WEBVTT - Did We Just Experience a Break in the Neoliberal Consensus? 0:00:10.720 --> 0:00:14.880 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:14.920 --> 0:00:18.720 I'm Joe Wisn't All and I'm Tracy Allaway. Tracy, you know, 0:00:19.000 --> 0:00:22.000 one of the big things, big themes I think that 0:00:22.160 --> 0:00:26.160 has especially in the last year, pervaded our episodes. It's 0:00:26.200 --> 0:00:29.280 really just this idea of like the forty year trend, 0:00:29.520 --> 0:00:32.000 more or less starting in the in the early vulgar years, 0:00:32.280 --> 0:00:36.519 years of declining rates, monetary policy dominant, and the question 0:00:36.600 --> 0:00:39.440 now is are we at some sort of turn in 0:00:39.479 --> 0:00:43.760 the direction of the economy, some meaningful sustaining change, you know, 0:00:43.880 --> 0:00:47.960 how we approach economic policy. Yeah, I guess the low 0:00:48.080 --> 0:00:50.360 rates aspect of it is still up for debate. But 0:00:50.479 --> 0:00:53.400 certainly we have seen this talk of a handoff from 0:00:53.400 --> 0:00:56.880 monetary policy to fiscal policy. There seems to be a 0:00:56.920 --> 0:01:01.720 lot more room in certainly the US political landscape to 0:01:01.960 --> 0:01:05.360 actually talk about things that the government could do on 0:01:05.360 --> 0:01:09.000 this front in a way that got stamped out much 0:01:09.120 --> 0:01:13.880 much more quickly um in earlier years. I think, yeah, 0:01:14.120 --> 0:01:16.000 I think that's exactly right. I mean, like we look 0:01:16.040 --> 0:01:17.960 back at this period and think so many of these 0:01:17.959 --> 0:01:21.840 discussions they really do come back to politics, political choices, 0:01:22.360 --> 0:01:24.720 and whether something is in the air, something in the water, 0:01:24.800 --> 0:01:29.840 or something something fundamental shifting such that we can sort 0:01:29.880 --> 0:01:33.679 of break out of the old expectations about what government 0:01:33.760 --> 0:01:36.920 can and can't do, how much it can really spend, 0:01:37.600 --> 0:01:39.840 and whether that will really produce a policy shift that 0:01:39.880 --> 0:01:45.199 would meaningfully changing, Maybe would meaningfully result in higher rates, 0:01:45.520 --> 0:01:51.280 maybe result in higher inflation, maybe result in higher sustained wages, 0:01:51.840 --> 0:01:55.640 fuller employment, so far and so forth, all kinds of 0:01:55.760 --> 0:01:58.080 questions like that. And so we seem to be at 0:01:58.080 --> 0:02:02.120 a moment where a lot of these questions, a lot 0:02:02.120 --> 0:02:06.600 of stuff that seemed impossible suddenly seemed possible. Yeah, there's 0:02:06.600 --> 0:02:09.720 also an aspect of this that I think often gets missed, 0:02:09.760 --> 0:02:13.480 which is, you know, people talk about the possibility of 0:02:13.520 --> 0:02:18.040 the government doing more or being more involved in economic 0:02:18.080 --> 0:02:20.320 policy and things like that, and they always frame it 0:02:20.400 --> 0:02:24.320 like before the government wasn't involved at all. But of course, 0:02:24.720 --> 0:02:28.480 the current system, even you know, even if you categorize 0:02:28.480 --> 0:02:31.280 it as liberal or light touch or however you want 0:02:31.320 --> 0:02:34.800 to put it, was devised by the government, Like the 0:02:34.840 --> 0:02:38.040 actual economic system that we have in place was made 0:02:38.080 --> 0:02:41.840 through political choices, and so there's a possibility that political 0:02:41.919 --> 0:02:44.600 choices can change, and we can get something different. Yeah, 0:02:44.639 --> 0:02:48.680 I think that's that's basically right. Like people have this idea, Okay, 0:02:48.960 --> 0:02:53.200 there's some sort of state of economic neutrality, or the 0:02:53.240 --> 0:02:56.919 government is hands off, another government will intervene in some way. 0:02:57.800 --> 0:02:59.919 But of course that's set up that we had then, 0:03:00.080 --> 0:03:02.799 or the setup that we have right now is also 0:03:02.919 --> 0:03:06.760 just the result of perhaps a different set of policy choices, 0:03:07.360 --> 0:03:10.960 and those political choices are of course subject to change, 0:03:11.000 --> 0:03:14.400 and I think it's potentially happening right now. I should 0:03:14.400 --> 0:03:18.120 note it's very important we're recording this March nine round, 0:03:18.160 --> 0:03:22.519 six PM. There is a scheduled to be a vote tomorrow, 0:03:22.960 --> 0:03:25.640 and hopefully that happens only so that we don't have 0:03:25.720 --> 0:03:28.440 to re record this intro. But you know, the House 0:03:28.560 --> 0:03:32.480 is scheduled to pass this one point nine trillion dollars 0:03:32.560 --> 0:03:36.120 stimulus at the Senate passed just this weekend, which really 0:03:36.160 --> 0:03:40.240 does open up this question of are we going to 0:03:40.360 --> 0:03:43.600 do fiscal policy in a way the likes of which 0:03:43.640 --> 0:03:47.520 we haven't seen? Yeah, I think that's fairy. So the 0:03:47.600 --> 0:03:49.600 question really is are we at a turn here? We 0:03:49.640 --> 0:03:52.200 have two great guests that I'm very excited to speak to, 0:03:52.320 --> 0:03:55.680 and they'll help us think through the current policy stance 0:03:55.760 --> 0:03:58.120 and the history and so forth. We're gonna be speaking 0:03:58.120 --> 0:04:01.120 with Sconda m n ath. He's the research director at 0:04:01.160 --> 0:04:04.720 Employee America as well as Mike Console, he's the director 0:04:04.760 --> 0:04:06.920 at the Roosevelt Institute, and he is the author of 0:04:06.960 --> 0:04:10.560 a new book, Freedom from the Market, America's fight to 0:04:10.600 --> 0:04:13.480 liberate itself from the grip of the invisible hands. So 0:04:13.800 --> 0:04:17.159 very excited to get his perspective. And I thought about 0:04:17.640 --> 0:04:21.159 this discussion and that we should have this discussion actually 0:04:21.200 --> 0:04:25.160 back in January because it was a tweet from Skanda 0:04:25.360 --> 0:04:29.720 and he asked this question, um, which is is essentially, 0:04:30.200 --> 0:04:34.440 are we at some structural break from neoliberalism in somewhere? 0:04:34.440 --> 0:04:37.560 Are we at this trend break? And that really is 0:04:37.680 --> 0:04:42.000 the key question. Did did something just turn? So let's 0:04:42.040 --> 0:04:44.400 just start with that. We'll try to answer that right 0:04:44.440 --> 0:04:47.400 off the bat. Are we at the structural break? So, 0:04:47.440 --> 0:04:49.720 Mike and Sconda, thank you so much for joining us. 0:04:50.320 --> 0:04:53.679 I really want to start with that term, that word neoliberalism, 0:04:53.760 --> 0:04:56.520 because I mean, it's kind of a joke. I would say, 0:04:56.560 --> 0:05:00.960 like on Twitter, people always use that word neoliberal, neoliberalism, 0:05:01.400 --> 0:05:04.520 the neoliberal consensus without any sort of idea of what 0:05:04.720 --> 0:05:08.760 we're actually talking about what that means. So I'd love 0:05:08.800 --> 0:05:10.960 to get your perspective, and I'll start with you, Scanda, 0:05:11.480 --> 0:05:13.280 both of you come in if you're like, what are 0:05:13.320 --> 0:05:17.760 we actually talking about when we throw that term the 0:05:17.880 --> 0:05:23.120 neoliberal consensus around? So thanks for having me. I think 0:05:23.360 --> 0:05:26.000 I agree that it has been overused as a word 0:05:26.120 --> 0:05:29.960 to just describe things people don't like, particularly from those 0:05:30.040 --> 0:05:31.960 on the left. But at the same time, I do 0:05:32.080 --> 0:05:34.880 think it also has some substantive meaning and does capture 0:05:34.960 --> 0:05:37.800 a certain arc that you're referring to earlier. So if 0:05:37.839 --> 0:05:41.080 we go back to some of the people who have 0:05:41.240 --> 0:05:46.640 defined themselves as neoliberals, from people like Milton Friedman about 0:05:46.680 --> 0:05:49.720 neoliberalism to Charles Peters he had a sort of Washington 0:05:49.800 --> 0:05:53.400 Post op ed on neo liberalism in two If you 0:05:53.480 --> 0:05:55.240 kind of try to find the common threads and where 0:05:55.279 --> 0:05:58.440 this all fits, it start rooted in a skepticism of 0:05:58.920 --> 0:06:04.600 democratic and political power in terms of organizing society. And 0:06:04.880 --> 0:06:06.680 that's at least how I would if I really try 0:06:06.720 --> 0:06:08.840 to break this down to some sort of crude shorthand, 0:06:09.240 --> 0:06:12.560 it would be de emphasizing the democratic forms of power 0:06:12.720 --> 0:06:15.440 and trying to rely more on markets and if you're 0:06:15.560 --> 0:06:17.280 coming maybe a little bit more from the left, it's 0:06:17.320 --> 0:06:22.400 probably a reliance on technocratic governance and maybe reliance on 0:06:22.560 --> 0:06:25.480 academia to really solve some of these problems. If you 0:06:25.520 --> 0:06:27.960 think about the FED and sort of it's arc in 0:06:28.080 --> 0:06:32.120 terms of dominating macroeconomic policy making, the Fed's independence is 0:06:32.160 --> 0:06:35.560 sort of this mix of markets and academics in the 0:06:35.640 --> 0:06:39.279 sense the FED is trusted because they are the macroeconomic experts, 0:06:39.640 --> 0:06:41.400 and at the same time they're also kind of relying 0:06:41.440 --> 0:06:43.520 on the banking system to respond in a certain way 0:06:43.560 --> 0:06:45.800 to their policies, and that is the way in which 0:06:46.360 --> 0:06:49.920 you will get full employment and stable macroeconomic policy. So 0:06:50.040 --> 0:06:52.880 it's really delegating out functions that were maybe thought of 0:06:52.920 --> 0:06:56.520 as traditionally in the domain of Congress and the President 0:06:56.720 --> 0:07:00.360 and really trying to rely more on technocracy and markets 0:07:00.400 --> 0:07:03.360 to really organize that sort of part of society. Some 0:07:03.480 --> 0:07:07.440 will disagree with this definition for sure. So Mike, I 0:07:07.720 --> 0:07:10.600 want to ask you about something um that's Canada just said, 0:07:10.640 --> 0:07:13.400 which is this idea of you know, a sort of 0:07:13.640 --> 0:07:17.760 market based structure or markets dictating the ultimate outcome. Is 0:07:17.840 --> 0:07:22.240 there a good historical example of that actually working well? 0:07:22.320 --> 0:07:25.400 Because I think nowadays we're so used to talking about 0:07:25.480 --> 0:07:29.160 you know, market based systems not really doing, um, what 0:07:29.320 --> 0:07:32.720 people would like them to do, or not providing certain 0:07:32.960 --> 0:07:35.680 you know, social needs in the way that some people 0:07:35.760 --> 0:07:38.360 might have expected or at least would would aim for. 0:07:39.040 --> 0:07:42.720 Is there an example in history where a market based 0:07:42.760 --> 0:07:44.680 system worked and it was sort of, you know, the 0:07:44.800 --> 0:07:50.000 pinnacle of neoliberal economic policy. Yeah. Sure. So just to 0:07:50.200 --> 0:07:52.880 go back to what's Scanda said. One reason the terms 0:07:52.920 --> 0:07:55.480 a little weird because the term liberal is a little 0:07:55.520 --> 0:07:59.280 weird in US context because some people use it to 0:07:59.360 --> 0:08:02.080 mean the New Deal and big activist government and the 0:08:02.120 --> 0:08:05.120 great society. Other people tend to want it to mean 0:08:05.960 --> 0:08:08.559 a more traditional what we might often call libertarian idea. 0:08:09.160 --> 0:08:13.720 And what people often emphasizes knew about this classical liberalism 0:08:14.520 --> 0:08:17.320 is the affirmative role of the state. Um that they, 0:08:17.680 --> 0:08:20.640 the neo liberals, understood themselves, and you if you actually 0:08:20.680 --> 0:08:23.200 read Higak and Freedmen, you'll see this pretty clearly. They 0:08:23.240 --> 0:08:26.840 understand is an affirmative state building project, and the project 0:08:26.920 --> 0:08:30.480 the goal of that project is to subordinate democracy to 0:08:30.560 --> 0:08:34.840 the market and put in what the historian Quinn Slovenian 0:08:34.960 --> 0:08:38.439 describes as encasement around the market to prevent it from 0:08:38.440 --> 0:08:41.679 democratic challenges. So that's why sometimes the question about like 0:08:42.200 --> 0:08:45.120 what's an example of like a neoliberal solution that work 0:08:45.440 --> 0:08:47.120 is often a little weird because it's often in the 0:08:47.280 --> 0:08:52.840 context of devolving, privatizing, voucherizing, or otherwise removing the publicness 0:08:53.120 --> 0:08:56.800 of public institutions and public programs. Um. You know, there's 0:08:56.800 --> 0:08:58.400 a lot of things that involved markets at work all 0:08:58.400 --> 0:09:01.000 the time. Single payer healthcare involves a lot of markets 0:09:01.040 --> 0:09:04.160 on the side of hiring doctors and buying bandages. What 0:09:04.360 --> 0:09:07.199 is unique about is that it is removed from market dependency. 0:09:07.240 --> 0:09:08.920 It's the big thing I try to go into my book, 0:09:09.240 --> 0:09:13.240 um the market is how individuals intersect with healthcare under 0:09:13.280 --> 0:09:16.559 single pair though obviously you know, even under even in 0:09:16.679 --> 0:09:19.280 the UK, doctors are employed, they're employed by the state. 0:09:19.320 --> 0:09:22.439 In that case, there's still markets and price mechanisms and 0:09:22.559 --> 0:09:27.640 feedback and incentives. It's but your ability to access isn't 0:09:27.640 --> 0:09:30.200 dependent on the logic of ability to pay and profit 0:09:30.280 --> 0:09:33.120 seeking activity. So that's why, you know, there's a lot 0:09:33.160 --> 0:09:35.480 of solutions that involve markets, and some things in which 0:09:35.920 --> 0:09:38.840 markets which have existed before capitalism it will exist after 0:09:39.480 --> 0:09:43.680 can play very important part of solutions. But it's the supremacy. 0:09:43.720 --> 0:09:46.439 It's that it's the dominance of the market dependency in 0:09:46.480 --> 0:09:48.800 the market logic. I think that catches people off guard. 0:09:48.880 --> 0:09:52.080 Ins Earrah, did something happen? You know in the intro, 0:09:52.160 --> 0:09:56.080 I was like, okay, forty years, forty years vulgar nineteen eighty. 0:09:56.679 --> 0:10:00.920 Is that actually a meaningful turning point in your in 0:10:01.000 --> 0:10:02.800 your book, Mike, or in the you know, when you 0:10:02.880 --> 0:10:06.560 look at the history of economic thought and economic policy, 0:10:06.760 --> 0:10:09.000 is that a real moment or is that kind of 0:10:09.040 --> 0:10:12.480 an arbitrary thing that we identify Because the thirty year 0:10:12.600 --> 0:10:16.679 yield peaked and then it started going down after his tenure. UH, 0:10:16.920 --> 0:10:18.840 you know, there's a real emphasis to run the clock 0:10:18.920 --> 0:10:22.400 back earlier. UM. A lot of deregulatory moves done under 0:10:22.720 --> 0:10:27.120 President Carter, A lot of choices made about the nature 0:10:27.480 --> 0:10:31.480 of corporate structure in the sixties and early seventies. I 0:10:31.600 --> 0:10:35.760 think the shock of Vulcar was enough of a massive 0:10:35.880 --> 0:10:38.720 change under which on the flip side of which UH, 0:10:38.800 --> 0:10:41.640 and it ran concurrently with loring the top end marginal 0:10:41.760 --> 0:10:47.360 tax rates. UH, A very increase in the decrease of unionization. UH, 0:10:47.800 --> 0:10:50.599 the doubling of the rise of the shaff finance in 0:10:50.640 --> 0:10:53.280 the economy. Um So, I think that it does mark 0:10:53.360 --> 0:10:56.160 a break though, as is in the nature of scholarship. 0:10:56.320 --> 0:10:57.920 You know, the more you look, the more you see things, 0:10:57.960 --> 0:11:00.400 and you see connections running earlier. But I do think 0:11:00.440 --> 0:11:02.960 in particularly in what we're talking about here in monetary policy, 0:11:02.960 --> 0:11:07.040 in macro economics, there's definitely a shift where the FED 0:11:07.160 --> 0:11:09.319 is viewed in a much different way, and the role 0:11:09.360 --> 0:11:14.600 of economic theory and macroeconomics also changes pretty profoundly. Sorry, 0:11:14.640 --> 0:11:16.760 can you elaborate on that point a little bit more? 0:11:16.920 --> 0:11:18.480 What do you mean when you say the FED is 0:11:18.800 --> 0:11:22.040 viewed very differently now? It is? Um? Sure? So? You 0:11:22.080 --> 0:11:23.839 know you can kick it to standard too if you 0:11:23.840 --> 0:11:25.679 want to jump, And I don't want to dominate the conversation, 0:11:26.200 --> 0:11:30.880 you sure so. I think the FED itself if you 0:11:30.920 --> 0:11:34.520 think about the fifties, sixties, seventies, eighties, where what really 0:11:34.600 --> 0:11:38.680 changed about the institutional centers of power on macro economic policy? 0:11:38.920 --> 0:11:41.560 And if he's in sixties, the Council of Economic Advisors 0:11:41.679 --> 0:11:44.839 is one of the key institutions we're thinking about like 0:11:44.960 --> 0:11:47.439 what to do with macro economic policy. That's who kind 0:11:47.480 --> 0:11:50.080 of Kennedy is leaning on for sort of passing tax cuts. 0:11:50.520 --> 0:11:52.680 Um you see like little things that sort of sound 0:11:52.760 --> 0:11:55.559 like like okay, tax cuts and sort of the Kennedy 0:11:55.640 --> 0:11:58.480 years sort of you start to see some similar measures 0:11:58.520 --> 0:12:01.520 sort of past the future kids. But really it's fiscal 0:12:01.600 --> 0:12:03.960 policy that's sort of at the center of it. Monterary 0:12:04.000 --> 0:12:07.000 policy is still doing some things around recessions and maybe 0:12:07.240 --> 0:12:12.079 in some cases pretty critical, but like Bulker sort of 0:12:12.360 --> 0:12:15.560 sort of crystallizes the sort of role of the FED 0:12:16.000 --> 0:12:18.280 in this process that the FED is going to be 0:12:18.880 --> 0:12:21.600 willing to hike rates to the point of putting people 0:12:21.640 --> 0:12:24.680 out of work and causing a recession. I think there 0:12:24.720 --> 0:12:28.199 are different different parts of different parts of the policy apparatus, 0:12:28.280 --> 0:12:30.280 So if you step away from macro from a sect, 0:12:30.800 --> 0:12:33.480 those breaks can happen at different times. I do think 0:12:33.600 --> 0:12:36.440 in the case of when Reagan was elected and when 0:12:36.480 --> 0:12:39.079 Carter was elected, they had certain ideas that were different 0:12:39.080 --> 0:12:44.440 from their predecessors. So Carter more so than Linden, Lindon B. Johnson, UM, 0:12:44.840 --> 0:12:48.160 Reagan more so than Nixon. So there were some shifts 0:12:48.200 --> 0:12:50.679 in terms of the philosophy around how much do we 0:12:50.840 --> 0:12:55.679 trust democratic forms of governance to really work? And look 0:12:55.920 --> 0:12:57.880 For a lot of people who are already skeptical of 0:12:57.920 --> 0:13:00.720 the state during the New Deal, is sort of natural 0:13:00.800 --> 0:13:02.840 to sort of go along these lines. For a lot 0:13:02.880 --> 0:13:06.800 of people who may have been more optimistic about what 0:13:07.480 --> 0:13:10.319 democratic governance can achieve, you can look at, well, the 0:13:10.400 --> 0:13:12.319 Vietnam War was going on. There's a lot of stuff 0:13:12.360 --> 0:13:14.920 that the government's doing that sort of breeds mistrust for 0:13:15.040 --> 0:13:18.079 rational reasons, for justifiable reasons, and that also helps to 0:13:18.200 --> 0:13:21.839 sort of catalyze well, maybe government really shouldn't be doing this, 0:13:22.200 --> 0:13:23.559 or if we're going to be doing this, we should 0:13:23.559 --> 0:13:25.599 be doing it in a way that's really deferring to 0:13:25.640 --> 0:13:27.760 the market and leaning on the market to find a solution. 0:13:28.280 --> 0:13:30.360 And again it starts to really warp the set of 0:13:30.440 --> 0:13:33.080 default rules around how we really structure all of these things. 0:13:33.360 --> 0:13:35.760 The default rule is, let's first try to do this 0:13:35.880 --> 0:13:38.600 through the market. Let's try to cut rates and hope 0:13:38.640 --> 0:13:42.400 that banks and financial intermediaries lend more money, and then 0:13:42.440 --> 0:13:44.400 if they lend more money, that will also help to 0:13:44.679 --> 0:13:47.720 sort of get the economy on right footing Mill Freedman 0:13:47.800 --> 0:13:49.280 was the one who said, I want to make the 0:13:49.320 --> 0:13:51.959 FED into a computer. I want to turn all this 0:13:52.040 --> 0:13:54.760 stuff into something automatic that we really can't lean on 0:13:55.240 --> 0:13:57.640 sort of a lot of these self dealing politicians to 0:13:57.720 --> 0:14:00.520 solve and so that I think is we're kind at 0:14:00.559 --> 0:14:03.080 a sort of wits end on some of this stuff now, 0:14:03.200 --> 0:14:05.880 because if you're leaning on interest rate policy to do 0:14:05.960 --> 0:14:10.440 the work of macroeconomics tabilization, it's necessary, but it's not sufficient. 0:14:10.480 --> 0:14:12.960 I guess that's the way I put it. Yeah, I'd 0:14:13.000 --> 0:14:15.160 also just throw in that, you know, it's easy to 0:14:15.320 --> 0:14:18.760 characaturize economists views about in this time period. I don't, 0:14:18.760 --> 0:14:19.960 I don't want to do this, but I think there's 0:14:19.960 --> 0:14:24.000 a genuine belief that the Federal Reserve had solved the 0:14:24.080 --> 0:14:27.400 problem of the business cycle by solely intervening in short 0:14:27.480 --> 0:14:32.280 term interest rates and communicating their path through inflation targeting 0:14:33.040 --> 0:14:36.080 or some sort of medium term target you know, the 0:14:36.280 --> 0:14:40.280 era of the Great Moderation I think gave intellectual bolsternus 0:14:40.360 --> 0:14:42.400 to the or like help bolster that as a concept, 0:14:43.000 --> 0:14:45.760 but evaporated in that is the notion of what the 0:14:45.840 --> 0:14:47.600 FET is doing this to be the financial sector and 0:14:48.400 --> 0:14:52.640 the way the FETE is really controlling the long term yields, uh, 0:14:53.120 --> 0:14:55.520 you know, the long term interest rate, the end rate 0:14:55.680 --> 0:14:59.320 at which individuals use interest rates and in access credit, 0:14:59.680 --> 0:15:04.160 and the way the fiscal situation evolved, the interconnectedness of 0:15:04.240 --> 0:15:06.920 Monterrey policy with all other fasts. The economy, which was 0:15:07.040 --> 0:15:11.600 a very strong part of how World War Two was executed. 0:15:11.640 --> 0:15:14.560 In its aftermath, it was kind of living memory in 0:15:14.600 --> 0:15:17.680 that mid century period had evaporate into this much more ethereal, 0:15:17.840 --> 0:15:21.720 like computerized mathematical sense of that you know, with this 0:15:21.920 --> 0:15:25.520 small intervention, like the smallest intervention, the smallest cut you 0:15:25.600 --> 0:15:28.880 could make, you could dictate the macro economy. And that's 0:15:28.920 --> 0:15:32.160 what failed in the Great Recession. Though we spent a 0:15:32.200 --> 0:15:33.600 decade trying to figure out what to make of that, 0:15:34.120 --> 0:15:37.120 so that that seems like a good sort of turning 0:15:37.200 --> 0:15:40.000 point to the sort of like the question or the 0:15:40.440 --> 0:15:43.120 Asconda's tweet about is this the trend break now? And 0:15:43.160 --> 0:15:47.160 it feels like that's sort of like great moderation triumphalism 0:15:47.600 --> 0:15:51.440 we figured out really came to a crashing halt with 0:15:51.560 --> 0:15:55.320 the financial crisis and two thousand eight, two thousand nine, 0:15:55.920 --> 0:15:58.760 and then we had this like decade of still mostly 0:15:58.920 --> 0:16:02.360 leaning on the FED in the Central Bank, even though 0:16:02.440 --> 0:16:05.240 it guess by that point on some level, the idea 0:16:05.320 --> 0:16:08.560 that we could control the economy through overnight short term 0:16:08.600 --> 0:16:12.200 interest rates kind of discredited. Now we come to the 0:16:12.280 --> 0:16:15.920 sort of the post virus period, and this question of 0:16:16.040 --> 0:16:19.200 like is this is are we on the new thing? Is? 0:16:19.320 --> 0:16:21.760 Are we finally ready to have a macro policy that 0:16:22.160 --> 0:16:24.760 is truly like sort of like post fed in some sense. 0:16:24.840 --> 0:16:27.600 So Scanda like start off, like you you posed that 0:16:27.720 --> 0:16:30.160 thought on Twitter? Is this the trend, brake? What are 0:16:30.240 --> 0:16:33.440 the sort of what's the affirmative argument for yes, this 0:16:33.640 --> 0:16:37.640 is the meaningful the turn is here. So I think 0:16:37.840 --> 0:16:39.920 just to go back to when I posted this tweet, 0:16:39.920 --> 0:16:43.240 it's about a week after both the Georgia runoffs, and 0:16:43.440 --> 0:16:46.320 I guess the the d C yes, um, sort of 0:16:46.720 --> 0:16:49.640 the capital riots and so or what everyone could call it. Yes, 0:16:49.800 --> 0:16:52.080 it's it's the insurrection. I think a lot of people 0:16:52.080 --> 0:16:55.720 would focus obviously on January six person obvious reasons. I yeah, 0:16:55.960 --> 0:16:58.760 just generally thinking more about the Georgia runoffs in the 0:16:58.800 --> 0:17:01.840 sense that you actually had the stars aligned. And I 0:17:01.880 --> 0:17:04.560 think I am generally someone who doesn't like to make 0:17:04.600 --> 0:17:08.240 big calls because they're like, that's hard, and it's it's 0:17:08.320 --> 0:17:10.680 it's something that I'm generally skeptical of when people do 0:17:10.680 --> 0:17:12.200 you start to just like always say, this is the 0:17:12.240 --> 0:17:14.280 big moment. But there's a lot of things that are 0:17:14.280 --> 0:17:16.040 going for this moment that are not have not been 0:17:16.040 --> 0:17:18.640 true for a long time. One is the political consensus 0:17:18.720 --> 0:17:20.639 is in a very different place in the sense of 0:17:20.880 --> 0:17:24.640 whether fiscal policy is warranted. In markets discussions, we've talked 0:17:24.640 --> 0:17:27.000 about is this the moment where monetary policy hands off 0:17:27.040 --> 0:17:29.679 to fiscal policy for quite some time now, It's been 0:17:29.680 --> 0:17:32.080 about almost I would say it's almost a decade of 0:17:32.240 --> 0:17:35.280 that kind of speak, where kind of saw that there 0:17:35.480 --> 0:17:39.400 was a lot of focus on cutting the deficit ine 0:17:39.440 --> 0:17:41.920 and it kind of just it was running on fumes. 0:17:42.200 --> 0:17:44.800 There was a lot of hype about is this infrastructure week? 0:17:45.000 --> 0:17:47.000 Is this the week when Trump is going to take 0:17:47.040 --> 0:17:49.560 fiscal policy really seriously? That was the whole thrust of 0:17:49.640 --> 0:17:53.879 the Trump trade in markets in November. I think you 0:17:54.000 --> 0:17:57.199 in general people will say that largely underwhelming. You did 0:17:57.280 --> 0:18:00.280 get tax cuts out of that, tax cuts that didn't 0:18:00.280 --> 0:18:03.119 really move the needle on either inflation or growth in 0:18:03.240 --> 0:18:06.520 a meaningful way, I would say. And so now we're 0:18:06.520 --> 0:18:09.520 at this point where you have the political consensus there, 0:18:09.520 --> 0:18:13.000 but you also have the legislative like capacity, where there 0:18:13.080 --> 0:18:16.920 are fifty senators who can pass a reconciliation bill. And 0:18:17.320 --> 0:18:21.040 while there is a lot of room between Bernie Sanders 0:18:21.119 --> 0:18:23.879 and Joe Mansion, they're all pretty much on board with 0:18:24.280 --> 0:18:27.359 the using fiscal policy pretty aggressively. They may have different 0:18:27.359 --> 0:18:32.479 philosophies about how to fund certain policy measures, but they 0:18:32.520 --> 0:18:35.119 are at least open to it. And that is different 0:18:35.280 --> 0:18:39.440 from what you saw in previous instances when there was 0:18:39.840 --> 0:18:43.200 one party in control of both the House, Senate and 0:18:43.800 --> 0:18:46.320 the White House, where you had this sort of alignment 0:18:46.960 --> 0:18:50.960 in terms of discull two thousand nine, but the people 0:18:51.000 --> 0:18:54.040 didn't really believe that fiscal policy was the thing to do. Um. 0:18:54.200 --> 0:18:58.399 I think people really undersell just how much of faith 0:18:58.480 --> 0:19:02.600 there was that fiscal policy really isn't the right. Fiscal 0:19:02.640 --> 0:19:04.920 policy isn't needed. Monetary policy will take care of it. 0:19:05.280 --> 0:19:07.920 Let's focus on cutting the deficit. Let's try to cut 0:19:07.960 --> 0:19:11.280 government spending where it's wasteful. Even among the Democratic Party, 0:19:11.320 --> 0:19:13.400 which we think of is sort of more on the left. 0:19:13.880 --> 0:19:17.280 So those stars have aligned on the legislative side, which 0:19:17.280 --> 0:19:19.359 I don't think would have been true if Georgia Ronous 0:19:19.400 --> 0:19:21.600 didn't go the way they did. So you need to 0:19:21.680 --> 0:19:24.080 have that you kind of and now the question is 0:19:24.160 --> 0:19:29.440 can you get responsiveness where people see that the AARP passes, 0:19:30.040 --> 0:19:32.120 and then people see the benefits of it and think 0:19:32.280 --> 0:19:35.560 this works. And then even people who are maybe a 0:19:35.600 --> 0:19:37.800 little more skeptical of these measures start to think that 0:19:37.880 --> 0:19:42.240 there is some sort of political incentive, some social incentive 0:19:42.320 --> 0:19:45.199 to actually pursue these policies in the future. So if 0:19:45.240 --> 0:19:47.400 people see this as a success, then I think it's 0:19:47.520 --> 0:19:50.480 more replicable. Right now is sort of the testing ground 0:19:50.720 --> 0:19:53.520 phase where this has past. We're gonna have to see 0:19:53.560 --> 0:19:57.360 how people digest it. Do people blame the rescue package 0:19:57.440 --> 0:20:00.359 as a sort of to create all these other problems, 0:20:00.440 --> 0:20:03.399 or people are gonna say, actually, all these standards of 0:20:03.760 --> 0:20:07.080 people standard of living have really improved in a material way. 0:20:07.680 --> 0:20:10.199 And now I'm more inclined to vote for Joe Biden 0:20:10.359 --> 0:20:12.880 and for Democrats because they passed this and it really 0:20:12.920 --> 0:20:15.040 made my life better. We're gonna have to see you, 0:20:15.119 --> 0:20:16.800 but I think the odds are better now than they 0:20:16.840 --> 0:20:19.879 were even two months ago or a three months ago. 0:20:19.880 --> 0:20:22.920 I should say, the sense that like, we actually have 0:20:23.160 --> 0:20:26.040 a package on the table that's historic in nature and 0:20:26.119 --> 0:20:28.359 the kind that even Paul Krugman is like, this is efficient, 0:20:28.440 --> 0:20:30.399 this is sufficient to actually get us out of the 0:20:30.440 --> 0:20:34.480 current run. So, um, I think that's meaningful. So I 0:20:34.600 --> 0:20:36.840 just want to dwell on this point a little bit, 0:20:36.920 --> 0:20:39.320 because you know, like Joe and I were disgusting in 0:20:39.320 --> 0:20:42.680 the intro, these are all ultimately political choices, and so 0:20:42.800 --> 0:20:45.680 I think it's worth spending time on how the political 0:20:46.000 --> 0:20:51.560 consensus actually shifts. But what are the conditions in place 0:20:52.040 --> 0:20:57.119 in that allowed this potential shift, or at least this 0:20:57.359 --> 0:21:01.520 testing of a new type of policy to actually be 0:21:01.680 --> 0:21:05.720 put in motion. And how were they different to previous 0:21:05.960 --> 0:21:09.760 economic crises like two thousand eight, where we did see 0:21:09.760 --> 0:21:12.560 a lot of popular outrage about things that had happened, 0:21:12.640 --> 0:21:16.000 and we did see some cries for help to offset 0:21:16.040 --> 0:21:18.800 mortgages and things like that, but they didn't really lead 0:21:18.960 --> 0:21:22.920 to a big break in the consensus. Um, Mike, maybe 0:21:23.000 --> 0:21:26.120 this one's for you. Yeah. Absolutely. Um. So two things 0:21:26.280 --> 0:21:28.920 jump out that are different right now than we're different 0:21:28.920 --> 0:21:31.399 in the last decade. Let's let's stick with inside kind 0:21:31.400 --> 0:21:34.040 of like the center left technocracy and especially within the 0:21:34.080 --> 0:21:36.000 Democratic Party, because I think it's very easy to say 0:21:36.359 --> 0:21:38.960 it's the tea Party, it's austerity it's the hypocrisy and 0:21:39.000 --> 0:21:40.800 the dead on the right. But the reason a lot 0:21:40.880 --> 0:21:43.720 of the stuff failed to take ignition in two thousand 0:21:43.840 --> 0:21:46.240 nine was because it was coming from inside that administration 0:21:46.520 --> 0:21:49.359 of President Obama's early years. And one is that you 0:21:49.560 --> 0:21:51.960 had in two thousand nine, you had a White House 0:21:52.000 --> 0:21:54.399 in a center left technocracy that walked in thinking that 0:21:55.040 --> 0:21:58.560 the deficit was a fund like an existential threat to 0:21:58.600 --> 0:22:01.439 the economy. UM That the trade deficit, that we were 0:22:01.480 --> 0:22:03.720 borrowing too much from China, we're on borrow of time, 0:22:03.800 --> 0:22:07.080