> 00:35:04,240 Speaker 1: their family, their friends losing their jobs. That can create 567 00:35:04,480 --> 00:35:08,480 Speaker 1: a lot of anxiety up and down the income distribution 568 00:35:08,719 --> 00:35:13,800 Speaker 1: because the vast majority of Americans are one paycheck sometimes 569 00:35:14,080 --> 00:35:18,920 Speaker 1: cut in overtime hours away from having serious financial distress. 570 00:35:19,080 --> 00:35:21,719 Speaker 1: So even if they don't end up losing their job, 571 00:35:22,200 --> 00:35:25,439 Speaker 1: there's a chance they could someone in their family could. 572 00:35:26,200 --> 00:35:29,399 Speaker 1: And so often if they're able to, they will cut 573 00:35:29,440 --> 00:35:32,720 Speaker 1: back in their spending. You know, maybe they're thinking about 574 00:35:32,760 --> 00:35:36,239 Speaker 1: buying a car and they're like, oh, yeah, let's let's 575 00:35:36,280 --> 00:35:39,239 Speaker 1: wait on that because I don't want to commit to 576 00:35:39,280 --> 00:35:42,000 Speaker 1: these payments. Then if I lose my job, it'll just 577 00:35:42,040 --> 00:35:46,359 Speaker 1: be really painful. So if that happens, that's really bad. 578 00:35:46,400 --> 00:35:49,760 Speaker 1: And that's that you see that in recessions, this happens 579 00:35:50,320 --> 00:35:56,880 Speaker 1: so I'm hopeful that we put policies in places in place, 580 00:35:57,480 --> 00:36:01,520 Speaker 1: like the direct payments to households. The it lead households 581 00:36:01,560 --> 00:36:03,960 Speaker 1: know ahead of time, and this could be a positive 582 00:36:05,040 --> 00:36:09,400 Speaker 1: mitigating factor. They would know ahead of time the government 583 00:36:09,520 --> 00:36:13,000 Speaker 1: has their back, the government is going to send them checks. 584 00:36:13,160 --> 00:36:16,480 Speaker 1: This is really straightforward. I think monetary policy is so important. 585 00:36:16,600 --> 00:36:20,640 Speaker 1: Monetary policy is not straightforward. We are never going to 586 00:36:20,680 --> 00:36:25,200 Speaker 1: get the communications clear enough that households will understand the 587 00:36:25,239 --> 00:36:27,840 Speaker 1: Feds got our back. I think it's really important in 588 00:36:27,880 --> 00:36:30,360 Speaker 1: that regard, we'd commit to it. People would know ahead 589 00:36:30,360 --> 00:36:32,560 Speaker 1: of time. It's not just they'd get the money, they 590 00:36:32,719 --> 00:36:35,720 Speaker 1: know that the government is really trying hard to short 591 00:36:35,760 --> 00:36:38,920 Speaker 1: circuit the recession, make it shorter, make it less severe. 592 00:36:39,320 --> 00:36:43,759 Speaker 1: That could have really positive effects on consumers. You could 593 00:36:43,800 --> 00:36:47,400 Speaker 1: have positive effects on employers. They might not be as 594 00:36:47,440 --> 00:36:49,680 Speaker 1: apt to lay people off because they're like, Okay, this 595 00:36:49,800 --> 00:36:52,080 Speaker 1: is we're just gonna ride this out. This isn't gonna 596 00:36:52,160 --> 00:36:55,799 Speaker 1: last long. So there could be huge positive effects. But 597 00:36:55,920 --> 00:36:59,840 Speaker 1: I really worry that if the some rule, this great 598 00:37:00,040 --> 00:37:03,680 Speaker 1: session indicator isn't paired with a commitment to have a 599 00:37:03,719 --> 00:37:07,839 Speaker 1: policy response, it might not turn out well. So I'm 600 00:37:07,960 --> 00:37:10,160 Speaker 1: very motivated right now to work with people on the 601 00:37:10,239 --> 00:37:14,560 Speaker 1: hill to get this figured out. So I'm I'm curious 602 00:37:14,680 --> 00:37:18,960 Speaker 1: if if we got a big enough policy response because 603 00:37:19,200 --> 00:37:24,000 Speaker 1: the Psalm rule, the recession indicator actually flashed up, would 604 00:37:24,000 --> 00:37:28,080 Speaker 1: you then start getting false positives in the recession indicator. 605 00:37:28,239 --> 00:37:30,600 Speaker 1: I guess what I'm asking is is the goal to 606 00:37:31,719 --> 00:37:34,319 Speaker 1: make the effects of the recession less worse than they 607 00:37:34,320 --> 00:37:37,680 Speaker 1: would otherwise be, or is the goal to completely stave 608 00:37:37,719 --> 00:37:42,959 Speaker 1: off the recession that's coming. So remember my indicator says 609 00:37:43,040 --> 00:37:47,000 Speaker 1: we're in a recession. The early stages of a recession, 610 00:37:47,320 --> 00:37:49,640 Speaker 1: it's clear when it starts moving up. So when you 611 00:37:49,680 --> 00:37:52,520 Speaker 1: get to a three tense increase, I mean this, this 612 00:37:52,680 --> 00:37:57,880 Speaker 1: will cause consternation, and maybe in a discretionary way, Congress 613 00:37:57,880 --> 00:38:00,439 Speaker 1: gets ahead of it. I mean the Fed, I said, 614 00:38:00,480 --> 00:38:03,400 Speaker 1: three tents gets them worried. Like there they are likely 615 00:38:03,480 --> 00:38:06,239 Speaker 1: to be moving and at this point they're gonna be 616 00:38:06,239 --> 00:38:08,719 Speaker 1: likely getting real creative about how to deal with the 617 00:38:08,840 --> 00:38:12,160 Speaker 1: zero lower bound. As a macroeconomist, I no longer have 618 00:38:12,320 --> 00:38:16,640 Speaker 1: enough optimism to really say this. But if in some 619 00:38:16,719 --> 00:38:18,879 Speaker 1: way this was enough, and I think there's a lot 620 00:38:18,920 --> 00:38:22,160 Speaker 1: of other automatic stabilizers the Congress ought to be thinking 621 00:38:22,400 --> 00:38:27,080 Speaker 1: very seriously about. But say Congress went big early in 622 00:38:27,080 --> 00:38:32,040 Speaker 1: a recession, there is a possibility that the economic data 623 00:38:32,200 --> 00:38:35,440 Speaker 1: would turn around in such a way that when the 624 00:38:35,480 --> 00:38:38,800 Speaker 1: recession dating Committee at the NBR looks back, they're like, yeah, 625 00:38:39,280 --> 00:38:42,240 Speaker 1: I'm not so sure there's really something there, because remember 626 00:38:42,280 --> 00:38:46,280 Speaker 1: it's not a done deal until they say a recession started. 627 00:38:46,600 --> 00:38:49,360 Speaker 1: I mean, frankly, if if there was that scenario and 628 00:38:49,440 --> 00:38:52,920 Speaker 1: people said the thumberil didn't work, we gave we supported 629 00:38:52,960 --> 00:38:55,960 Speaker 1: all these households, we supported unemployed people, I mean, my goodness, 630 00:38:56,200 --> 00:38:59,600 Speaker 1: I'll take that one. You know, the some non recession 631 00:38:59,719 --> 00:39:02,760 Speaker 1: will just fine with me. That's what I was gonna say. 632 00:39:02,920 --> 00:39:05,719 Speaker 1: So like the question of false positives. Of course, like 633 00:39:05,960 --> 00:39:08,720 Speaker 1: in financial markets, people look at the inverted yield curve. 634 00:39:09,080 --> 00:39:11,600 Speaker 1: But just you know, going back to your point, if 635 00:39:11,640 --> 00:39:14,719 Speaker 1: the worst thing that happens is that households got some 636 00:39:14,840 --> 00:39:18,399 Speaker 1: support and we never really had a declared recession, uh, 637 00:39:18,440 --> 00:39:22,160 Speaker 1: that doesn't seem like a particular disaster in any respects. 638 00:39:22,200 --> 00:39:24,600 Speaker 1: There's one more component to this that I really want 639 00:39:24,680 --> 00:39:28,799 Speaker 1: to make sure we don't miss, and that is the 640 00:39:29,000 --> 00:39:32,280 Speaker 1: right way to structure these household payments, and you talked 641 00:39:32,320 --> 00:39:36,560 Speaker 1: about your work sort of doing the microeconomics of households. 642 00:39:37,360 --> 00:39:38,799 Speaker 1: What is the best way to do it? I mean, 643 00:39:38,800 --> 00:39:41,200 Speaker 1: we have the Bush we we really had it twice 644 00:39:41,280 --> 00:39:43,440 Speaker 1: under Bush, right, I believe we had it in a 645 00:39:43,640 --> 00:39:45,560 Speaker 1: two thousand one or two thousand two they cut a 646 00:39:45,640 --> 00:39:47,839 Speaker 1: check to everyone. Then we had the one in two 647 00:39:47,880 --> 00:39:51,960 Speaker 1: thousand seven. Then we had the payroll tax cuts under Obama, 648 00:39:52,000 --> 00:39:54,399 Speaker 1: which kind of does this accepted only goes to people 649 00:39:54,400 --> 00:39:58,880 Speaker 1: who have payrolls. Based on your research, what is the 650 00:39:58,960 --> 00:40:02,239 Speaker 1: best way to get the most bang for the economic 651 00:40:02,320 --> 00:40:07,920 Speaker 1: buck of sending people cash? So my proposal is to 652 00:40:08,120 --> 00:40:13,560 Speaker 1: send out checks, big checks like five thousand dollars, calibrated 653 00:40:13,600 --> 00:40:16,680 Speaker 1: off how large the economy is, how much spending there 654 00:40:16,760 --> 00:40:19,799 Speaker 1: was going into the recession, So everybody gets a check, 655 00:40:20,160 --> 00:40:23,800 Speaker 1: and frankly, I want those checks to go to everybody. 656 00:40:23,840 --> 00:40:27,640 Speaker 1: That there were some limits on who got the tax 657 00:40:27,719 --> 00:40:30,440 Speaker 1: rebates the fiscal payments in two thousand one and two 658 00:40:30,440 --> 00:40:33,120 Speaker 1: thousand eight. So I want us to go go broad. 659 00:40:33,640 --> 00:40:35,640 Speaker 1: So that's a big piece of it. We already talked 660 00:40:35,640 --> 00:40:38,040 Speaker 1: about this SOM rule. They need to go out as 661 00:40:38,080 --> 00:40:41,840 Speaker 1: soon as possible. The only way to guarantee, that is, 662 00:40:41,880 --> 00:40:47,440 Speaker 1: to get the logistics in place. I in developing my proposal, 663 00:40:47,600 --> 00:40:50,760 Speaker 1: You're right, I drew on my research the other research 664 00:40:50,840 --> 00:40:55,279 Speaker 1: that went on about all these household payments. Sadly, our 665 00:40:55,400 --> 00:40:59,239 Speaker 1: research program we had a lot of different policy responses 666 00:40:59,280 --> 00:41:03,520 Speaker 1: to study because they kept going. So my read of 667 00:41:03,560 --> 00:41:10,520 Speaker 1: that research is direct payments checks really clear, tell people 668 00:41:10,560 --> 00:41:15,319 Speaker 1: they're coming, and do it fast. Now a peace that 669 00:41:15,400 --> 00:41:18,040 Speaker 1: maybe people will think as a sidebar, but I think 670 00:41:18,080 --> 00:41:21,400 Speaker 1: it is important for making all this happen. Is if 671 00:41:21,480 --> 00:41:26,120 Speaker 1: Congress pre commits to doing these payments, then that will 672 00:41:26,200 --> 00:41:30,440 Speaker 1: give the Internal Revenue Service the time to put logistics 673 00:41:30,440 --> 00:41:35,239 Speaker 1: in place. I read for my research for my policy proposal. 674 00:41:35,400 --> 00:41:39,280 Speaker 1: I read the Inspector General reports from the Treasury looking 675 00:41:39,320 --> 00:41:43,240 Speaker 1: back on the two eight stimulus payments. These are fascinating reads. 676 00:41:43,480 --> 00:41:46,360 Speaker 1: I learned a lot looking at them. And essentially everyone 677 00:41:46,400 --> 00:41:48,840 Speaker 1: who worked at the Internal Revenue Service and Social Security 678 00:41:48,840 --> 00:41:50,959 Speaker 1: Administration who worked on this ought to get a gold 679 00:41:50,960 --> 00:41:54,799 Speaker 1: medal for it because they hustled in a way that 680 00:41:55,480 --> 00:42:00,200 Speaker 1: is almost impossible to believe. So they were a old 681 00:42:00,200 --> 00:42:03,439 Speaker 1: to work together because an important piece of the two 682 00:42:03,440 --> 00:42:06,480 Speaker 1: thousand eight stimulus payments, and I am fully on board 683 00:42:06,480 --> 00:42:08,640 Speaker 1: with this. Is they wanted to get it to people 684 00:42:08,680 --> 00:42:12,160 Speaker 1: who did not even have a tax liability two thousand one, 685 00:42:12,160 --> 00:42:17,120 Speaker 1: when entirely through the tax system, have more thoughts on that, 686 00:42:17,200 --> 00:42:20,160 Speaker 1: but setting that aside, when entirely through internal Revenue Service, 687 00:42:20,200 --> 00:42:21,960 Speaker 1: the only people that got it were once who had 688 00:42:21,960 --> 00:42:27,160 Speaker 1: filed a tax return. Many recipients of Social Security benefits 689 00:42:27,160 --> 00:42:30,279 Speaker 1: do not file tax returns, So in two thousand and eight, 690 00:42:30,440 --> 00:42:33,760 Speaker 1: the Social Security Administration did a huge push to tell 691 00:42:34,200 --> 00:42:37,640 Speaker 1: Social Security recipients that they needed to file tax returns. 692 00:42:37,960 --> 00:42:41,040 Speaker 1: They helped get that going, so you had that was 693 00:42:41,080 --> 00:42:43,240 Speaker 1: not a perfect take up, but I mean they really 694 00:42:43,680 --> 00:42:47,160 Speaker 1: they really moved the Internal Revenue Service, got all the 695 00:42:47,200 --> 00:42:50,640 Speaker 1: pieces in place. What's a little bit fascinating is it 696 00:42:50,719 --> 00:42:53,640 Speaker 1: the government they don't have all of our bank account 697 00:42:53,800 --> 00:42:58,560 Speaker 1: numbers or are mailing addresses to send checks. My brother, 698 00:42:58,880 --> 00:43:03,279 Speaker 1: who is has been in agriculture, he never files his 699 00:43:03,360 --> 00:43:06,040 Speaker 1: taxes electronically because he doesn't want the government to know 700 00:43:06,200 --> 00:43:09,000 Speaker 1: his bank account number. So he is not alone and 701 00:43:09,080 --> 00:43:11,239 Speaker 1: in any case, so that actually creates a challenge to 702 00:43:11,280 --> 00:43:15,280 Speaker 1: get the money out. If you know that this these 703 00:43:15,360 --> 00:43:17,319 Speaker 1: checks that we want to get them out, it would 704 00:43:17,360 --> 00:43:20,160 Speaker 1: give you an opportunity to make sure that that infrastructure 705 00:43:20,239 --> 00:43:22,880 Speaker 1: is always in place. It would give you a chance 706 00:43:22,920 --> 00:43:25,759 Speaker 1: to work to try and get people outside of Social 707 00:43:25,760 --> 00:43:29,640 Speaker 1: Security administration who do not receive benefits. So think about 708 00:43:30,360 --> 00:43:34,879 Speaker 1: individuals who received food stamps. They have cards that they 709 00:43:34,960 --> 00:43:37,719 Speaker 1: used to do payments. Those are run at the state level. 710 00:43:37,840 --> 00:43:40,960 Speaker 1: That is an even bigger logistical lift. But there's no 711 00:43:41,000 --> 00:43:44,200 Speaker 1: reason that we can't do that. So if you put 712 00:43:44,239 --> 00:43:46,400 Speaker 1: all of that infrastructure in place, and of course that 713 00:43:46,600 --> 00:43:49,480 Speaker 1: something Congress would have to fund if they were to 714 00:43:49,520 --> 00:43:53,200 Speaker 1: create an automatic, stabilized like direct payments. But wow, that's 715 00:43:53,280 --> 00:43:58,040 Speaker 1: huge and is another little wonky detail. Stimulus payments at 716 00:43:58,040 --> 00:44:01,320 Speaker 1: this point cannot go out during act season, no matter 717 00:44:01,360 --> 00:44:05,560 Speaker 1: how amazing the internal revenue services they are fully on it. 718 00:44:05,640 --> 00:44:09,919 Speaker 1: During tax season. Recessions can happen in tax season, right, 719 00:44:10,000 --> 00:44:12,800 Speaker 1: So if you had a parallel structure that was in place, 720 00:44:13,200 --> 00:44:15,759 Speaker 1: we could do it any time and we could get 721 00:44:15,800 --> 00:44:19,640 Speaker 1: it to everybody. So I think that would be important. 722 00:44:19,880 --> 00:44:22,680 Speaker 1: And this is not just my personal opinion, this is 723 00:44:22,719 --> 00:44:26,240 Speaker 1: my read of the research that this was the most 724 00:44:26,320 --> 00:44:30,040 Speaker 1: effective way in terms of the spending response. I think 725 00:44:30,080 --> 00:44:33,640 Speaker 1: it was the most effective in terms of the political economy. 726 00:44:33,800 --> 00:44:37,360 Speaker 1: Again having worked on these household survey data, so my 727 00:44:37,440 --> 00:44:40,319 Speaker 1: research is very much ask household, what did you do 728 00:44:40,480 --> 00:44:42,960 Speaker 1: with the check or what did you do with the 729 00:44:43,040 --> 00:44:46,960 Speaker 1: extra bump you've got in your your payrolls from making 730 00:44:46,960 --> 00:44:49,520 Speaker 1: work pay or the payroll tax credit. When we worked 731 00:44:49,960 --> 00:44:53,279 Speaker 1: on the Making Work Pay, it was amazing to us 732 00:44:53,320 --> 00:44:57,080 Speaker 1: how many individuals did not even know what making work 733 00:44:57,080 --> 00:44:59,480 Speaker 1: pay was. There was one woman that had some very 734 00:44:59,600 --> 00:45:02,399 Speaker 1: choice comments about what it meant to her to get 735 00:45:02,400 --> 00:45:05,359 Speaker 1: another thirty bucks a month in her paycheck. I mean 736 00:45:05,400 --> 00:45:09,080 Speaker 1: these not only was it completely missed. That was the 737 00:45:09,120 --> 00:45:13,000 Speaker 1: most common era when people fired their tax returns that 738 00:45:13,120 --> 00:45:16,680 Speaker 1: they didn't claim the making work tax credit. Now the 739 00:45:16,719 --> 00:45:19,160 Speaker 1: i R S fixed all of that and people, you know, 740 00:45:19,480 --> 00:45:21,360 Speaker 1: it showed up in their tax returns, but that just 741 00:45:21,360 --> 00:45:26,480 Speaker 1: shows you people did not know. I have many reservations 742 00:45:26,600 --> 00:45:30,600 Speaker 1: about us doing stealth stimulus right because I think that 743 00:45:30,680 --> 00:45:34,319 Speaker 1: the way that households react, how much anxiety they have 744 00:45:34,520 --> 00:45:37,040 Speaker 1: about what's happening in the economy. That's a real thing. 745 00:45:37,440 --> 00:45:39,920 Speaker 1: So why in the world would you want to send 746 00:45:39,960 --> 00:45:43,680 Speaker 1: the money and they don't know it? Now being a 747 00:45:43,719 --> 00:45:47,239 Speaker 1: little strong here, because there is some research. Dick Saylor 748 00:45:47,400 --> 00:45:51,319 Speaker 1: and other behavioral economists had said before this that if 749 00:45:51,360 --> 00:45:53,279 Speaker 1: people don't know they're going to put it in a 750 00:45:53,360 --> 00:45:55,239 Speaker 1: mental account, it's just kind of in their bank and 751 00:45:55,239 --> 00:45:57,719 Speaker 1: they're like, oh, I've got an extra hundred dollars and 752 00:45:57,760 --> 00:46:00,840 Speaker 1: they go spend it. I don't think that's policy. And 753 00:46:00,920 --> 00:46:04,279 Speaker 1: we have data now that really contradicts that, And we 754 00:46:04,400 --> 00:46:07,080 Speaker 1: have the fact that households were clueless and just didn't 755 00:46:07,120 --> 00:46:10,040 Speaker 1: help in terms of they're thinking the government had their back. 756 00:46:10,719 --> 00:46:12,799 Speaker 1: And then finally, and I talked about this and my 757 00:46:12,880 --> 00:46:16,960 Speaker 1: policy proposal. What you want to do is short circuit 758 00:46:17,000 --> 00:46:20,279 Speaker 1: the recession. You want to get it out fast. I 759 00:46:20,320 --> 00:46:24,720 Speaker 1: think it's much better to do it in one fell swoop, 760 00:46:24,800 --> 00:46:28,000 Speaker 1: one check. Any of these things that go through payrolls, 761 00:46:28,040 --> 00:46:31,440 Speaker 1: they are spread out across a year, spread out across 762 00:46:31,520 --> 00:46:35,600 Speaker 1: two years. Well that that does support households in a 763 00:46:35,680 --> 00:46:41,799 Speaker 1: regular way, smaller dollars at each paycheck. But why do that, 764 00:46:41,920 --> 00:46:44,320 Speaker 1: Like you want to do you want to move fast 765 00:46:44,440 --> 00:46:47,799 Speaker 1: if you have any chance of shortening the recession, it's 766 00:46:47,880 --> 00:46:50,680 Speaker 1: right at the beginning. So I think there's a lot 767 00:46:50,680 --> 00:46:52,560 Speaker 1: And as you can tell, I've thought a lot about 768 00:46:52,600 --> 00:46:56,480 Speaker 1: the different policies. I've thought about them both in terms 769 00:46:56,640 --> 00:47:00,320 Speaker 1: of the research, and I watched it in real time 770 00:47:00,480 --> 00:47:03,880 Speaker 1: in the consumer spending data, and it hurt, like it 771 00:47:04,040 --> 00:47:06,719 Speaker 1: hurt to see that, like the household spending wasn't coming 772 00:47:06,760 --> 00:47:12,200 Speaker 1: back and households were really becoming pessimistic. How is the 773 00:47:12,480 --> 00:47:16,000 Speaker 1: health of the US consumer now? I see a lot 774 00:47:16,040 --> 00:47:20,480 Speaker 1: of positive but I again I want to frame that 775 00:47:20,600 --> 00:47:26,200 Speaker 1: positive in in a shadow to some extent. So we 776 00:47:26,440 --> 00:47:32,120 Speaker 1: are now past the tenth year of this expansion that 777 00:47:32,760 --> 00:47:35,799 Speaker 1: in any other time would be Wow, this is a 778 00:47:35,840 --> 00:47:39,440 Speaker 1: big deal. I look at that ten years of expansion 779 00:47:39,800 --> 00:47:44,000 Speaker 1: and I see a lot that isn't good. The recovery 780 00:47:44,160 --> 00:47:48,880 Speaker 1: took way too long. The unemployment rate and these are 781 00:47:48,920 --> 00:47:51,640 Speaker 1: like people not with jobs, right, this is bad. It 782 00:47:51,719 --> 00:47:54,239 Speaker 1: stayed up way longer than it should have. There is 783 00:47:54,320 --> 00:47:56,600 Speaker 1: a lot of research and you can talk to people 784 00:47:56,800 --> 00:47:59,799 Speaker 1: this is not It's not hard to figure out being 785 00:48:00,000 --> 00:48:04,279 Speaker 1: out of a job long term. Unemployment was really elevated. 786 00:48:04,280 --> 00:48:05,680 Speaker 1: So being out of a job for a long time 787 00:48:06,280 --> 00:48:13,560 Speaker 1: these have consequences, negative consequences for careers. I really feel 788 00:48:13,719 --> 00:48:16,440 Speaker 1: for those students who came out onto the job market 789 00:48:16,520 --> 00:48:19,960 Speaker 1: in two thousand nine. You don't have to look too 790 00:48:19,960 --> 00:48:22,920 Speaker 1: hard at like the student loan data, the wages they 791 00:48:23,040 --> 00:48:26,080 Speaker 1: entered with. I mean, they got slammed. And this this 792 00:48:26,160 --> 00:48:27,840 Speaker 1: is not the kind of thing that, oh, we're in 793 00:48:27,840 --> 00:48:30,040 Speaker 1: the tenth year of the expansion, all is good. It's 794 00:48:30,120 --> 00:48:33,120 Speaker 1: never going to be all good for them. When I 795 00:48:33,120 --> 00:48:38,160 Speaker 1: look at the consumer spending data now, and while I 796 00:48:38,160 --> 00:48:40,480 Speaker 1: haven't been a forecaster for the last two years, I 797 00:48:40,640 --> 00:48:43,960 Speaker 1: still follow the data more than this probably a reasonable 798 00:48:44,040 --> 00:48:47,200 Speaker 1: person would. Uh So I look at the consumer spending data. 799 00:48:47,280 --> 00:48:52,080 Speaker 1: Consumption is seventy pc of GDP. Those numbers are good. 800 00:48:52,560 --> 00:48:56,120 Speaker 1: Income is good on aggregate on average, right, I can 801 00:48:56,960 --> 00:48:59,880 Speaker 1: the last two years I managed to survey at the 802 00:49:00,000 --> 00:49:03,760 Speaker 1: were to governors, the survey of household economics and decision making. 803 00:49:04,280 --> 00:49:10,120 Speaker 1: There are and always have been groups of individuals and communities. 804 00:49:10,360 --> 00:49:13,200 Speaker 1: So if you think of people of color, rural areas, 805 00:49:13,560 --> 00:49:17,600 Speaker 1: areas that have been hit hard by trade, less educated, 806 00:49:17,760 --> 00:49:20,080 Speaker 1: I mean, I can point to several groups that have 807 00:49:20,160 --> 00:49:23,280 Speaker 1: been on the margins of the economy have not shared 808 00:49:23,640 --> 00:49:27,600 Speaker 1: in what we see in the aggregates, the averages they 809 00:49:27,719 --> 00:49:30,520 Speaker 1: deserve more in terms of the economic policy and support 810 00:49:30,960 --> 00:49:35,200 Speaker 1: they are benefiting from the expansion. Going longer. I find 811 00:49:35,239 --> 00:49:39,320 Speaker 1: that incredibly encouraging. It's like way overdue, but there there's 812 00:49:39,360 --> 00:49:43,080 Speaker 1: so much upside and potential by bringing them into the economy, 813 00:49:43,239 --> 00:49:46,200 Speaker 1: So I see a lot of good things. I firmly 814 00:49:46,560 --> 00:49:50,440 Speaker 1: disagreed earlier this year when the yield curve inverted, the 815 00:49:50,480 --> 00:49:54,160 Speaker 1: Yoeld curve is a very wonky thing, or not wonky. 816 00:49:54,239 --> 00:49:57,759 Speaker 1: The Yeld curve is a very unpredictable, i'd almost say 817 00:49:57,800 --> 00:50:02,280 Speaker 1: unreliable at this point, signal of a recession down the road. 818 00:50:03,000 --> 00:50:07,239 Speaker 1: It's a forecasting device. It is not a recession indicator 819 00:50:07,480 --> 00:50:10,160 Speaker 1: like I was using. There's a lot of research that 820 00:50:10,239 --> 00:50:13,480 Speaker 1: says with these massive balance sheets that the Federal Reserve has, 821 00:50:13,719 --> 00:50:16,359 Speaker 1: that it is not going to behave financial markets are 822 00:50:16,360 --> 00:50:19,480 Speaker 1: not behaving the way they have in the past. Setting 823 00:50:19,480 --> 00:50:22,080 Speaker 1: that outside. When that came out, I was like, I 824 00:50:22,120 --> 00:50:25,680 Speaker 1: don't think, I'm not real worried, and there was a 825 00:50:25,680 --> 00:50:31,080 Speaker 1: lot of discussion about a recession is coming now. Frankly, 826 00:50:31,120 --> 00:50:34,200 Speaker 1: that's been very good for our recession ready volume, and 827 00:50:34,239 --> 00:50:36,200 Speaker 1: people have been thinking about a recession more than I 828 00:50:36,239 --> 00:50:38,839 Speaker 1: would have ever thought when I was working on my 829 00:50:38,920 --> 00:50:44,000 Speaker 1: chapter early last year. But what there was a lot 830 00:50:44,040 --> 00:50:49,719 Speaker 1: of discussion about OH investment manufacturing, their contracting. Actually, when 831 00:50:49,760 --> 00:50:52,880 Speaker 1: I came back from the White House, I worked on 832 00:50:53,000 --> 00:50:55,600 Speaker 1: business investment because to be a generalist at the board, 833 00:50:55,640 --> 00:50:58,359 Speaker 1: you have to be a specialist in multiple areas. It's 834 00:50:58,360 --> 00:51:00,480 Speaker 1: a lot of fun. So I came back and I 835 00:51:00,520 --> 00:51:03,040 Speaker 1: worked on business investment. And that was actually a period 836 00:51:03,040 --> 00:51:05,920 Speaker 1: for the first time ever we had seen the business 837 00:51:05,960 --> 00:51:10,400 Speaker 1: sector business investment contract and we did not have a recession. 838 00:51:10,840 --> 00:51:13,360 Speaker 1: So the fact that we were seeing a contraction business 839 00:51:13,400 --> 00:51:16,600 Speaker 1: investment is temper cent of the economy. Consumers look just fine. 840 00:51:16,680 --> 00:51:20,160 Speaker 1: I'm like this, this is hard hitting these industries. It's 841 00:51:20,200 --> 00:51:23,600 Speaker 1: hard hitting people who work in these industries. A recession 842 00:51:24,000 --> 00:51:28,160 Speaker 1: is broad based, it's across industries, it's across the country. 843 00:51:28,320 --> 00:51:31,560 Speaker 1: And to me, this did not look like something that 844 00:51:31,680 --> 00:51:34,600 Speaker 1: was going to spread to the entire economy. And the 845 00:51:34,719 --> 00:51:39,319 Speaker 1: numbers really aren't there unless it starts kicking around. I mean, 846 00:51:39,360 --> 00:51:44,799 Speaker 1: there are orange lights flashing, and financial sectors they feel 847 00:51:44,840 --> 00:51:47,319 Speaker 1: like they're always are. So I'm not saying that I 848 00:51:47,360 --> 00:51:50,960 Speaker 1: completely write it off, but I personally looking at the 849 00:51:51,080 --> 00:51:54,160 Speaker 1: data and not just my recession indicator. Forecasters should never 850 00:51:54,200 --> 00:51:59,880 Speaker 1: just look at one series. I see nearly no way 851 00:52:00,200 --> 00:52:02,799 Speaker 1: that we are in a recession by the end of 852 00:52:02,840 --> 00:52:07,919 Speaker 1: this year, and frankly, I don't unless we find some 853 00:52:08,080 --> 00:52:12,520 Speaker 1: really big unforced policy errors to pull out of the cabinet. 854 00:52:13,120 --> 00:52:15,480 Speaker 1: I see no reason why we have to be in 855 00:52:15,480 --> 00:52:22,160 Speaker 1: a recession anytime soon. So I worry this is one 856 00:52:22,440 --> 00:52:25,240 Speaker 1: more piece to put in here. I worry a lot 857 00:52:25,280 --> 00:52:28,640 Speaker 1: about the discussion saying the FED has no ammunition. I 858 00:52:28,719 --> 00:52:32,319 Speaker 1: worry a lot about the discussions where Congress just could 859 00:52:32,400 --> 00:52:34,279 Speaker 1: never agree on this. Even if we got in a 860 00:52:34,280 --> 00:52:37,080 Speaker 1: recession right now, there's no way they'd even agree to 861 00:52:37,200 --> 00:52:41,560 Speaker 1: do any stimulus. I find those very worrying because they 862 00:52:41,600 --> 00:52:47,320 Speaker 1: do not calm They do the opposite of calming consumers 863 00:52:47,360 --> 00:52:52,319 Speaker 1: and businesses and financial markets, and I don't think those 864 00:52:52,320 --> 00:52:58,040 Speaker 1: are really necessary discussions to have. The FED is incredibly creative. 865 00:52:58,480 --> 00:53:00,520 Speaker 1: I mean, they did stuff that was totally out of 866 00:53:00,560 --> 00:53:04,319 Speaker 1: the playbook, and they got more I mean having been there, 867 00:53:04,560 --> 00:53:06,839 Speaker 1: like there's more in the playbook, and they were like 868 00:53:07,000 --> 00:53:11,440 Speaker 1: one European disaster away from doing some other things. So 869 00:53:11,600 --> 00:53:13,719 Speaker 1: like I'm not I'm not as worried about the FED. 870 00:53:13,760 --> 00:53:16,480 Speaker 1: I don't think they're going to be as effective fiscal 871 00:53:16,520 --> 00:53:19,560 Speaker 1: policy we need it. I think, you know, everybody's a 872 00:53:19,640 --> 00:53:22,840 Speaker 1: Kinesian in the foxhole, like Congress will get it together. 873 00:53:23,000 --> 00:53:27,280 Speaker 1: They always have so like I don't. So I really 874 00:53:27,320 --> 00:53:30,360 Speaker 1: I find those discussions like the doom and gloom in 875 00:53:30,520 --> 00:53:34,640 Speaker 1: forecasting discussions and market watching. I think we should stop, 876 00:53:34,920 --> 00:53:38,759 Speaker 1: Like I think it's bad. Claudia, that was awesome. It's 877 00:53:38,800 --> 00:53:41,239 Speaker 1: so great to have you on. I think that's a 878 00:53:41,280 --> 00:53:43,920 Speaker 1: great place to leave it there. And I'm confident just 879 00:53:43,960 --> 00:53:46,759 Speaker 1: based on listening to this that that you didn't peak 880 00:53:47,239 --> 00:53:49,799 Speaker 1: with the sumb role. But either way, it was really 881 00:53:50,080 --> 00:53:53,400 Speaker 1: it was awesome, really great. Appreciate you joining us. Yeah, no, 882 00:53:53,520 --> 00:53:55,839 Speaker 1: thank you both. I really appreciate a lot of fun. 883 00:53:55,880 --> 00:54:13,640 Speaker 1: Thanks so much, Claudia. That was great. Thanks Claudia, Tracy. 884 00:54:13,800 --> 00:54:18,480 Speaker 1: I really think that conversation helps move the ball forward. 885 00:54:18,640 --> 00:54:22,319 Speaker 1: Maybe not this particular episode of the podcast having a 886 00:54:22,320 --> 00:54:25,160 Speaker 1: big effect per se, but in terms of like wrapping 887 00:54:25,160 --> 00:54:28,440 Speaker 1: our heads around what it means for the handoff or 888 00:54:28,440 --> 00:54:31,680 Speaker 1: what it means for fiscal stimulus to kick in. I 889 00:54:31,760 --> 00:54:34,600 Speaker 1: really feel like a lot of the ideas that Claudia 890 00:54:34,640 --> 00:54:38,560 Speaker 1: expressed are really important for this discussion that everyone is having. 891 00:54:39,640 --> 00:54:42,719 Speaker 1: I have so many thoughts Joe. So number one is 892 00:54:43,040 --> 00:54:45,480 Speaker 1: we need to have Claudia back on to do an 893 00:54:45,520 --> 00:54:48,839 Speaker 1: episode on what it was like in the FED and 894 00:54:48,880 --> 00:54:51,600 Speaker 1: just give us all the gossip about everything that's going 895 00:54:51,600 --> 00:54:53,439 Speaker 1: on and tell us how to decode all the FED 896 00:54:53,480 --> 00:54:56,759 Speaker 1: statements and all of that. The other thing is she's 897 00:54:56,800 --> 00:55:01,640 Speaker 1: got some great quotes like monetary very policy needs to 898 00:55:01,719 --> 00:55:05,160 Speaker 1: work around the edge, Like that's a really good description 899 00:55:05,200 --> 00:55:07,600 Speaker 1: of it um and I think that's sort of starting 900 00:55:07,640 --> 00:55:13,279 Speaker 1: to become a not consensus theory, but you can see 901 00:55:13,320 --> 00:55:17,440 Speaker 1: people sort of moving towards it, right. Yeah, No, absolutely, 902 00:55:17,520 --> 00:55:21,200 Speaker 1: I totally agree. There were so many like different individual 903 00:55:21,400 --> 00:55:24,080 Speaker 1: insights observations that you had that we could have, like 904 00:55:24,360 --> 00:55:27,000 Speaker 1: each one of those could have been probably a separate conversation. 905 00:55:27,320 --> 00:55:30,200 Speaker 1: So we should definitely have her back. But you know, 906 00:55:30,320 --> 00:55:33,120 Speaker 1: right now it's still generality. As you'll have like some 907 00:55:33,280 --> 00:55:36,000 Speaker 1: sort of like uh, you know, very big name and 908 00:55:36,080 --> 00:55:40,160 Speaker 1: economics say o, time for fiscal fiscal policy makers to work, 909 00:55:40,520 --> 00:55:43,400 Speaker 1: but with no idea of when that is or why 910 00:55:43,440 --> 00:55:46,719 Speaker 1: that is, or what are the thresholds for when they 911 00:55:46,760 --> 00:55:49,560 Speaker 1: should kick in. It feels kind of arbitrary. What do 912 00:55:49,600 --> 00:55:51,799 Speaker 1: you spend the money on? All kinds of things. And 913 00:55:51,840 --> 00:55:55,439 Speaker 1: I really feel like this was very helpful in sort 914 00:55:55,480 --> 00:55:58,480 Speaker 1: of saying, Okay, yes, we get it, we need fiscal 915 00:55:58,520 --> 00:56:01,880 Speaker 1: stimulus to stave off for sessions, but what does that 916 00:56:01,960 --> 00:56:05,400 Speaker 1: actually mean? And it feels like this is very fruitful avenue. 917 00:56:06,280 --> 00:56:09,640 Speaker 1: It's a concrete proposal, that's for sure. And more than that, 918 00:56:09,680 --> 00:56:12,360 Speaker 1: it also comes with the PM role, which is the 919 00:56:12,400 --> 00:56:15,560 Speaker 1: recession indicator, so it can actually give you that exact 920 00:56:15,600 --> 00:56:18,239 Speaker 1: trigger point for when the checks you're going to get 921 00:56:18,280 --> 00:56:21,880 Speaker 1: mailed out. And I thought the point that you and 922 00:56:22,640 --> 00:56:26,239 Speaker 1: she also made, which is like who cares if you 923 00:56:26,280 --> 00:56:29,760 Speaker 1: get a false positive? The okay, so the recession doesn't 924 00:56:29,760 --> 00:56:32,480 Speaker 1: actually get declared. So then you ended up spending a 925 00:56:32,560 --> 00:56:34,680 Speaker 1: little bit of money for a few months to help 926 00:56:34,760 --> 00:56:38,200 Speaker 1: households that had gone into unemployment and everyone else. It's 927 00:56:38,239 --> 00:56:40,879 Speaker 1: not a big deal. And whatever sort of cost there 928 00:56:41,040 --> 00:56:44,920 Speaker 1: is to doing that, it is far less than allowing 929 00:56:45,160 --> 00:56:49,360 Speaker 1: a sustained recession to take place, just given the lifetime 930 00:56:49,440 --> 00:56:52,880 Speaker 1: hits that that has to people's entire income and so forth. 931 00:56:53,760 --> 00:56:56,439 Speaker 1: I think your last point is probably valid, but I'm 932 00:56:56,480 --> 00:56:58,759 Speaker 1: sure there are some people out there who will think 933 00:56:58,800 --> 00:57:01,480 Speaker 1: that sending a bunch of money at a time when 934 00:57:01,520 --> 00:57:04,480 Speaker 1: there isn't a recession adds up to something. This is 935 00:57:04,520 --> 00:57:09,480 Speaker 1: your innate m m tier from within speaking. Now someone 936 00:57:09,600 --> 00:57:12,959 Speaker 1: will pick up on it and probably complain, And that's 937 00:57:13,840 --> 00:57:16,080 Speaker 1: going back to the beginning of the conversation. Like that 938 00:57:16,200 --> 00:57:19,520 Speaker 1: is the difficulty with all of this. There is politics 939 00:57:19,680 --> 00:57:21,840 Speaker 1: running through all of it. When when you're trying to 940 00:57:21,840 --> 00:57:25,080 Speaker 1: make it as objective as possible, right, and that's its 941 00:57:25,120 --> 00:57:29,240 Speaker 1: own separate thing, because there is still this element of like, look, 942 00:57:29,280 --> 00:57:32,680 Speaker 1: this is public money, the idea of public money. Can 943 00:57:32,720 --> 00:57:36,440 Speaker 1: you do it in a democratically accountable manner fiscal policy 944 00:57:36,920 --> 00:57:39,680 Speaker 1: and have it be automatic and just sort of set 945 00:57:39,720 --> 00:57:42,840 Speaker 1: a rule and have Congress go on vacation or does 946 00:57:43,000 --> 00:57:46,320 Speaker 1: not need to vote there it raises sort of thorny issues. 947 00:57:46,880 --> 00:57:48,960 Speaker 1: There's always this tension of how do you do things 948 00:57:49,000 --> 00:57:52,040 Speaker 1: in an efficient way and in a democratic way? And 949 00:57:52,080 --> 00:57:54,960 Speaker 1: I think that's another whole area that needs to be discussed. 950 00:57:55,560 --> 00:57:58,840 Speaker 1: But at least this sort of provides some framework for 951 00:57:58,840 --> 00:58:02,080 Speaker 1: sort of bridging the gap between the automatic aspect of 952 00:58:02,160 --> 00:58:06,320 Speaker 1: monetary policy and the democratic aspect of fiscal policy. Yeah, 953 00:58:06,760 --> 00:58:10,000 Speaker 1: it's it's definitely an interesting one. It's a framework, yes, 954 00:58:10,440 --> 00:58:13,640 Speaker 1: all right, Uh, this has been another episode of the 955 00:58:13,680 --> 00:58:16,960 Speaker 1: All Thoughts Podcast. I'm Tracy Alloway. You can follow me 956 00:58:17,040 --> 00:58:20,800 Speaker 1: on Twitter at Tracy Alloway, and I'm Joe Wisn't Thal. 957 00:58:20,880 --> 00:58:24,080 Speaker 1: You can follow me on Twitter at the Stalwart. And 958 00:58:24,120 --> 00:58:28,080 Speaker 1: you should definitely follow Claudia on Twitter, who has definitely 959 00:58:28,120 --> 00:58:32,640 Speaker 1: not piqud great insights. Her handle is at Claudia Underscore 960 00:58:32,680 --> 00:58:36,480 Speaker 1: Some That's s a h M. And you should follow 961 00:58:36,480 --> 00:58:40,480 Speaker 1: our producer on Twitter, Laura Carlson. She's at Laura M. Carlson. 962 00:58:40,840 --> 00:58:45,000 Speaker 1: Follow the Bloomberg head of podcast, Francesca Levy at Francesca Today, 963 00:58:45,440 --> 00:58:49,160 Speaker 1: and check out the whole family of Bloomberg podcasts under 964 00:58:49,200 --> 00:59:04,000 Speaker 1: the handle at podcasts. Thanks for listening to the