1 00:00:00,400 --> 00:00:04,160 Speaker 1: Welcome to the Internal Revenue Service. You can also visit 2 00:00:04,240 --> 00:00:15,080 Speaker 1: us that wu wu W dot i RS. Don't guard Hello, 3 00:00:15,200 --> 00:00:18,080 Speaker 1: and don't worry. You haven't just called the inn Revenue Service. 4 00:00:18,160 --> 00:00:21,160 Speaker 1: You're listening to Stephanomics, the podcast that brings the global 5 00:00:21,200 --> 00:00:23,520 Speaker 1: economy to you. But if you were trying to get 6 00:00:23,560 --> 00:00:25,919 Speaker 1: through to the hard working folks who helped to collect 7 00:00:25,920 --> 00:00:30,280 Speaker 1: America's taxes, you'd have a long time to wait. Keep 8 00:00:30,320 --> 00:00:34,000 Speaker 1: listening to hear about the extreme lengths that American taxpayers 9 00:00:34,040 --> 00:00:36,960 Speaker 1: and accountants are going to get through to the i 10 00:00:37,120 --> 00:00:40,640 Speaker 1: R S. First, though, I wanted to play you part 11 00:00:40,640 --> 00:00:43,640 Speaker 1: of a webinar we held this week featuring the latest 12 00:00:43,680 --> 00:00:47,320 Speaker 1: insights on the road ahead for the US economy, China, 13 00:00:47,720 --> 00:00:50,919 Speaker 1: and the US Central Bank, featuring some of the brightest 14 00:00:50,960 --> 00:00:55,120 Speaker 1: minds of Bloomberg Economics. It started naturally enough with a 15 00:00:55,120 --> 00:00:59,279 Speaker 1: great introduction by me. There does seem to be an 16 00:00:59,360 --> 00:01:03,240 Speaker 1: unusually wide gap right now between where we are and 17 00:01:03,280 --> 00:01:06,200 Speaker 1: where economists expect us to end up in a year 18 00:01:06,280 --> 00:01:08,760 Speaker 1: or two time. I mean, the leading assumption when you 19 00:01:08,800 --> 00:01:12,800 Speaker 1: look at the forecast for twenty three or four is 20 00:01:12,840 --> 00:01:15,319 Speaker 1: that we're kind of heading back to normal in the 21 00:01:15,360 --> 00:01:19,880 Speaker 1: global economy by by that time, probably by midy three. 22 00:01:20,080 --> 00:01:23,040 Speaker 1: And that's fine, that's a traditional assumption that economists makes, 23 00:01:23,040 --> 00:01:25,959 Speaker 1: sort of reversion to the mean. But you look around 24 00:01:26,000 --> 00:01:28,559 Speaker 1: you and you think, wow, we're an awfully long way 25 00:01:28,680 --> 00:01:30,960 Speaker 1: away from normal right now. You know, we've got a 26 00:01:31,000 --> 00:01:33,640 Speaker 1: large chunk of the workforce isolating at home, maybe due 27 00:01:33,640 --> 00:01:37,600 Speaker 1: to omicron. We have energy bills soaring in large parts 28 00:01:37,600 --> 00:01:41,400 Speaker 1: of Europe, and for many American households, millions of workers 29 00:01:41,480 --> 00:01:46,240 Speaker 1: missing from the labor market supply chain, still in a 30 00:01:46,360 --> 00:01:48,680 Speaker 1: in a very troubled state. I mean, it all seems 31 00:01:48,840 --> 00:01:52,520 Speaker 1: very out of whack. So, although it's probably always the 32 00:01:52,560 --> 00:01:54,640 Speaker 1: case that economists are better at telling you where you're 33 00:01:54,640 --> 00:01:57,120 Speaker 1: going to end up than how you're going to get there, 34 00:01:57,560 --> 00:02:00,160 Speaker 1: I think this year that path from a to be 35 00:02:00,880 --> 00:02:05,920 Speaker 1: from now to normal seems particularly hazardous and uncertain, and 36 00:02:06,000 --> 00:02:08,600 Speaker 1: I think the potential role of central banks in that 37 00:02:09,480 --> 00:02:13,840 Speaker 1: also feels particularly challenging. So I'm especially glad that we're 38 00:02:13,880 --> 00:02:17,720 Speaker 1: focusing today on the downside and upside risks that we're 39 00:02:17,720 --> 00:02:21,000 Speaker 1: seeing in the global economy. Um, and I'm also very 40 00:02:21,000 --> 00:02:22,560 Speaker 1: glad that we're going to spend a bit of extra 41 00:02:22,639 --> 00:02:26,400 Speaker 1: time talking about how the US Central Bank is positioned 42 00:02:26,600 --> 00:02:30,120 Speaker 1: for this year with one of the former leaders of 43 00:02:30,160 --> 00:02:33,960 Speaker 1: the Federal Reserve, the former Federals New York Federals President 44 00:02:33,960 --> 00:02:37,120 Speaker 1: Bill Dudley. So that's all to come, but first I 45 00:02:37,160 --> 00:02:40,839 Speaker 1: think we should set the scene with our chief US Economist, 46 00:02:40,919 --> 00:02:46,880 Speaker 1: Anna Wall and how things looking, Thank you, Stephanie. So 47 00:02:47,480 --> 00:02:50,480 Speaker 1: a big question heading into this year for US is 48 00:02:50,680 --> 00:02:54,840 Speaker 1: when will the Fed begin to raise rates? And a 49 00:02:54,960 --> 00:02:58,040 Speaker 1: March rate hike had looked uncertain when we were just 50 00:02:58,280 --> 00:03:01,480 Speaker 1: entering into this year because omicron has swept through the 51 00:03:01,600 --> 00:03:07,040 Speaker 1: US like wildfire and cost widespread workers absentaism. There were 52 00:03:07,120 --> 00:03:11,800 Speaker 1: lots of anecdotes of temporary business closures. So we developed 53 00:03:11,840 --> 00:03:15,040 Speaker 1: a daily GDP tracker to allow us to better track 54 00:03:15,120 --> 00:03:19,160 Speaker 1: the disruption of Omicron, and it had pointed to a 55 00:03:19,200 --> 00:03:22,120 Speaker 1: big plunge in activity in the first week of this year, 56 00:03:22,440 --> 00:03:25,440 Speaker 1: and using this daily activity index as a tool, we 57 00:03:25,560 --> 00:03:27,800 Speaker 1: forecast out what GDP would look like at the end 58 00:03:27,840 --> 00:03:31,280 Speaker 1: of the quarter, and the model forecast the recovery would 59 00:03:31,320 --> 00:03:35,800 Speaker 1: be in full swing by March and in a reassuring sign, indeed, 60 00:03:35,880 --> 00:03:39,880 Speaker 1: our daily trecker is already showing signs of improvement in 61 00:03:40,040 --> 00:03:42,760 Speaker 1: the second week of this year, So this is why 62 00:03:42,800 --> 00:03:45,360 Speaker 1: we now believe that a March rate hike is in 63 00:03:45,440 --> 00:03:48,720 Speaker 1: the cards. So then the next question is how many 64 00:03:48,800 --> 00:03:52,600 Speaker 1: hikes will there be this year, and the FED future 65 00:03:52,800 --> 00:03:57,320 Speaker 1: market currently expect four hikes, but that forecast is contingent 66 00:03:57,480 --> 00:04:02,560 Speaker 1: on inflation and unemployment rate evolving as we have written down, 67 00:04:03,160 --> 00:04:07,440 Speaker 1: and our baseline currently is for inflation to peak in 68 00:04:07,560 --> 00:04:12,880 Speaker 1: February at seven point two and thereafter we expect it 69 00:04:12,920 --> 00:04:17,040 Speaker 1: will slow to an average of three. In the labor market, 70 00:04:17,200 --> 00:04:20,640 Speaker 1: we expect it to continue to show signs of being 71 00:04:20,800 --> 00:04:25,640 Speaker 1: very tight. Wage growth is now at the highest in 72 00:04:25,640 --> 00:04:31,279 Speaker 1: the early nineties. There's one point six open jobs for 73 00:04:31,640 --> 00:04:36,000 Speaker 1: every unemployed person out there UM, and we project unemployment 74 00:04:36,080 --> 00:04:39,799 Speaker 1: rate to fall to three point five percent or lower 75 00:04:40,040 --> 00:04:43,080 Speaker 1: by the end of the second quarter. But let me 76 00:04:43,120 --> 00:04:46,600 Speaker 1: emphasize that our forecast for the inflation is subject to 77 00:04:46,839 --> 00:04:50,600 Speaker 1: a lot of uncertainty, and we see two non trivial 78 00:04:51,200 --> 00:04:54,080 Speaker 1: risks in the near term that could push it much higher. 79 00:04:54,440 --> 00:04:58,160 Speaker 1: So first, um, with China hosting the Winter Olympics in 80 00:04:58,240 --> 00:05:01,360 Speaker 1: early February and for the s time really open its 81 00:05:01,480 --> 00:05:05,280 Speaker 1: borders to international visitors, there could be a risk that 82 00:05:05,440 --> 00:05:10,480 Speaker 1: Amochron will infiltrate into China and with their zero COVID policy, 83 00:05:11,040 --> 00:05:14,839 Speaker 1: this could um disrupt the production there and re intensify 84 00:05:14,920 --> 00:05:18,880 Speaker 1: supply chains. And the second risk is that there is 85 00:05:18,880 --> 00:05:22,000 Speaker 1: a risk of port strikes in June of this year 86 00:05:22,000 --> 00:05:24,520 Speaker 1: and the along the ports along the West Coast in 87 00:05:24,720 --> 00:05:31,360 Speaker 1: US as the contract expires between the port workers longshoremen 88 00:05:31,520 --> 00:05:35,120 Speaker 1: and the ports. So overall we think that the risk 89 00:05:35,200 --> 00:05:37,680 Speaker 1: are on the upside for more hikes in store than 90 00:05:37,720 --> 00:05:40,760 Speaker 1: what the market currently expects. But for this year and 91 00:05:41,040 --> 00:05:43,640 Speaker 1: next year, thank you, Anna, there's a lot there. But 92 00:05:43,680 --> 00:05:47,960 Speaker 1: I'm interested in what you said about wage growth picking 93 00:05:48,040 --> 00:05:51,080 Speaker 1: up and also the potential for us to hear from 94 00:05:51,080 --> 00:05:53,880 Speaker 1: from some union activity or at least in the sort 95 00:05:53,880 --> 00:05:56,520 Speaker 1: of crucial deal at the ports. And I think power 96 00:05:56,560 --> 00:06:00,960 Speaker 1: workers have also got potentially a dispute coming down the track. 97 00:06:01,040 --> 00:06:02,919 Speaker 1: I mean, are we are we going to see a 98 00:06:03,040 --> 00:06:06,760 Speaker 1: very different kind of US labor market this year than 99 00:06:06,800 --> 00:06:09,720 Speaker 1: we've seen in recent years? Or is this with more 100 00:06:10,279 --> 00:06:16,520 Speaker 1: with workers actually um able to extract real wage increases, 101 00:06:16,760 --> 00:06:19,200 Speaker 1: or is this really just about trying to catch up 102 00:06:19,320 --> 00:06:23,120 Speaker 1: with with the very high level of inflation. I think 103 00:06:23,160 --> 00:06:26,279 Speaker 1: that when the labor market is tight as you you're 104 00:06:26,360 --> 00:06:28,440 Speaker 1: we are seeing right now, as I was saying, one 105 00:06:28,440 --> 00:06:31,760 Speaker 1: point six open jobs for every unemployed person out there. 106 00:06:32,560 --> 00:06:36,120 Speaker 1: Just the threat of um you know, your workers quitting. 107 00:06:36,600 --> 00:06:41,400 Speaker 1: It's that latent threat there that can cause um um 108 00:06:41,440 --> 00:06:45,400 Speaker 1: employers to raise the wage and you know, submit to 109 00:06:45,800 --> 00:06:49,120 Speaker 1: request of the workers. And when it comes to the 110 00:06:49,200 --> 00:06:53,960 Speaker 1: port workers in historically, whenever there's uh where where the 111 00:06:54,000 --> 00:06:58,679 Speaker 1: port workers are up for renegotiating their UM wages, there 112 00:06:58,720 --> 00:07:02,560 Speaker 1: has been significant slow down in ports. It happened in, 113 00:07:03,520 --> 00:07:09,080 Speaker 1: It happened in and at a time when these port 114 00:07:09,120 --> 00:07:12,080 Speaker 1: workers had been asked to work twenty four hours per 115 00:07:12,160 --> 00:07:15,520 Speaker 1: day by the by the Biden administration. I think they're 116 00:07:15,560 --> 00:07:19,880 Speaker 1: fed up, and uh so, the likelihood of that is high. 117 00:07:20,000 --> 00:07:23,000 Speaker 1: But but back to the you know, to to the 118 00:07:23,160 --> 00:07:26,480 Speaker 1: your question, I do think that the labor market now 119 00:07:26,720 --> 00:07:29,239 Speaker 1: is different than what we have seen in the last 120 00:07:29,240 --> 00:07:33,160 Speaker 1: ten years, just because um there's just just this latent 121 00:07:33,400 --> 00:07:37,240 Speaker 1: threat of quitting, quitting, which gives a lot of bargaining 122 00:07:37,240 --> 00:07:40,800 Speaker 1: powers to workers. Those missing workers. We have that the 123 00:07:41,320 --> 00:07:45,280 Speaker 1: several million workers who as far as we could tell, 124 00:07:45,400 --> 00:07:50,320 Speaker 1: we were in jobs before COVID struck and maybe lost 125 00:07:50,360 --> 00:07:53,160 Speaker 1: their jobs during the recession but have not gone back. 126 00:07:53,800 --> 00:07:56,040 Speaker 1: Is there any sign of of some of those coming 127 00:07:56,040 --> 00:08:00,520 Speaker 1: back into the picture? Yeah? So you had a estimated 128 00:08:00,600 --> 00:08:04,400 Speaker 1: how much workers have in their bank by income destiles, 129 00:08:04,840 --> 00:08:09,720 Speaker 1: and our expectation is that um, the workers which are 130 00:08:09,760 --> 00:08:14,360 Speaker 1: in shortage there their savings give them enough about to 131 00:08:14,720 --> 00:08:20,000 Speaker 1: two months of runway to cover their spending. And UM, 132 00:08:20,160 --> 00:08:22,560 Speaker 1: we were expecting that there would be a flood of 133 00:08:23,080 --> 00:08:27,679 Speaker 1: labor supply starting this year because of that estimate. And 134 00:08:28,240 --> 00:08:31,440 Speaker 1: I do see signs of the labor market loosening, but 135 00:08:31,800 --> 00:08:35,959 Speaker 1: that is right before omicron hit. Okay, so we've got 136 00:08:35,960 --> 00:08:39,079 Speaker 1: a good picture on the state of the economy and 137 00:08:39,080 --> 00:08:40,440 Speaker 1: as far as we can see it, and we can 138 00:08:40,480 --> 00:08:44,280 Speaker 1: see a bit better with those high frequency indicators. But 139 00:08:44,360 --> 00:08:46,600 Speaker 1: clearly there's the center of a lot of the debate, 140 00:08:46,640 --> 00:08:49,320 Speaker 1: and certainly what financial markets are focused on is what's 141 00:08:49,360 --> 00:08:51,400 Speaker 1: the Fed gonna do? Is it going to do too 142 00:08:51,520 --> 00:08:55,600 Speaker 1: much or too little UM this year? Having now resolved 143 00:08:55,600 --> 00:08:59,120 Speaker 1: to raise interest rates UM several times in two And 144 00:08:59,160 --> 00:09:02,200 Speaker 1: it's great to have a versation with Bill Dudley about 145 00:09:02,240 --> 00:09:05,000 Speaker 1: these things, former chief economists for Goldman Sex and former 146 00:09:05,040 --> 00:09:07,680 Speaker 1: President of the New York Federal Reserve now a senior 147 00:09:07,679 --> 00:09:12,880 Speaker 1: adviser to Bloomberg Economics and Bloomberg Opinion columnists. Um, Bill, 148 00:09:13,360 --> 00:09:15,360 Speaker 1: if we just stepped back briefly, I mean, there's a 149 00:09:15,360 --> 00:09:17,080 Speaker 1: lot to talk about. But if we think about the 150 00:09:17,120 --> 00:09:19,640 Speaker 1: FEDS handling of the past two years of the pandemic, 151 00:09:20,120 --> 00:09:22,360 Speaker 1: did they win the war but lose the piece? You 152 00:09:22,400 --> 00:09:24,319 Speaker 1: have a lot of people in the peanut gallery now 153 00:09:24,679 --> 00:09:29,840 Speaker 1: critiquing their view all through last year that inflation was 154 00:09:29,880 --> 00:09:32,560 Speaker 1: going to be transitory. I think Muhammad al Arian has 155 00:09:32,600 --> 00:09:35,680 Speaker 1: called it probably the worst inflation call in the history 156 00:09:35,679 --> 00:09:38,360 Speaker 1: of the Federal Reserve, wasn't it. Well. I think they 157 00:09:38,400 --> 00:09:40,440 Speaker 1: did a great job at the early stages of the 158 00:09:40,440 --> 00:09:44,760 Speaker 1: pandemic in terms of their interventions to restore market function. Uh, 159 00:09:44,880 --> 00:09:47,880 Speaker 1: these financial conditions push into tras to zero. So I 160 00:09:47,960 --> 00:09:49,920 Speaker 1: give them, you know, a plus, you know, back in 161 00:09:50,000 --> 00:09:53,960 Speaker 1: March two thousand, twenty April two thy But since then, 162 00:09:54,000 --> 00:09:56,640 Speaker 1: I think they've made a number of errors. And some 163 00:09:56,679 --> 00:09:59,360 Speaker 1: of the errors are related to how they implement monetary policy, 164 00:09:59,600 --> 00:10:02,520 Speaker 1: and some the ears are just bad forecasting. On the 165 00:10:02,559 --> 00:10:07,120 Speaker 1: monterary policy implementation side, they operationalize their two percent average 166 00:10:07,120 --> 00:10:10,760 Speaker 1: inflation target regime by essentially tying their hands and saying 167 00:10:10,760 --> 00:10:13,360 Speaker 1: we cannot lift off, we cannot raise short term rates 168 00:10:13,600 --> 00:10:18,000 Speaker 1: until three conditions are satisfied. Inflation at two expected to 169 00:10:18,000 --> 00:10:20,080 Speaker 1: be above two percent for some time in the future, 170 00:10:20,600 --> 00:10:23,840 Speaker 1: and we've also have to achieve our estimate of maximum 171 00:10:23,880 --> 00:10:27,640 Speaker 1: sustainable employment. So what that meant was the FED was 172 00:10:27,640 --> 00:10:31,079 Speaker 1: gonna have policy extremely easy even as the economy reach 173 00:10:31,120 --> 00:10:33,840 Speaker 1: full employment, so be a big gap between where the 174 00:10:33,840 --> 00:10:37,160 Speaker 1: FED needed to be versus where the FED was completely 175 00:10:37,280 --> 00:10:40,560 Speaker 1: self induced er on their part. The second thing that 176 00:10:40,600 --> 00:10:42,840 Speaker 1: was self induces they were so worried about a taper 177 00:10:42,840 --> 00:10:46,040 Speaker 1: tantrum that they were very slow to actually taper the 178 00:10:46,160 --> 00:10:49,080 Speaker 1: rate of asset purchases. So we've ended up in this 179 00:10:49,200 --> 00:10:52,400 Speaker 1: odd situation today where everyone's talking about FED tightening, but 180 00:10:52,440 --> 00:10:54,960 Speaker 1: the FED even as we speak, is still buying assets 181 00:10:55,040 --> 00:10:58,360 Speaker 1: adding accommodation. The other two areas they made I think 182 00:10:58,360 --> 00:11:00,880 Speaker 1: our heart heart, you know, I would give them less 183 00:11:01,640 --> 00:11:06,040 Speaker 1: grief about because they were forecasting errors. The first forecasting error, 184 00:11:06,080 --> 00:11:08,719 Speaker 1: which was significant, was that the inflation shock turned out 185 00:11:08,760 --> 00:11:12,640 Speaker 1: to be much bigger and lasted much longer than they 186 00:11:12,640 --> 00:11:15,920 Speaker 1: were anticipating. Nobody was expecting at the beginning of two thousand, 187 00:11:16,400 --> 00:11:18,800 Speaker 1: uh and and and twenty that we were going to 188 00:11:18,840 --> 00:11:23,079 Speaker 1: see seven percent CPI inflation by the end of one 189 00:11:23,720 --> 00:11:26,880 Speaker 1: and so that was a surprise to them. The supply 190 00:11:26,960 --> 00:11:31,400 Speaker 1: chain disruption just lasted longer than they expected. The second surprise, 191 00:11:31,480 --> 00:11:34,440 Speaker 1: and it wasn't all completely a bad surprise, is that 192 00:11:34,480 --> 00:11:37,800 Speaker 1: the labor market tightened much faster than they expected. UH. 193 00:11:37,920 --> 00:11:42,200 Speaker 1: As you went through and twenty the first part of FETE, 194 00:11:42,200 --> 00:11:45,520 Speaker 1: officials were focused on the shortfall of employment relative to 195 00:11:45,520 --> 00:11:48,760 Speaker 1: where it was in February and pointing to the fact 196 00:11:48,760 --> 00:11:50,839 Speaker 1: that there's still a lot of We're still a lot 197 00:11:50,840 --> 00:11:53,679 Speaker 1: of jobs short from where we were in February. Well, 198 00:11:53,679 --> 00:11:56,000 Speaker 1: that's still the case today. We're still three million jobs 199 00:11:56,040 --> 00:11:59,040 Speaker 1: short of where we were in February. But that ignored 200 00:11:59,080 --> 00:12:01,240 Speaker 1: the fact that there a lot of people that left 201 00:12:01,360 --> 00:12:04,599 Speaker 1: the labor forces, and pointed out the labor force participate 202 00:12:04,880 --> 00:12:08,000 Speaker 1: participation rate did not come back like the FETE expected. 203 00:12:08,320 --> 00:12:10,920 Speaker 1: There are retirements, There are people that didn't want to 204 00:12:10,920 --> 00:12:13,640 Speaker 1: work because of COVID risk. Uh there are people who 205 00:12:13,640 --> 00:12:16,280 Speaker 1: are still sick because of COVID long COVID and all 206 00:12:16,320 --> 00:12:18,600 Speaker 1: those things. They have made the labor market tighten much 207 00:12:18,640 --> 00:12:21,160 Speaker 1: faster than what the FETE expect. Now, be fine if 208 00:12:21,160 --> 00:12:23,599 Speaker 1: the labor market tighten faster than the FETE expected and 209 00:12:23,640 --> 00:12:26,680 Speaker 1: the FED responded by tightening Monterrey policy. But we're in 210 00:12:26,720 --> 00:12:28,960 Speaker 1: a situation today where the labor market is very, very 211 00:12:29,040 --> 00:12:33,280 Speaker 1: very tight and monetary policy is is still extraordinarily easy. 212 00:12:33,320 --> 00:12:35,600 Speaker 1: So the Fed is late. They're trying to catch up, 213 00:12:35,960 --> 00:12:38,560 Speaker 1: and they'll start to catch up in March when they 214 00:12:38,600 --> 00:12:41,240 Speaker 1: tightened at the March of Home c meeting. So what's 215 00:12:41,280 --> 00:12:44,280 Speaker 1: the road from here? Do you think the Fed's gonna 216 00:12:44,440 --> 00:12:46,679 Speaker 1: end up having to raise interest rates much more than 217 00:12:46,720 --> 00:12:49,319 Speaker 1: people currently expect. Yeah, I think they are gonna have 218 00:12:49,360 --> 00:12:51,520 Speaker 1: to do more than people expect, because you know, if 219 00:12:51,520 --> 00:12:54,199 Speaker 1: you look at the Federal Reserves forecast, it's a incredibly 220 00:12:54,240 --> 00:12:58,440 Speaker 1: benign forecast. If you look at their forecast twenty four 221 00:12:58,440 --> 00:13:01,760 Speaker 1: in the Summary of Economic Projection, what they show is 222 00:13:01,840 --> 00:13:04,600 Speaker 1: that inflation is going to magically melt away two point 223 00:13:04,679 --> 00:13:07,520 Speaker 1: six this year, two point three percent next year two 224 00:13:07,559 --> 00:13:11,280 Speaker 1: point on. The Federal funds rate is not gonna go 225 00:13:11,360 --> 00:13:13,480 Speaker 1: very high two point one percent by the end of 226 00:13:15,120 --> 00:13:17,600 Speaker 1: uh and the uneplanyer rate is gonna even even as 227 00:13:17,679 --> 00:13:21,160 Speaker 1: the undeployer rate is persistently below beyond full employment, So 228 00:13:21,400 --> 00:13:24,079 Speaker 1: it's not obvious how the FED forecast works. Why does 229 00:13:24,120 --> 00:13:28,320 Speaker 1: inflation fall if the economy is operating below beyond full 230 00:13:28,320 --> 00:13:31,400 Speaker 1: employment for three years and monetary policy never gets to 231 00:13:31,400 --> 00:13:33,719 Speaker 1: a tight setting. So I think the FED hasn't you know, 232 00:13:33,800 --> 00:13:35,800 Speaker 1: they've they've been in the bullet partly in the sense 233 00:13:35,840 --> 00:13:37,760 Speaker 1: that they've admitted that they're behind the curve, and then 234 00:13:37,760 --> 00:13:41,240 Speaker 1: so they're speeding up the pace of removing monetary policy accommodation, 235 00:13:41,720 --> 00:13:43,959 Speaker 1: but they haven't gotten to the situation place where they 236 00:13:44,080 --> 00:13:47,520 Speaker 1: actually recognize that they have to actually make monetary policy tight. 237 00:13:48,040 --> 00:13:51,240 Speaker 1: And I think the last couple of weeks, our market 238 00:13:51,280 --> 00:13:54,480 Speaker 1: is starting to come to the uh conclusion that monetary 239 00:13:54,520 --> 00:13:56,280 Speaker 1: policy at some point the cycle is gonna have to 240 00:13:56,320 --> 00:13:58,600 Speaker 1: be tight. It's not there yet, but we're moving in 241 00:13:58,600 --> 00:14:02,600 Speaker 1: that direction. And just to continue that thought, I mean, 242 00:14:02,920 --> 00:14:05,839 Speaker 1: some are suggesting that in order to indicate that it's 243 00:14:05,880 --> 00:14:09,640 Speaker 1: taking inflation more seriously, the Fed could go for a 244 00:14:09,720 --> 00:14:13,400 Speaker 1: half a percentage point increase the first time they raise 245 00:14:13,480 --> 00:14:16,960 Speaker 1: interest rates, rather than this very gradual path people are 246 00:14:17,000 --> 00:14:19,840 Speaker 1: expecting of a quarter of a percentage point each time 247 00:14:20,320 --> 00:14:23,200 Speaker 1: do you think that's something that they should be thinking about. Well, 248 00:14:23,240 --> 00:14:25,360 Speaker 1: I'm certainly certainly worth thinking about it, but I'd be 249 00:14:25,440 --> 00:14:27,680 Speaker 1: very surprised if they did that. I mean, this FED 250 00:14:27,760 --> 00:14:31,120 Speaker 1: has tried to be very predictable, you know, in terms 251 00:14:31,120 --> 00:14:34,440 Speaker 1: of how they communicate and how they act following their communications. 252 00:14:34,440 --> 00:14:37,360 Speaker 1: So you know, a fifty basis point rate hike, which 253 00:14:37,440 --> 00:14:40,960 Speaker 1: which certainly you know you could argue it's appropriate, would 254 00:14:40,960 --> 00:14:42,640 Speaker 1: be a huge shock to markets, and I think it 255 00:14:42,680 --> 00:14:46,240 Speaker 1: goes very much against you know, everything that Powell has 256 00:14:46,640 --> 00:14:49,200 Speaker 1: told us over the last eight months. I think would 257 00:14:49,200 --> 00:14:51,200 Speaker 1: be a huge surprise, and I'd be very surprised if 258 00:14:51,200 --> 00:14:55,240 Speaker 1: they actually do that. Smiling because I'm remembering I think 259 00:14:55,240 --> 00:14:58,240 Speaker 1: it was was it Paul Volca in the early eighties 260 00:14:58,240 --> 00:15:00,600 Speaker 1: who just decided on a Sunday night to raise interest 261 00:15:00,680 --> 00:15:03,520 Speaker 1: rates by two percentage points and to help with the 262 00:15:03,640 --> 00:15:06,280 Speaker 1: markets or what they were expecting. You just can't imagine 263 00:15:06,280 --> 00:15:09,400 Speaker 1: a FED chair doing that these days. Goodness, Stephanie on 264 00:15:09,480 --> 00:15:11,920 Speaker 1: that is that the markets still have quite a bit 265 00:15:11,920 --> 00:15:14,080 Speaker 1: of confidence in the FED. You know, if we have 266 00:15:14,200 --> 00:15:17,360 Speaker 1: a tight labor market, we have higher wages, but inflation 267 00:15:17,400 --> 00:15:20,440 Speaker 1: expectations are still pretty well anchored, and I think if 268 00:15:20,480 --> 00:15:24,080 Speaker 1: if inflation expectations were to become unanchored, that would be 269 00:15:24,360 --> 00:15:26,840 Speaker 1: a science. The markets were losing conference in the FED, 270 00:15:27,160 --> 00:15:28,880 Speaker 1: and that's why I think we pushed the FED into 271 00:15:28,880 --> 00:15:40,160 Speaker 1: having to be more aggressive. Well, Bill, we're going to 272 00:15:40,240 --> 00:15:41,920 Speaker 1: run out of time. But I think there is one 273 00:15:42,000 --> 00:15:47,680 Speaker 1: big question I was interested in your answer to you 274 00:15:47,720 --> 00:15:49,240 Speaker 1: have to bet that by the end of this year, 275 00:15:49,280 --> 00:15:52,480 Speaker 1: the chances are policymakers will either have done too much 276 00:15:52,760 --> 00:15:56,560 Speaker 1: to tame inflation or too little. And we've had many 277 00:15:56,640 --> 00:15:59,880 Speaker 1: years where the assumption has been that you should air 278 00:16:00,080 --> 00:16:04,120 Speaker 1: on the side of of having policy be too loose 279 00:16:04,480 --> 00:16:08,960 Speaker 1: rather than too tight. The risks of of not giving 280 00:16:09,040 --> 00:16:11,520 Speaker 1: enough support for the economy but much greater than the 281 00:16:11,640 --> 00:16:15,760 Speaker 1: risks of doing too much. Has that changed. Are we 282 00:16:15,840 --> 00:16:19,600 Speaker 1: now looking at a situation where the FED should be 283 00:16:19,680 --> 00:16:23,960 Speaker 1: more concerned about not doing enough to tame inflation. Well, 284 00:16:24,040 --> 00:16:27,040 Speaker 1: I think that's that's that's absolutely correct because last cycle 285 00:16:27,480 --> 00:16:30,920 Speaker 1: inflation was too low for most of the cycle, so 286 00:16:30,960 --> 00:16:33,480 Speaker 1: the federers are could actually try to see how far 287 00:16:33,600 --> 00:16:35,440 Speaker 1: they can how tight they can make the labor market 288 00:16:35,440 --> 00:16:38,640 Speaker 1: without any really big risk of that as a consequence, 289 00:16:38,920 --> 00:16:41,080 Speaker 1: this time we're starting from a point that inflation is 290 00:16:41,120 --> 00:16:43,840 Speaker 1: too high, it's above what the FEDS objective is, and 291 00:16:43,880 --> 00:16:46,360 Speaker 1: the labor market is already very very tight. So I 292 00:16:46,400 --> 00:16:49,640 Speaker 1: think using the last economic cycle as a template for 293 00:16:49,680 --> 00:16:52,960 Speaker 1: this cycle, I think it is a very very poor choice. Uh. 294 00:16:53,040 --> 00:16:55,160 Speaker 1: This cycle is very different in terms of where we're 295 00:16:55,200 --> 00:16:58,560 Speaker 1: starting in terms of inflation and the unimplant rate. And 296 00:16:58,560 --> 00:17:00,960 Speaker 1: it's also a very different cycle where we're starting in 297 00:17:01,040 --> 00:17:04,720 Speaker 1: terms of household balance sheets. Household balance sheets, death service 298 00:17:04,760 --> 00:17:07,680 Speaker 1: costs are really low, households have a lot of savings. 299 00:17:08,040 --> 00:17:11,119 Speaker 1: Last cycle, we had lots of damage caused by the 300 00:17:11,119 --> 00:17:14,320 Speaker 1: Great Financial Crisis. So people who are using the last 301 00:17:14,320 --> 00:17:16,280 Speaker 1: cycle as a template for this secle, I think are 302 00:17:16,280 --> 00:17:20,560 Speaker 1: going to be disappointed. Thanks very much for that, Bill Dudley. Now, 303 00:17:20,600 --> 00:17:23,840 Speaker 1: we're not trying to cover everything in this webinar, everything 304 00:17:23,840 --> 00:17:25,960 Speaker 1: that's going on in the global economy. We're just trying 305 00:17:25,960 --> 00:17:29,199 Speaker 1: to zero in on some of the key risks that 306 00:17:29,280 --> 00:17:31,959 Speaker 1: people are thinking about, and I think the top of 307 00:17:31,960 --> 00:17:35,200 Speaker 1: that list is China. So we're going to hear now 308 00:17:35,240 --> 00:17:40,240 Speaker 1: from our chief global economist, frequent participant on Stephanomics, Tom Olig, 309 00:17:40,520 --> 00:17:43,520 Speaker 1: who also spent eleven years in Beijing and has written 310 00:17:43,520 --> 00:17:47,359 Speaker 1: two books about the Chinese economy. Tom Thanks, Stephanie Um. 311 00:17:47,880 --> 00:17:51,159 Speaker 1: So if we were having this conversation a year or 312 00:17:51,200 --> 00:17:54,960 Speaker 1: so ago, there would be a pretty positive story to 313 00:17:55,080 --> 00:17:59,600 Speaker 1: tell about how China had weathered the COVID storm. From 314 00:17:59,600 --> 00:18:01,880 Speaker 1: where we are at the start of twenty two, though, 315 00:18:02,240 --> 00:18:07,200 Speaker 1: and there's some pretty significant risks and obstacles which China 316 00:18:07,359 --> 00:18:12,640 Speaker 1: now faces, in particular the Evergrand property slump. It's difficult 317 00:18:12,640 --> 00:18:18,119 Speaker 1: to disagree with Beijing's strategy here. The property sector is 318 00:18:18,240 --> 00:18:22,720 Speaker 1: over built and over leaver Ridge, and the entire rickety 319 00:18:22,840 --> 00:18:27,000 Speaker 1: structure rests on a foundation of moral hazard. An ever 320 00:18:27,119 --> 00:18:31,760 Speaker 1: Grand in many ways is the poster child for those problems, 321 00:18:31,800 --> 00:18:36,080 Speaker 1: so allowing ever Grand to default and go into restructuring 322 00:18:36,480 --> 00:18:40,680 Speaker 1: absolutely makes sense. The trouble is that with so many 323 00:18:40,880 --> 00:18:44,520 Speaker 1: other developers in a similar position to ever Grand in 324 00:18:44,640 --> 00:18:47,960 Speaker 1: terms of their leverage levels, and with property such an 325 00:18:47,960 --> 00:18:51,480 Speaker 1: important driver of growth across the economy as a whole, 326 00:18:52,280 --> 00:18:56,439 Speaker 1: even making that modest down payment on addressing the problem 327 00:18:56,520 --> 00:19:01,040 Speaker 1: of moral hazard comes with some significant costs attached. There's 328 00:19:01,080 --> 00:19:05,159 Speaker 1: confidence in the sector ebbs away, We're seeing sales and 329 00:19:05,280 --> 00:19:10,200 Speaker 1: investment weekend, and with property directly and indirectly driving about 330 00:19:10,240 --> 00:19:14,680 Speaker 1: a quarter of China's overall GDP. That has to come 331 00:19:14,960 --> 00:19:18,399 Speaker 1: at a cost to growth in the year ahead. The 332 00:19:18,440 --> 00:19:22,960 Speaker 1: second big risk for China looking forward is what happens 333 00:19:23,040 --> 00:19:29,760 Speaker 1: when the omicron variant hits. Now in China's COVID strategy 334 00:19:29,880 --> 00:19:34,400 Speaker 1: was brutally effective. It saves lives, It provided the basis 335 00:19:34,400 --> 00:19:38,119 Speaker 1: for a V shaped recovery in g d P, But 336 00:19:38,200 --> 00:19:42,119 Speaker 1: now they face some new and some difficult questions, in particular, 337 00:19:42,520 --> 00:19:47,000 Speaker 1: what's the end game for their strategy. That strategy works 338 00:19:47,000 --> 00:19:49,960 Speaker 1: in terms of keeping the population healthy, but it does 339 00:19:50,040 --> 00:19:54,560 Speaker 1: come at a cost of growth. Lockdown's hit consumption. We 340 00:19:54,600 --> 00:19:58,239 Speaker 1: saw that last summer when retail sales stumbled in the 341 00:19:58,240 --> 00:20:01,560 Speaker 1: face of the Delta outbreak, and as we heard from Anna, 342 00:20:02,000 --> 00:20:06,520 Speaker 1: in a nightmare scenario with widespread lockdowns, factories and ports 343 00:20:06,560 --> 00:20:10,360 Speaker 1: closing down, we could see China contributing to the global 344 00:20:10,440 --> 00:20:14,800 Speaker 1: supply crunch. We don't think that's the baseline scenario. China 345 00:20:14,920 --> 00:20:17,520 Speaker 1: so far has done a good job at keeping production 346 00:20:17,880 --> 00:20:22,520 Speaker 1: on track, but certainly, as cases in the Chian outbreak rise, 347 00:20:22,920 --> 00:20:25,919 Speaker 1: it's a risk which is worth keeping in mind. So 348 00:20:25,960 --> 00:20:29,040 Speaker 1: if we pull those pieces together our base case for 349 00:20:29,119 --> 00:20:32,640 Speaker 1: China's GDP this year is actually pretty positive. We think 350 00:20:32,920 --> 00:20:36,080 Speaker 1: growth could come in above five for the year, but 351 00:20:36,320 --> 00:20:40,440 Speaker 1: risks to that outlook from Evergrand from the omicron variant 352 00:20:40,800 --> 00:20:44,199 Speaker 1: affirmly to the downside, and a much lower number is 353 00:20:44,240 --> 00:20:47,879 Speaker 1: certainly possible. With all that in mind, it's no surprise 354 00:20:47,960 --> 00:20:51,359 Speaker 1: that the People's Bank of China has already moved towards stimulus. 355 00:20:51,760 --> 00:20:54,520 Speaker 1: So just coming back to the question of the property risk, 356 00:20:55,400 --> 00:20:59,159 Speaker 1: obviously everyone's had to learn the name ever Grand and 357 00:20:59,200 --> 00:21:03,159 Speaker 1: even think about how to pronounce it. Apart from these 358 00:21:03,400 --> 00:21:06,240 Speaker 1: monetary policy tools you've talked about, are there any specific 359 00:21:06,359 --> 00:21:10,240 Speaker 1: policies that China has for managing the boom and bust 360 00:21:10,280 --> 00:21:13,920 Speaker 1: of the property cycle and maybe getting to a situation 361 00:21:13,920 --> 00:21:16,800 Speaker 1: where they're not so dependent on property for driving the 362 00:21:17,080 --> 00:21:21,200 Speaker 1: driving the growth of the economy. Yes, you're you're completely right, Stephanie, 363 00:21:21,240 --> 00:21:23,520 Speaker 1: and I should have gone with the more flamboyant ever 364 00:21:23,600 --> 00:21:27,720 Speaker 1: Grandy pronunciation, which which I hear in Hong Kong is 365 00:21:27,720 --> 00:21:31,840 Speaker 1: a little bit more fun um. So, what China can't 366 00:21:31,880 --> 00:21:36,240 Speaker 1: do is control the kind of the fundamental problem in 367 00:21:36,240 --> 00:21:39,520 Speaker 1: the property sector. They can't they can't get away from 368 00:21:39,560 --> 00:21:43,200 Speaker 1: the problem, that there's massive overbuilding, that the country is 369 00:21:43,280 --> 00:21:47,199 Speaker 1: littered with ghost towns, the developers have borrowed too much money. 370 00:21:47,280 --> 00:21:51,080 Speaker 1: That sort of fundamental characteristics of the problem they can't change. 371 00:21:51,440 --> 00:21:54,679 Speaker 1: What they do have, though, is a very refined and 372 00:21:54,760 --> 00:21:57,639 Speaker 1: granular set of tools that they can try and use 373 00:21:57,720 --> 00:22:01,080 Speaker 1: to manage the problem down. So they can They don't 374 00:22:01,119 --> 00:22:06,560 Speaker 1: just set interest rates. They set interest rates for mortgages specifically, 375 00:22:06,960 --> 00:22:09,080 Speaker 1: and they can set them at different rates for first 376 00:22:09,080 --> 00:22:11,960 Speaker 1: time buyers and second time buyers and third time buyers. 377 00:22:12,480 --> 00:22:16,240 Speaker 1: They can change down payment requirements city by city and 378 00:22:16,400 --> 00:22:19,399 Speaker 1: change down payment requirements for first time buyers and second 379 00:22:19,400 --> 00:22:22,520 Speaker 1: time buyers and third time buyers. They can open the 380 00:22:22,560 --> 00:22:28,119 Speaker 1: credit taps for real estate developers in different ways for 381 00:22:28,200 --> 00:22:33,119 Speaker 1: different categories of developer. So they can't magically make the 382 00:22:33,160 --> 00:22:36,040 Speaker 1: problem go away. But what they've done over the last 383 00:22:36,080 --> 00:22:40,439 Speaker 1: decade is developed this rather precise set of tools for 384 00:22:40,560 --> 00:22:43,640 Speaker 1: managing it, and I expect we'll see those coming into 385 00:22:43,680 --> 00:22:47,840 Speaker 1: play in the months ahead. And finally, Tom sh Jingping, 386 00:22:47,840 --> 00:22:51,960 Speaker 1: we've seen him become more and more powerful as a 387 00:22:52,080 --> 00:22:56,560 Speaker 1: Chinese president, leader of the Chinese Communist Party, and he's 388 00:22:56,600 --> 00:23:00,880 Speaker 1: also through that increased the hold of the party over 389 00:23:01,560 --> 00:23:06,240 Speaker 1: um the economy. We're now seeing him seek a third 390 00:23:06,400 --> 00:23:10,280 Speaker 1: term as leader, maybe even leadership for life, as someone 391 00:23:10,359 --> 00:23:14,360 Speaker 1: calling it. What are the economic implications of that? Yes, 392 00:23:14,480 --> 00:23:19,119 Speaker 1: so she has been moving the sort of pieces into 393 00:23:19,160 --> 00:23:23,280 Speaker 1: place to ensure that he can have a third term 394 00:23:23,320 --> 00:23:26,359 Speaker 1: as president and as general secretary of the Communist Party, 395 00:23:27,200 --> 00:23:31,199 Speaker 1: and that process will sort of reach its endgame at 396 00:23:31,200 --> 00:23:34,640 Speaker 1: the end of this year, and very likely she will succeed. 397 00:23:34,960 --> 00:23:37,080 Speaker 1: So there are some short term and some long term 398 00:23:37,160 --> 00:23:42,240 Speaker 1: implications of that. The short term implication is, well, China 399 00:23:42,520 --> 00:23:45,679 Speaker 1: in the best of times, has very little tolerance for 400 00:23:45,720 --> 00:23:49,320 Speaker 1: bad news in the run up to big political events, 401 00:23:49,760 --> 00:23:52,600 Speaker 1: and appointing she for a third term as president will 402 00:23:52,640 --> 00:23:55,919 Speaker 1: be a big political event. They have zero tolerance for 403 00:23:55,960 --> 00:23:59,560 Speaker 1: bad news. So that's a reason to think that they 404 00:24:00,000 --> 00:24:03,639 Speaker 1: will stay very strict in terms of containing the spread 405 00:24:03,880 --> 00:24:06,560 Speaker 1: of COVID, and it's also a reason to think I 406 00:24:06,600 --> 00:24:09,280 Speaker 1: think that in the final analysis, they're not going to 407 00:24:09,440 --> 00:24:13,760 Speaker 1: allow property to trigger a collapse in the economy this year. 408 00:24:14,160 --> 00:24:17,720 Speaker 1: Looking longer term, well, one of the big successes of 409 00:24:17,800 --> 00:24:21,600 Speaker 1: dong Hao Ping, China's great reformer, was getting in place 410 00:24:21,640 --> 00:24:26,119 Speaker 1: a process for orderly leadership succession and orderly handover from 411 00:24:26,240 --> 00:24:29,440 Speaker 1: Dong to jang Zamin, from jang Zamin to Jujuin Tao, 412 00:24:29,720 --> 00:24:33,520 Speaker 1: and from Jujun Tao to shijim ping Um. If Hi 413 00:24:33,600 --> 00:24:37,040 Speaker 1: Jimping succeeds in getting a third term as China's leader, 414 00:24:37,320 --> 00:24:40,280 Speaker 1: well there's going to be some new questions about that 415 00:24:40,520 --> 00:24:44,880 Speaker 1: orderly succession process. The wheels are not going to come 416 00:24:44,920 --> 00:24:48,840 Speaker 1: off the wagon of Chinese governance immediately, but I think 417 00:24:48,880 --> 00:24:51,840 Speaker 1: we'd be looking for problems in that area in the 418 00:24:51,920 --> 00:25:02,320 Speaker 1: years ahead. Thank you very much. So that was a 419 00:25:02,359 --> 00:25:06,760 Speaker 1: big dollop of economic intelligence from Bloomberg. Next week we 420 00:25:06,880 --> 00:25:10,960 Speaker 1: might let some non Bloomberg folks get a word in. Finally, 421 00:25:11,440 --> 00:25:15,119 Speaker 1: David Hood from Bloomberg Tax has this sorry tale of 422 00:25:15,200 --> 00:25:19,760 Speaker 1: the overburdened Inland Revenue Service switchboard and very long suffering 423 00:25:19,760 --> 00:25:23,520 Speaker 1: accountants c p a s who are finding they can't 424 00:25:23,600 --> 00:25:28,480 Speaker 1: ever ever get through. Welcome to the Internal Revenue Service. 425 00:25:28,960 --> 00:25:33,720 Speaker 1: You can also visit us at www dot IRS dot gov. 426 00:25:34,200 --> 00:25:36,200 Speaker 1: Got a tax question, who are you going to call 427 00:25:36,400 --> 00:25:39,800 Speaker 1: to continue in England? Not the i r S in fact, 428 00:25:39,920 --> 00:25:43,159 Speaker 1: anyone but the I r S, unless, of course, you 429 00:25:43,680 --> 00:25:47,879 Speaker 1: or your c p A have time to wait wait, wait, 430 00:25:52,720 --> 00:25:55,919 Speaker 1: and wait some more on hold. That's the opinion of 431 00:25:55,960 --> 00:26:00,879 Speaker 1: frustrated taxpairs, tax preparers, the White House, and even the 432 00:26:00,920 --> 00:26:04,800 Speaker 1: agency itself. During peaks tax season, your c p A 433 00:26:04,920 --> 00:26:07,720 Speaker 1: can expect to be on hold for ninety minutes or more, 434 00:26:08,240 --> 00:26:11,000 Speaker 1: even if they call what some pros called the bat phone, 435 00:26:11,760 --> 00:26:14,119 Speaker 1: a dedicated line to the I R S for cp 436 00:26:14,119 --> 00:26:17,919 Speaker 1: as to call when they have a complicated question. The 437 00:26:18,040 --> 00:26:27,040 Speaker 1: films have been particularly difficult when certain big things have happened. 438 00:26:27,160 --> 00:26:30,600 Speaker 1: For instance, if you needed to get ahold of the 439 00:26:30,640 --> 00:26:33,680 Speaker 1: I R S to deal with a certain penalty notice 440 00:26:34,560 --> 00:26:37,720 Speaker 1: around the same time that something would happen with the 441 00:26:37,760 --> 00:26:43,919 Speaker 1: stimulus payments, that would be particularly difficult. That was Rochelle 442 00:26:44,000 --> 00:26:48,160 Speaker 1: Holds a principle in Crows Washington National Tax Office. Many 443 00:26:48,240 --> 00:26:52,920 Speaker 1: big things happened in one like more stimulus payments, advanced 444 00:26:53,000 --> 00:26:57,760 Speaker 1: child tax credit checks, and of course the pandemic. The 445 00:26:57,840 --> 00:27:00,320 Speaker 1: free market did come up with an idea to help 446 00:27:00,359 --> 00:27:04,080 Speaker 1: tax professionals. They can, for a fee, hire robots to 447 00:27:04,119 --> 00:27:07,680 Speaker 1: wait in line for them. A startup called n Q Inc. 448 00:27:07,760 --> 00:27:10,920 Speaker 1: Offers a service starting around a hundred dollars a month 449 00:27:11,200 --> 00:27:14,800 Speaker 1: that makes robocalls to the agency's special so called bat 450 00:27:14,800 --> 00:27:18,280 Speaker 1: phone waits on hold and then when it makes a connection, 451 00:27:18,359 --> 00:27:20,639 Speaker 1: puts the client through to an I r S agent 452 00:27:21,680 --> 00:27:24,560 Speaker 1: or your CPA can just call, wait on hold, maybe 453 00:27:24,600 --> 00:27:27,960 Speaker 1: get some lunch and come back, and of course stay 454 00:27:28,000 --> 00:27:34,400 Speaker 1: on hold. Thankfully, the agency recognizes these problems and has 455 00:27:34,400 --> 00:27:37,200 Speaker 1: a strategy in the works to fix them. The I 456 00:27:37,359 --> 00:27:39,480 Speaker 1: r S has plans to ramp up hiring for its 457 00:27:39,520 --> 00:27:42,119 Speaker 1: call centers around the country, which have felt the same 458 00:27:42,200 --> 00:27:45,880 Speaker 1: labor shortage crunch as other businesses. The agency is also 459 00:27:46,080 --> 00:27:49,840 Speaker 1: rolling out natural language service spots to help taxpayers set 460 00:27:49,920 --> 00:27:55,240 Speaker 1: up payment plans and get help quicker. However, these plans 461 00:27:55,280 --> 00:28:01,119 Speaker 1: hinge on the country's and most notoriously unreliable group. That's right, Congress. 462 00:28:03,240 --> 00:28:06,600 Speaker 1: If Congress can pass President Joe Biden's Build Back Better Bill, 463 00:28:06,960 --> 00:28:09,359 Speaker 1: it will hand the I r S eight billion dollars 464 00:28:09,359 --> 00:28:12,800 Speaker 1: a year for the next ten years. That tax pros 465 00:28:12,800 --> 00:28:15,439 Speaker 1: say will go long way to help hire more people, 466 00:28:15,920 --> 00:28:19,960 Speaker 1: open more call centers, and roll out better technology. But 467 00:28:20,040 --> 00:28:23,080 Speaker 1: a bill isn't the magic wand the agency would still 468 00:28:23,119 --> 00:28:27,600 Speaker 1: need to recruit, hire, train and routine more folks, update 469 00:28:27,640 --> 00:28:30,480 Speaker 1: I T systems, and tell the public phone lines are 470 00:28:30,520 --> 00:28:34,320 Speaker 1: open for business. If everything goes perfectly, We're still some 471 00:28:34,440 --> 00:28:37,800 Speaker 1: years off from solving these problems, said Bill Smith, National 472 00:28:37,880 --> 00:28:41,880 Speaker 1: director of tax Technical Services for c BIZ. M h M. 473 00:28:42,240 --> 00:28:46,720 Speaker 1: It would go a long way towards helping that situation 474 00:28:46,840 --> 00:28:50,560 Speaker 1: get a lot better. Is it? Is it going to 475 00:28:50,840 --> 00:28:54,360 Speaker 1: happen immediately even with the funding? I don't think so. 476 00:28:56,320 --> 00:29:17,280 Speaker 1: From Bloomberg tax I'm David Hood. H that's it for 477 00:29:17,320 --> 00:29:20,120 Speaker 1: this week. Join me for another Stephonomics next week, and 478 00:29:20,200 --> 00:29:22,240 Speaker 1: if you want more on the global economy, do follow 479 00:29:22,360 --> 00:29:26,400 Speaker 1: at Economics on Twitter. Also rate this podcast if you 480 00:29:26,480 --> 00:29:29,640 Speaker 1: like it. This episode was produced by Magnus Henrison, with 481 00:29:29,760 --> 00:29:33,280 Speaker 1: special thanks to Anna Wong, Bill Dudley, Tom Rlick, and 482 00:29:33,400 --> 00:29:37,400 Speaker 1: David Hood. Mike Sasso is executive producer of Stephanomics and 483 00:29:37,440 --> 00:29:40,120 Speaker 1: the head of Bloomberg Podcast is Francesca Levi.