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Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.

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Speaker 1: I'm Joe Wisenthal and I'm Tracy Allaway. Tracy, I'm very

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Speaker 1: excited about today's episode. Obviously, you know, we we talk

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Speaker 1: a lot about economic theory on the show. We talk

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Speaker 1: a lot about how like changes have in economic thinking

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Speaker 1: have changed from you know, now and pre crisis and

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Speaker 1: so forth. We talked about the sort of condition of

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Speaker 1: the macro economy quite a bit, but you know, not

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Speaker 1: as much on the actual I guess, specific policymaking side. Yeah, well,

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Speaker 1: today is a chance for us to put theory into practice,

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Speaker 1: I guess. And we've been talking basically a year now

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Speaker 1: about this idea of the handoff to fiscal policy, this

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Speaker 1: movement from monetary policy to fiscal eimulus being more important

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Speaker 1: for economies post COVID, and now's our chance to actually

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Speaker 1: dig into how fiscal policy is enacted and how people

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Speaker 1: in power are thinking about it. Yeah, exactly right. So

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Speaker 1: like that is of course a huge theme, a huge

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Speaker 1: discussion the sort of the post I guess. I would say,

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Speaker 1: you know that the lesson of the last years that

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Speaker 1: fiscal firepower has been incredibly effective at reviving the economy,

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Speaker 1: and there is certainly an increased openness, it feels like,

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Speaker 1: politically and also intellectually to really take a more expansive

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Speaker 1: view of what government spending and taxation power is capable

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Speaker 1: of in terms of building into economy and sort of

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Speaker 1: not leaving all of so many of so much of

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Speaker 1: the decision making to um the Central Bank. Yeah, I

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Speaker 1: think that's exactly right. And we are seeing even you know,

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Speaker 1: if you think back a couple of years, even the

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Speaker 1: idea of massive fiscal spend ending things like direct payments

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Speaker 1: to Americans were kind of on the fringe. But now

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Speaker 1: not only have we seen that happen, but people are

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Speaker 1: talking about other things for future crises, such as automatic

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Speaker 1: stabilizers things like that. Yeah, exactly right. It feels like

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Speaker 1: it's a time of of openness to new ideas, which

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Speaker 1: often is the case after a big crisis. Anyway, I

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Speaker 1: want to jump right into our discussion today because we

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Speaker 1: have the perfect guest with the perfect perspective to talk

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Speaker 1: about all this. We're gonna be speaking with Jared Bernstein.

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Speaker 1: He is a member of the White Houses Council of

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Speaker 1: Economic Advisors right now, advising the President on economic policy,

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Speaker 1: and he was the Previously, he was the chief economist

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Speaker 1: and economic advisor to then Vice President Joe Biden coming

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Speaker 1: out of the Great Financial Crisis. So he's truly an

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Speaker 1: extraordinary purch extraordinary position, great perspective to talk about today,

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Speaker 1: in the past and everything that's going on. Uh A,

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Speaker 1: thank you so much for joining odd lots. Well, thanks

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Speaker 1: so much for inviting me. I think the right way

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Speaker 1: to start is to say long time listener, first time caller,

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Speaker 1: as they say, that's great. I love hearing that. I've

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Speaker 1: taken many a job accompanied by the two of you,

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Speaker 1: which has helped, you know, burn calories and learn something

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Speaker 1: while I'm running. So well, we're all about physical fitness. Yeah,

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Speaker 1: you're the second person recently to actually cite our podcast

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Speaker 1: in contributing to burn calories, which is, you know, it's

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Speaker 1: nice to be listened to by influential people and stuff,

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Speaker 1: but we really want to help people lose weights, so

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Speaker 1: that that really means a lot. But you know, I

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Speaker 1: want to start actually with something UM kind of specific.

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Speaker 1: So we're in this I think pretty extraordinary moment. Economic

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Speaker 1: growth is much faster than I think a lot of

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Speaker 1: people UM would have guests. The willingness of the government

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Speaker 1: over the last year, both onto the last administration in

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Speaker 1: this one, to you engage age and aggressive fiscal expansion

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Speaker 1: is truly historical. But there is this other bill or

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Speaker 1: possibly set of bills that the White House is aiming

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Speaker 1: to pass later this year, and I want to get

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Speaker 1: into those. But right now everyone's talking about inflation, lumber prices,

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Speaker 1: gas prices, and so forth. We know that the Fed

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Speaker 1: is planning on basically really looking through that understanding its transitory,

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Speaker 1: but from a political perspective and thinking about the task

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Speaker 1: ahead of you this summer and sort of building support

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Speaker 1: for more aggressive fiscal firepower infrastructure. Is that a political challenge?

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Speaker 1: You know? This, this sort of thinking about, Okay, we

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Speaker 1: need to convince members of Congress and the Senate to

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Speaker 1: spend a lot more money. At the same time, the

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Speaker 1: news is filled with stories about rising prices. Well, I

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Speaker 1: think anything you undertake in Washington, given the legislative environment,

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Speaker 1: as a political challenge. But you're very much correct to

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Speaker 1: think about this, at least from my perspective and that

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Speaker 1: of our economic t from the perspective of political economy

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Speaker 1: or the intersection of politics and uh, the kind of

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Speaker 1: economics concerns embedded in your question from the inflation perspective,

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Speaker 1: it's really really important to separate the American Rescue Plan

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Speaker 1: from the Families and Jobs Plan because the former the

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Speaker 1: former is very much in the spirit really of relief

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Speaker 1: more than stimulus, and that that that's a subtle difference,

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Speaker 1: but one that I think it probably isn't lost on

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Speaker 1: this audience, where stimulus is often about trying to quickly

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Speaker 1: address a demand shock and get people back into the economy,

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Speaker 1: where relief is more about helping people and businesses get

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Speaker 1: to the other side. But putting that distinction aside for

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Speaker 1: a second, there's a big difference between direct impact payments

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Speaker 1: or the checks you were just referencing, and enhanced Unemployment

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Speaker 1: benefit PPP loans things like that, and a set of

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Speaker 1: investments that spend out over eight to ten years from

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Speaker 1: both from the perspective of kind of the of the

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Speaker 1: political economy or the kind of the politics of those

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Speaker 1: different initiatives, and uh to your question from the perspective

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Speaker 1: of inflation, I think it's actually quite a non sequitur

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Speaker 1: to talk about the Jobs and the Family Plan and

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Speaker 1: the kind of you know, monthly inflation reads that we're

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Speaker 1: digging into right now, that are very much driven by

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Speaker 1: base effects, by what we we believe to be transitory

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Speaker 1: supply demand misalignments by some of the pent up demand,

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Speaker 1: and the elevated savings rates and investments in long term

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Speaker 1: clean energy initiatives, advanced manufacturing, standing up a care sector

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Speaker 1: measures which I'm sure we can get into from the

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Speaker 1: Families and Jobs Plan, pretty different creatures from the perspective

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Speaker 1: of price pressures. Well, just on that subject, is there

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Speaker 1: anything the administration could do to expand capacity for things

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Speaker 1: that are in short supply? So I'm thinking, you know,

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Speaker 1: lumber is obviously important for housing. Horn prices have also surged,

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Speaker 1: important source of food, animal feed, semiconductors have already been

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Speaker 1: discussed by the administration as being strategically important. But is

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Speaker 1: there more that you could do? Would you be inclined

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Speaker 1: to do more? So let me begin my answer there

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Speaker 1: with with a very firm statement which may sound a

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Speaker 1: little tangential to your question, Tracy, but I don't think

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Speaker 1: is um, which is that when it comes to managing inflation,

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Speaker 1: that is first and last, beginning and end. Uh. How

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Speaker 1: I want to just really emphasize this, the remit of

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Speaker 1: the Federal Reserve, not the White House. Clearly we are

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Speaker 1: tracking carefully monitoring inflationary developments, and by the way, not

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Speaker 1: just in the data, which we're doing with the regular data,

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Speaker 1: the high frequency data, but also anecdote. I mean, this

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Speaker 1: is something we're tracking extremely carefully. But when it comes

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Speaker 1: to managing price pressures, that's the job of the Federal Reserve. Yeah,

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Speaker 1: so that that that's that kind of independence of the

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Speaker 1: Fed is a huge value of of course our administration.

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Speaker 1: That said, um, you raise a perfectly legitimate question that

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Speaker 1: is addressed by some of the measures in the Job's Plan.

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Speaker 1: In particular, you mentioned semiconductors. So there's a fifty billion

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Speaker 1: dollar investment in the in the Job's Plan to help

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Speaker 1: promote and onshore some critical supply chain aspects, including semiconductors.

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Speaker 1: But this is not something that happens, you know right away.

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Speaker 1: I mean as as I was mentioning to Joe. You know, obviously,

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Speaker 1: on like the Rescue Plan, the Jobs Plan still has

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Speaker 1: to be legislated, but it takes a couple of years

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Speaker 1: to stand up a semiconductor plant. When it comes to

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Speaker 1: addressing what we're looking at as transitory misalignments between and

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Speaker 1: supplying them in and some of the sectors you mentioned,

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Speaker 1: I think right there, we have to think about the

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Speaker 1: sort of elasticities or response functions that occur in markets

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Speaker 1: where demand for lumber sends a signal to saw mills

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Speaker 1: to activate the lines that have been dormant. And now

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Speaker 1: there there are misalignments that evolved throughout the course of

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Speaker 1: the pandemic where I think some key actors took down

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Speaker 1: production not foreseeing that it would come back as quickly

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Speaker 1: as it did, and those sorts of things that that's not,

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Speaker 1: you know, necessarily a position for an administration to intervene in.

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Speaker 1: But we'll see how that evolves as as time unfold. Well,

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Speaker 1: on that note, and this is a theme that we

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Speaker 1: talked about a lot, which is the you know, we

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Speaker 1: supply and demand sometimes get discussed as if they're like

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Speaker 1: these sort of very distinct separate things and two lines

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Speaker 1: intersect on a chart and there is the price. But

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Speaker 1: of course, as you basically just alluded to, you know,

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Speaker 1: we lost we've lost a lot of supply in part

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Speaker 1: because of weak demand, and so we lost saw mill

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Speaker 1: demand over the last decade after the Great Financial Crisis,

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Speaker 1: with the mediocre housing recovery and tech capex hasn't been

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Speaker 1: impressive in your thinking about investment, and you know, again

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Speaker 1: the longer term investment. Do you think about basically this

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Speaker 1: idea of maintaining demand, whether it's direct purchases of equipment

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Speaker 1: or incentives to keep you know, growth high, such that

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Speaker 1: private sector actors will be incentivized to continue to build

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Speaker 1: out capacity and not just look at the current moment

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Speaker 1: as a sort of short short blip. Yeah, generally I

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Speaker 1: would say more yes than no, although nobody I wouldn't.

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Speaker 1: I wouldn't use the phrase short blip because you just

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Speaker 1: don't know right fair enough, We and others have packed

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Speaker 1: a lot into this word transitory, but I think what

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Speaker 1: it really means is that we expect these misalignments to correct,

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Speaker 1: although I don't know that any of us really have

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Speaker 1: a great feel for the timing of that because we

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Speaker 1: haven't been through this before. I mean, like you said

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Speaker 1: Joe earlier, this is a remarkable period. We've we essentially

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Speaker 1: shut the economy off and we're turning it back on.

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Speaker 1: That's a you know, not something that we have a

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Speaker 1: lot of time series evidence on. I think that theoretically,

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Speaker 1: the theory of the case is kind of this law

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Speaker 1: and this is this is very traditional kind of Keynesian economics.

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Speaker 1: Is this is this recognition that the world works much

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Speaker 1: more in Keynesian term than in Says Law term, meaning

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Speaker 1: that it's it's it's not correct to believe that supply

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Speaker 1: creates demand. It's more correct to believe that demand pulls

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Speaker 1: in supply. That theory of the case is very much

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Speaker 1: you know, embedded in my and I would argue our

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Speaker 1: thinking in the administration. However, that said, if you look

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Speaker 1: at our plans, particularly the job's plan, but also the

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Speaker 1: families Plan, the longer term investment plans, what you see

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Speaker 1: there is not a you know, kind of acceptance that

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Speaker 1: it's it's you know, completely up to the market to

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Speaker 1: align supply and demand and deliver whatever outcomes the market

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Speaker 1: delivers full stop. And we'll just stand on the sideline

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Speaker 1: and observed. There's much more intention there about, for example,

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Speaker 1: not just job creation, but the quality of the jobs

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Speaker 1: that are created, um ensuring that those jobs are union

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Speaker 1: jobs that pay a good middle class wage. That's one

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Speaker 1: of President Biden's most important marching orders to us. It's

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Speaker 1: recognizing that there are serious missing markets in this economy.

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Speaker 1: The care area is one where that's really pronounced where

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Speaker 1: unlike most other advanced countries, we simply don't have an affordable,

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Speaker 1: accessible care sector for people who are providing elder care

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Speaker 1: or wildcare, which those people are disproportionately women and moms,

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Speaker 1: to be able to find a clear path into the

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Speaker 1: job market if that's what they want to do, So

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Speaker 1: we have to help stand up that sector. The economy

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Speaker 1: will under invest in research and innovation, particularly when the

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Speaker 1: returns from those investments are longer term. The economy will

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Speaker 1: under invest in clean energy at tremendous existential cost to

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Speaker 1: our survival, and so there are areas where we have

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Speaker 1: to make sure that our investment meets those missing markets

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Speaker 1: and helps to create demand that will lead to better

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Speaker 1: quality jobs and investments in under invested sectors. Mhm. So

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Speaker 1: we have so much to get through, and I want

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Speaker 1: to make sure we have time for everything. So if

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Speaker 1: I could shift gears slightly to one of the big

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Speaker 1: questions hanging over you know, Biden spending plans, which is

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Speaker 1: how are they actually going to be paid for? So

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Speaker 1: I would love to know you're thinking about the deficit

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Speaker 1: I suppose, And also the proposed package includes I think

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Speaker 1: tax hikes well enormous tax hikes for the rich, you know,

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Speaker 1: something equivalent to one percent of GDP per year. Why

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Speaker 1: tax hikes to fund this particular package? And the reason

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Speaker 1: I asked that is because, you know, Joe and I

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Speaker 1: talked a little bit about economic opinion maybe changing in

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Speaker 1: political circles, this idea of stuff like modern monetary theory

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Speaker 1: making inroads in the administration. So are the tax hikes

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Speaker 1: because you're actually worried about funding the spending plan and

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Speaker 1: deficits or is it more about seizing a political opportunity

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Speaker 1: that's arisen from this extraordinary time? Is Joe mentioned to

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Speaker 1: actually tackle inequality? Okay, another great set of questions to unpack. Sorry,

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Speaker 1: I know that it's the only take about three and

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Speaker 1: a half hours, but do my. I'll try to be succinct.

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Speaker 1: First of all, though, I want to challenge and adjective views,

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Speaker 1: which is enormous. Um. Yeah, sorry, I knew you too.

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Speaker 1: And well it's it's not just saying that. I happen

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Speaker 1: to be looking right now at a new paper that

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Speaker 1: just came out by the economist Mark Zany, And in

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Speaker 1: chart three of that paper, we shows the building back better,

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Speaker 1: that is, American families and jobs planned tax hikes in context,

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Speaker 1: and he has a bar chart of all the tax

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Speaker 1: hikes that have occurred, you know, since the nineteen thirties.

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Speaker 1: Really it's it's really a lot of work went into

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Speaker 1: this chart, and the one at the very bottom is

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Speaker 1: the one we've proposed. So I think you have to

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Speaker 1: recognize two things send my adjective, okay, And I think

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Speaker 1: the reason you get that result is twofold. One is

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Speaker 1: that many cases were resetting rates to where they've been

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Speaker 1: before or not. Even in the case of the corporate rate.

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Speaker 1: Of course, the Trump tax that took the corporate rate

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Speaker 1: of thirty five to twenty one, we take it to eight.

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Speaker 1: That's our proposal, So that's kind of right in the middle.

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Speaker 1: But also, and this is most important for listeners to

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Speaker 1: recognize that these tax increases do not hit anybody under

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Speaker 1: four hundred thousand family income. And if we're talking about

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Speaker 1: the capital gains tax increase, it's only above one million,

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Speaker 1: so it only affects the top point three percent. Okay,

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Speaker 1: So now that we got that out of the way,

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Speaker 1: let's get to the kind of meaty part of your

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Speaker 1: question around how we're thinking about deficits and debt. It

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Speaker 1: is the president's view that longer term or more permanent

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Speaker 1: proposals should be paid for. I think that makes sense,

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Speaker 1: and I think one way to recognize the sense that

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Speaker 1: that makes is to look at the disinvestment in the

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Speaker 1: things that the Jobs Plan in particular, as well as

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Speaker 1: the Famili's Plan, invests in research and development, innovation, the

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Speaker 1: kinds of long term return investments that private firms often

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Speaker 1: won't make because it simply doesn't fit the kind of

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Speaker 1: schedule that they have to report on to their investors.

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Speaker 1: If you look at infrastructure, everything from public education to

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Speaker 1: replacing pipes that have led in them. You know, there's

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Speaker 1: hundreds of thousands of kids who are are still exposed

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Speaker 1: in today's America to let in the water. That's completely

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Speaker 1: unacceptable to this administration. Again, I talked earlier about a

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Speaker 1: car agenda, but even even traditional stuff, you know, roads

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Speaker 1: and bridges, those investments have really suffered over the long term.

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Speaker 1: And if you look at the share of GDP invested,

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Speaker 1: for example, in R and D and innovation, it's gone

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Speaker 1: from about two percent in the sixties too about half

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Speaker 1: a percent now, a big and portentious drop. Reversing those

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Speaker 1: investments is the point of the building back Better agenda,

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Speaker 1: and one of the reasons why those investments have failed

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Speaker 1: is because they don't have any reliable funding sources. So

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Speaker 1: while I completely understand and have in fact contributed to

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Speaker 1: the literature that understands deficits and debt in a new

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Speaker 1: and different, and you can call it a more progressive way,

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Speaker 1: I'd probably call it a more economically and empirically sound way.

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Speaker 1: I'm very much moved by that work. I also think

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Speaker 1: you have to recognize that the effects of not having

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Speaker 1: um funding sources for permanent programs show up all the

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Speaker 1: time in their disinvestment, and they're insufficient upkeep. By contrast,

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Speaker 1: look at Medicare and Social Security, which have held up,

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Speaker 1: you know, relatively well in that space because they have

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Speaker 1: dedicated funding sources. We need to keep unpacking this because

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Speaker 1: I kind of get that and I kind of don't

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Speaker 1: with the so called entitlements or Medicare social Security. Yes,

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Speaker 1: they have dedicated funding sources, but they also just have

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Speaker 1: laws that say these programs will exist and they're not sunseted.

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Speaker 1: They're not temporary. They weren't five year health programs. They

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Speaker 1: were at ten year, which they were permanent legal fixtures

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Speaker 1: and yes, they did come with dedicated funding sources, payroll

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Speaker 1: taxes and so forth. But what makes the programs exist

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Speaker 1: forever is the fact that they the laws say they

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Speaker 1: have to exist forever. With some of these things that

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Speaker 1: you describe, and we agree, you know, or most many

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Speaker 1: people would agree, they have been underinvested. How much is

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Speaker 1: this a just a just the need to pass a

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Speaker 1: law that says this will always be here. So we're

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Speaker 1: talking about child care, some sort of family leave thing

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Speaker 1: to make it permanent. Seems like it should just be

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Speaker 1: a law saying this is a permanent benefit, or it

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Speaker 1: seems like it could be solved that way. And so

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Speaker 1: when you draw the connection to metacare and Social Security,

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Speaker 1: is it that those taxes are needed for the programs

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Speaker 1: to exist or are they needed to get the votes

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Speaker 1: such that politicians are willing to make them permanent. No,

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Speaker 1: I mean, I really think on this one. The way

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Speaker 1: I kind of laid it out is, you know, this

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Speaker 1: sounds more snarky than I mean, is more correct than

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Speaker 1: the way you just laid it out. But let me

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Speaker 1: just explain. It's fun I you know you could do that.

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Speaker 1: You know, the gut we actually have something called the

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Speaker 1: Highway Trust Fund. This is a federal accounting device wherein

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Speaker 1: resources are supposed to flow to fund our highway system,

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Speaker 1: and its main source of income is a nominal tax

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Speaker 1: on gas that hasn't been changed in like thirty five

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Speaker 1: years or something. And that and and and even as

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Speaker 1: you know, obviously inflation has increased and the efficiency of

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Speaker 1: the auto fleet has increased, the Highway Trust Fund is

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Speaker 1: always a massive trouble. And it's one of the reasons

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Speaker 1: why our transportation infrastructure, including mass transit, by the way,

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Speaker 1: mass transit, which by the way is in the rescue

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Speaker 1: plan and the Job's plan quite deeply that that trust

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Speaker 1: fund has failed to support that and the and the

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Speaker 1: reason is that it's a law on the books, you know.

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Speaker 1: And you know, according to your theory, a law on

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Speaker 1: the book should be all that it takes, but it isn't.

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Speaker 1: It takes more than that. I actually think if one

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Speaker 1: wanted to make a better you know, kind of an

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Speaker 1: argument against having to fund these, uh these building back

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Speaker 1: better plans, it would be that the return on the

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Speaker 1: investments should be greater than the cost of borrowing. And um,

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Speaker 1: you know that that is true, and it makes sense

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Speaker 1: to me and you'll hear economists, you know, some of

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Speaker 1: my economist friends make that point. They say, hey, look,

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Speaker 1: you're going to get a return on these investments that

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Speaker 1: are great greater than you're borrowing costs, which of course

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Speaker 1: are historically low, so why pay for them? And I

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Speaker 1: totally get the economics and the public finance kind of

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Speaker 1: the g greater than our thinking behind that. But but

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Speaker 1: what I do, what I think it misses is the

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Speaker 1: political economy of the sustainability point that that Joe Biden

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Speaker 1: just intuitively understand. So I actually wanted to ask a

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Speaker 1: big picture question on this topic. But do you think

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Speaker 1: that economists grasp the political realities of putting theory into practice?

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Speaker 1: And what I mean by that is, for instance, it's

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Speaker 1: one thing to say, you know, if you're an MMT

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Speaker 1: person that deficits are only limited by inflation, but it

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Speaker 1: doesn't necessarily help you get to a place where people

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Speaker 1: are enacting more fiscal spending. If everyone can't agree on,

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Speaker 1: you know, what to spend the money on. I think

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Speaker 1: let me answer it this way. I won't name names,

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Speaker 1: but I was trying to I was trying to draft

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Speaker 1: an economist to come in and work with us who's

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Speaker 1: a uh someone I'm really fond of their work, and

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Speaker 1: what I he's a private sector person, And what I

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Speaker 1: said to him is, if you really want to understand

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Speaker 1: how the economy and the nexus of the economy and

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Speaker 1: government work, and I would include theory and that nexus, Tracy,

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Speaker 1: you've got to work for the government. You can't understand

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Speaker 1: it if you don't. So I do think that there

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Speaker 1: is a kind of empirical gap between what a lot

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Speaker 1: of theoretical economists sort of right about, and even some

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Speaker 1: empirical economists right about, and a kind of tangible, granular

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Speaker 1: understanding of how economic policy really works. You might I

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Speaker 1: think you mentioned MMT that that's a good example because

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Speaker 1: in m m T there's there's a belief that if

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Speaker 1: inflation were to take off, this is a kind of

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Speaker 1: a timely point. I think, if inflation were to take off,

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Speaker 1: don't worry and don't assign much to the FED, because

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Speaker 1: that's just not part of the kind of cosmology there.

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Speaker 1: You can just raise taxes to take money out of

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Speaker 1: the economy. Well, you know, that's a coaching theoretical point,

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Speaker 1: but when applied to the real political economy and the

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Speaker 1: legislative timing involved therein and the partisans squabbling involved therein.

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Speaker 1: But that's not you know, a very I think realistic solution,

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Speaker 1: especially when you have a central bank whose independence allows

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Speaker 1: it to get outside of that political constraints there and

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Speaker 1: do what needs to be done for you know, very

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Speaker 1: good sound economic reasons. So I do think that there

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Speaker 1: can be a gap between theory and practice, not unlike

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Speaker 1: the one I just talked about in terms of with

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Speaker 1: to Joe, in terms of why I think President Biden's

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Speaker 1: view on pay force for the investment programs makes sense.

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Speaker 1: Every every answer you give, I have like a billion

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Speaker 1: other questions I want to ask another version though, uh

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Speaker 1: kind of related to the mm T question. But you know,

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Speaker 1: I mentioned in the beginning, and has anyone who has

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Speaker 1: followed your career, You were the chief adviser to then

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Speaker 1: Vice President Biden coming out of the Great Financial Crisis

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Speaker 1: all else society, and I think there are a lot

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Speaker 1: of lessons from that period, particularly the first two years.

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Speaker 1: I think it's pretty clear that in both sort of

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Speaker 1: the intellectual sphere and the media sphere, there is much

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Speaker 1: less concern about deficits these days than there was ten

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Speaker 1: years ago, or eleven years ago or twelve years ago.

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Speaker 1: And I'm curious if from a policy perspective in the

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Speaker 1: White House thinking about, Okay, what is uh, you know,

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Speaker 1: what is the best stimulus to do, what is the

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Speaker 1: best way to structure spending for the next ten years, etcetera.

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Speaker 1: That new sort of environment. And if you don't think

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Speaker 1: that exists, let me know. But it feels like it does.

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Speaker 1: That new environment creates more political space, creates more flexibility

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Speaker 1: to achieve your goal. Yeah, that environment does exist more

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Speaker 1: there's more fiscal space, and there's more political space to

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Speaker 1: wield that fiscal space. Um. Now, the fiscal space existed before.

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Speaker 1: But here's an area where I think kind of empirical

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Speaker 1: public finance economics has made real strides. Say, from the

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Speaker 1: last time I was in government, dealing with a downturn

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Speaker 1: in the Great Recession, after the housing bus, and now

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Speaker 1: and and and interestingly, as you point out, the current

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Speaker 1: president was the vice president there, and I think one

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Speaker 1: of the lessons he learned is go big or go

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Speaker 1: home is not just important fiscal policy when you're punching

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Speaker 1: back against a globally threatening pandemic or last time against

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Speaker 1: a globally harmful financial slash housing bus. Um but there's

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Speaker 1: also not only the fiscal space to do so, but

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Speaker 1: there's actually good research that shows if you fail to

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Speaker 1: wield fiscal power policy with enough power to offset the contraction,

432
00:27:10,840 --> 00:27:14,760
Speaker 1: your debt to GDP ratio can actually worse it because

433
00:27:14,800 --> 00:27:18,320
Speaker 1: you've done too little to boost the denominator g d P.

434
00:27:19,000 --> 00:27:22,280
Speaker 1: And again there's uh there, there's I think some pretty

435
00:27:22,280 --> 00:27:26,320
Speaker 1: solid research that that makes this case. So I think

436
00:27:26,440 --> 00:27:31,600
Speaker 1: the urgency and the intersection of good policy, good policy,

437
00:27:31,640 --> 00:27:36,480
Speaker 1: and politics boosted by high quality economic research as all

438
00:27:36,600 --> 00:27:40,479
Speaker 1: landed us in a moment where we've recognized greater fiscal space.

439
00:27:41,760 --> 00:27:46,840
Speaker 1: On the topic of two thousand eight versus after the

440
00:27:46,880 --> 00:27:50,119
Speaker 1: financial crisis, we did see a lot of emphasis on

441
00:27:50,359 --> 00:27:53,520
Speaker 1: trying to fix problems in the housing market that had

442
00:27:53,640 --> 00:27:58,000
Speaker 1: contributed to the financial system melting down. So, for instance,

443
00:27:58,000 --> 00:28:01,240
Speaker 1: there's a lot of focus on GS reform. One of

444
00:28:01,280 --> 00:28:04,600
Speaker 1: the things that was left out in Biden's proposal were

445
00:28:04,920 --> 00:28:09,639
Speaker 1: substantial changes to healthcare, And I'm just wondering what the

446
00:28:09,720 --> 00:28:14,680
Speaker 1: thinking was there, because I guess coming out of having

447
00:28:14,720 --> 00:28:19,400
Speaker 1: experienced a massive health crisis and also needing to stimulate

448
00:28:19,440 --> 00:28:23,560
Speaker 1: the economy, it seems like healthcare would be a really

449
00:28:23,600 --> 00:28:27,080
Speaker 1: good area in some ways to focus on, but so

450
00:28:27,160 --> 00:28:32,000
Speaker 1: far Biden seems to have shied away from that. Well again,

451
00:28:32,080 --> 00:28:36,080
Speaker 1: I think if you look at a couple of different places,

452
00:28:36,440 --> 00:28:40,040
Speaker 1: you'll find that the President has leaned into that and

453
00:28:40,440 --> 00:28:44,040
Speaker 1: not really shied away. So in the Joint Address, there

454
00:28:44,120 --> 00:28:48,120
Speaker 1: was a very important paragraph where the President spoke about

455
00:28:48,400 --> 00:28:52,240
Speaker 1: how important the healthcare agenda is going to be for

456
00:28:52,240 --> 00:28:55,600
Speaker 1: for our administration. There's also some similar language in the

457
00:28:55,680 --> 00:28:58,560
Speaker 1: fact sheet around the family Plan. I feel like we've

458
00:28:58,600 --> 00:29:00,880
Speaker 1: been here for about ten years already, but in fact

459
00:29:00,880 --> 00:29:03,520
Speaker 1: we've only been here for a few months. I think

460
00:29:03,520 --> 00:29:07,040
Speaker 1: we just hit the first hundred days, so we have

461
00:29:07,160 --> 00:29:11,000
Speaker 1: to move the freight on on different cars at different times.

462
00:29:11,040 --> 00:29:14,040
Speaker 1: But there, if you look back to the campaign, you'll

463
00:29:14,080 --> 00:29:17,920
Speaker 1: see many areas that the President has leaned into and

464
00:29:18,000 --> 00:29:22,040
Speaker 1: he is just taking through them with alacrity, with power,

465
00:29:22,800 --> 00:29:26,600
Speaker 1: with legislation, and with you know, I think, you know,

466
00:29:26,680 --> 00:29:30,479
Speaker 1: really quite here, I'm somewhat padding some of my fellows

467
00:29:30,520 --> 00:29:33,280
Speaker 1: deputies here in the administration on the back here, you know,

468
00:29:33,280 --> 00:29:36,239
Speaker 1: with I think some pretty well developed policy plans. So

469
00:29:36,320 --> 00:29:39,720
Speaker 1: healthcare is, of course it's going to be into in

470
00:29:39,800 --> 00:29:44,520
Speaker 1: the mix. It's the economy, and it fits right into

471
00:29:45,120 --> 00:29:47,960
Speaker 1: the discussion we were having before about the public private

472
00:29:48,040 --> 00:29:52,040
Speaker 1: mix and the importance of getting that right. So even

473
00:29:52,080 --> 00:29:55,640
Speaker 1: if it's not in the actual spending bill, now you're

474
00:29:55,720 --> 00:30:00,160
Speaker 1: confident that something substantial is coming down the line. I'm

475
00:30:00,160 --> 00:30:03,120
Speaker 1: not going to lean into something substantial because that begs

476
00:30:03,120 --> 00:30:05,120
Speaker 1: the question of what you're talking about, and we have

477
00:30:05,240 --> 00:30:09,000
Speaker 1: to run an extensive process before we you know, I

478
00:30:09,800 --> 00:30:12,240
Speaker 1: don't front run the President, which is why I still

479
00:30:12,240 --> 00:30:16,960
Speaker 1: have my job. But look look at what he said.

480
00:30:17,280 --> 00:30:19,120
Speaker 1: It's actually worth reading, you know, look at what he

481
00:30:19,160 --> 00:30:21,480
Speaker 1: said in the UH, in the Joint Address and the

482
00:30:21,520 --> 00:30:25,239
Speaker 1: Family's plan, because he he really does lean into what

483
00:30:25,280 --> 00:30:27,440
Speaker 1: we're going to be planning to do it. In that space,

484
00:30:28,120 --> 00:30:32,000
Speaker 1: I want to pivot a little bit the conversation towards

485
00:30:32,280 --> 00:30:35,280
Speaker 1: the FED. And of course, obviously the Fed's independent, we

486
00:30:35,320 --> 00:30:37,800
Speaker 1: all we all know that. But you mentioned that there's

487
00:30:37,800 --> 00:30:40,600
Speaker 1: the fed's remit to think about inflation. And of course

488
00:30:40,640 --> 00:30:43,880
Speaker 1: the White House has a role in shaping who is

489
00:30:44,360 --> 00:30:46,280
Speaker 1: who is on the FED now and who is going

490
00:30:46,320 --> 00:30:47,680
Speaker 1: to be on it in the future. So I want

491
00:30:47,680 --> 00:30:50,200
Speaker 1: to ask a couple of questions on that. But uh,

492
00:30:50,280 --> 00:30:52,920
Speaker 1: you know, to start with you know, thinking about the

493
00:30:53,000 --> 00:30:56,239
Speaker 1: question of Powell, He's have obviously had this sort of

494
00:30:56,360 --> 00:30:58,200
Speaker 1: pretty I I think a lot of people would say

495
00:30:58,200 --> 00:31:01,800
Speaker 1: fairly radical shift for the FED to really focus on labor,

496
00:31:01,920 --> 00:31:06,240
Speaker 1: to not try to preempt inflation, to uh commit in

497
00:31:06,320 --> 00:31:08,600
Speaker 1: a way that we haven't seen, to not snuffing out

498
00:31:08,600 --> 00:31:11,880
Speaker 1: the recovery prematurely. That seems to be a shifted. And

499
00:31:11,920 --> 00:31:14,600
Speaker 1: he also seems to have um won the respect of

500
00:31:14,680 --> 00:31:17,800
Speaker 1: financial markets quite a bit, which is rare when you

501
00:31:17,840 --> 00:31:22,280
Speaker 1: think about the question of a potential reappointment or replacement.

502
00:31:22,680 --> 00:31:26,000
Speaker 1: Is that respect that he has among financial markets? Do

503
00:31:26,000 --> 00:31:29,240
Speaker 1: you think that's an important thing? Well, I'm definitely not

504
00:31:29,280 --> 00:31:32,880
Speaker 1: going to say anything about the personnel. You know, this

505
00:31:32,920 --> 00:31:36,720
Speaker 1: is sure. It used to be a gun flapping chin,

506
00:31:36,880 --> 00:31:39,640
Speaker 1: music making pundit who talked about all this kind of

507
00:31:39,680 --> 00:31:43,080
Speaker 1: thing all day long, and it's hard to draw that

508
00:31:43,160 --> 00:31:46,360
Speaker 1: line now. And remember that I'm I'm in the White House,

509
00:31:46,440 --> 00:31:48,880
Speaker 1: and you know we're gonna try. We're gonna try. Our

510
00:31:48,920 --> 00:31:50,720
Speaker 1: goal used to be to make news. Now my goal

511
00:31:50,800 --> 00:31:52,360
Speaker 1: is to not make news. So I'm not going to

512
00:31:52,440 --> 00:31:56,560
Speaker 1: make news. Let me say instead the following I talked

513
00:31:56,560 --> 00:31:59,000
Speaker 1: a second ago about what I think is one of

514
00:31:59,040 --> 00:32:05,280
Speaker 1: the most important advances in UH political economy, which is

515
00:32:05,400 --> 00:32:10,080
Speaker 1: the recognition of true fiscal space, a recognition that I

516
00:32:10,120 --> 00:32:17,600
Speaker 1: think was significantly fogged up by views on crowding out,

517
00:32:17,720 --> 00:32:20,880
Speaker 1: how public borrowing would crowd out private borrowing and pressure

518
00:32:20,920 --> 00:32:25,520
Speaker 1: interest rates that has long been unsupported by the empirical record. Well,

519
00:32:25,560 --> 00:32:31,720
Speaker 1: there's another important, the other you know, equally important economic

520
00:32:31,840 --> 00:32:33,960
Speaker 1: development that I would put, you know, really in the

521
00:32:34,040 --> 00:32:39,040
Speaker 1: stratosphere of ways that economists are better understanding how economies

522
00:32:39,120 --> 00:32:43,680
Speaker 1: really work is of course the relationship between unemployment and inflation.

523
00:32:44,000 --> 00:32:45,920
Speaker 1: And you know, in this regard, I think one of

524
00:32:45,960 --> 00:32:48,840
Speaker 1: Powell's most important speeches was, I believe with the Jackson

525
00:32:48,880 --> 00:32:53,440
Speaker 1: whole speech when he talked about how because there's so

526
00:32:53,520 --> 00:32:57,080
Speaker 1: much uncertainty around what we call the star variables, why

527
00:32:57,160 --> 00:33:00,720
Speaker 1: star you star, our star potential g d P, the

528
00:33:00,800 --> 00:33:03,800
Speaker 1: natural rate of unemployment, the natural rate of interest. These

529
00:33:03,840 --> 00:33:07,200
Speaker 1: are all theoretical concepts that you don't know, maybe it's

530
00:33:07,200 --> 00:33:10,240
Speaker 1: too strong to say that can't be, but are extremely

531
00:33:10,280 --> 00:33:13,840
Speaker 1: hard to be reliably estimated by which I mean estimated

532
00:33:13,880 --> 00:33:18,000
Speaker 1: within a policy relevant confidence interval. That that I think,

533
00:33:18,080 --> 00:33:22,640
Speaker 1: you know, going back to Bernanke yelling Powell that the

534
00:33:22,760 --> 00:33:27,320
Speaker 1: recognition that the confidence interval around those estimates is far

535
00:33:27,440 --> 00:33:31,040
Speaker 1: far wider than was realized before, and that it's beyond

536
00:33:31,640 --> 00:33:36,080
Speaker 1: our empirical scope to to nail them down has led

537
00:33:36,160 --> 00:33:40,120
Speaker 1: to a much more data driven approach to both fiscal

538
00:33:40,160 --> 00:33:44,320
Speaker 1: and monetary policy. And that's a really great advance, particularly

539
00:33:44,600 --> 00:33:48,360
Speaker 1: from the perspective of tightening labor markets. And there you've

540
00:33:48,400 --> 00:33:51,640
Speaker 1: heard again this dates back before Powell. There you've heard

541
00:33:51,840 --> 00:33:55,880
Speaker 1: the Fellow Reserve make critically important connections. By the way,

542
00:33:56,080 --> 00:33:59,960
Speaker 1: most of my research agenda before I took this particular

543
00:34:00,000 --> 00:34:02,680
Speaker 1: their job was in this space that I'm about to mention,

544
00:34:03,040 --> 00:34:08,440
Speaker 1: the really important connection between achieving full employment and pushing

545
00:34:08,480 --> 00:34:14,200
Speaker 1: back on racial inequities, on economic inequality, providing folks and

546
00:34:14,239 --> 00:34:17,000
Speaker 1: communities are typically left behind, but the kind of economically

547
00:34:17,120 --> 00:34:21,600
Speaker 1: opportunities they need and deserve that is very much linked

548
00:34:21,680 --> 00:34:27,200
Speaker 1: up to achieving persistent, stable full employment, and that and

549
00:34:27,360 --> 00:34:32,600
Speaker 1: getting to persistent, stable, truly chock full employment is itself

550
00:34:33,400 --> 00:34:37,480
Speaker 1: closely related to these important insights about both fiscal and

551
00:34:37,560 --> 00:34:41,680
Speaker 1: monetary policy. So this is something that I wanted to

552
00:34:41,719 --> 00:34:44,160
Speaker 1: ask you about. So you wrote, I think it was

553
00:34:44,239 --> 00:34:47,680
Speaker 1: just last year that the FED should consider targeting not

554
00:34:47,800 --> 00:34:51,200
Speaker 1: the overall unemployment rate, but the black rate. And now

555
00:34:51,280 --> 00:34:54,120
Speaker 1: we have this idea of an inclusive and broad based

556
00:34:54,160 --> 00:34:59,160
Speaker 1: employment framework from the FED. But in your opinion, what

557
00:34:59,360 --> 00:35:02,359
Speaker 1: is that actually mean? And does the Central Bank need

558
00:35:02,440 --> 00:35:08,080
Speaker 1: to go further by perhaps setting explicit targets for black

559
00:35:08,160 --> 00:35:12,520
Speaker 1: unemployment for instance. Yeah, So when I wrote that, I

560
00:35:12,560 --> 00:35:15,600
Speaker 1: wasn't in the administration, and you know, I felt that

561
00:35:15,600 --> 00:35:18,440
Speaker 1: that was so. I was again, I was playing chin

562
00:35:18,640 --> 00:35:22,040
Speaker 1: music all day about things that I don't sing about now.

563
00:35:22,239 --> 00:35:24,560
Speaker 1: And by the way, I think if you look back

564
00:35:24,840 --> 00:35:27,920
Speaker 1: at least, what I was trying to say was was

565
00:35:28,040 --> 00:35:31,120
Speaker 1: not so much as the FED should target black unemployment,

566
00:35:31,160 --> 00:35:36,319
Speaker 1: but that racial equity and monetary policy are linked in

567
00:35:36,360 --> 00:35:39,360
Speaker 1: the way that I was describing a minute ago, because

568
00:35:39,719 --> 00:35:43,560
Speaker 1: if you look at who benefits disproportionately from tight labor markets,

569
00:35:44,000 --> 00:35:47,920
Speaker 1: it's uh, it's people and communities of color. So and

570
00:35:48,239 --> 00:35:50,839
Speaker 1: actually you could see this in a way that was

571
00:35:51,360 --> 00:35:53,920
Speaker 1: fascinating to me. I was. I was writing, you know,

572
00:35:53,960 --> 00:35:56,759
Speaker 1: empirical papers about this, crunching the heck out of every

573
00:35:56,840 --> 00:36:02,440
Speaker 1: number I could find showing how existently low unemployment was

574
00:36:02,560 --> 00:36:06,520
Speaker 1: providing labor market opportunities on so many different margins, not

575
00:36:06,680 --> 00:36:10,360
Speaker 1: just the extensive margin, which is pulling people into the

576
00:36:10,440 --> 00:36:13,160
Speaker 1: job market who weren't there before, but as much and

577
00:36:13,239 --> 00:36:16,719
Speaker 1: even more so the intensive margin, giving those people way

578
00:36:16,760 --> 00:36:19,560
Speaker 1: more hours of work if that's what they if that's

579
00:36:19,560 --> 00:36:22,960
Speaker 1: what they wanted, and the changes for say African Americans

580
00:36:22,960 --> 00:36:25,400
Speaker 1: in the bottom quintile. I did a paper with a

581
00:36:25,400 --> 00:36:27,640
Speaker 1: guy named Keith Bentley on this, which you can find

582
00:36:27,719 --> 00:36:32,960
Speaker 1: out there somewhere are economically really large. So those connections,

583
00:36:33,160 --> 00:36:36,440
Speaker 1: you know, uh, what what I can talk about is

584
00:36:36,560 --> 00:36:39,600
Speaker 1: what I mentioned in my last comment is the intersection

585
00:36:39,719 --> 00:36:44,840
Speaker 1: between critically important new insights in fiscal space and in

586
00:36:45,000 --> 00:36:49,560
Speaker 1: the relationships between unemployment and inflation, the linkage between those

587
00:36:49,600 --> 00:36:54,040
Speaker 1: insights and the ability to maintain full employment with such

588
00:36:54,440 --> 00:36:59,240
Speaker 1: deep benefits to two groups that are too often left behind.

589
00:37:01,280 --> 00:37:04,000
Speaker 1: So I want to explore this point further, but I

590
00:37:04,000 --> 00:37:07,560
Speaker 1: think you know, one of the particularly tragic things about

591
00:37:07,560 --> 00:37:11,640
Speaker 1: the timing of the coronavirus crisis and this setback was

592
00:37:11,719 --> 00:37:15,200
Speaker 1: that right prior to it, we were seeing um an

593
00:37:15,239 --> 00:37:19,359
Speaker 1: impressive level of compression between say, the white unemployment rate

594
00:37:19,560 --> 00:37:22,799
Speaker 1: and the black unemployment rate. As as you know, the

595
00:37:22,840 --> 00:37:25,960
Speaker 1: economy continue to improve, and so obviously there's a hope

596
00:37:25,960 --> 00:37:28,600
Speaker 1: that we can get back there really fast. But it also,

597
00:37:28,680 --> 00:37:31,560
Speaker 1: on the other hand, seems like unfortunate that Okay, that

598
00:37:31,640 --> 00:37:35,400
Speaker 1: was a desirable state, but that came after ten years

599
00:37:35,520 --> 00:37:39,080
Speaker 1: or I don't know, nine years of a very disappointingly

600
00:37:39,640 --> 00:37:42,360
Speaker 1: wide gap and uh sort of labor market that was

601
00:37:42,400 --> 00:37:45,840
Speaker 1: almost nobody's idea of tight. How do you think, like, okay,

602
00:37:45,880 --> 00:37:47,960
Speaker 1: like we want to get back that. But and I

603
00:37:47,960 --> 00:37:50,160
Speaker 1: guess this gets to the question of, like what is

604
00:37:50,880 --> 00:37:54,240
Speaker 1: your what is President Biden's vision of like the future?

605
00:37:54,920 --> 00:37:57,319
Speaker 1: Can we have that sustainably? Can we have that so

606
00:37:57,400 --> 00:38:00,799
Speaker 1: that we always have a tight labor market and it's

607
00:38:00,840 --> 00:38:03,160
Speaker 1: not just like a special treat that comes at the

608
00:38:03,280 --> 00:38:08,000
Speaker 1: end of every expansion. Yeah, that's a great question. Let

609
00:38:08,000 --> 00:38:11,480
Speaker 1: me talk about it from my economist perspective and then

610
00:38:11,560 --> 00:38:14,719
Speaker 1: shift to the president's vision here, because it's that the

611
00:38:15,239 --> 00:38:18,960
Speaker 1: latter is way more important as he's the president. Here's

612
00:38:19,000 --> 00:38:22,359
Speaker 1: the statistics that I haven't cooked up lately. But so

613
00:38:22,400 --> 00:38:25,360
Speaker 1: it may this this number changes as you'll see, but

614
00:38:25,480 --> 00:38:28,080
Speaker 1: I think I'm in the right ballpark. If you look

615
00:38:28,120 --> 00:38:32,600
Speaker 1: at the percentage of quarters starting around which is the

616
00:38:32,600 --> 00:38:36,520
Speaker 1: period when job markets have been persistently to slack. If

617
00:38:36,520 --> 00:38:38,960
Speaker 1: you look at the percentage of quarters where the unemployment

618
00:38:39,040 --> 00:38:42,560
Speaker 1: rate has been above the CBO's estimate of of of

619
00:38:42,600 --> 00:38:45,320
Speaker 1: what the natural rate is, that is the lowest unemployment

620
00:38:45,360 --> 00:38:49,920
Speaker 1: rate and system with full employment, that ratio is six

621
00:38:50,000 --> 00:38:54,160
Speaker 1: point six six, you know, points seven, maybe point seven five,

622
00:38:54,200 --> 00:38:56,880
Speaker 1: it depending on the end points that you choose. That is,

623
00:38:57,040 --> 00:38:59,640
Speaker 1: most of the quarters or most of the years since

624
00:38:59,760 --> 00:39:03,520
Speaker 1: nine teen eight, this economy has been slacked. And that's

625
00:39:03,560 --> 00:39:07,000
Speaker 1: by a measure which you know probably in many years

626
00:39:07,640 --> 00:39:10,439
Speaker 1: pitches the natural rate too high. So it's probably even

627
00:39:10,440 --> 00:39:13,840
Speaker 1: worse than that. So the foundation of your question is

628
00:39:13,880 --> 00:39:17,800
Speaker 1: exactly right. We have not had tight enough labor markets.

629
00:39:18,000 --> 00:39:21,839
Speaker 1: And that's one of the great insights of recent federal reserves,

630
00:39:22,320 --> 00:39:27,200
Speaker 1: and again links back to the importance of recognizing fiscal space. Now,

631
00:39:27,400 --> 00:39:30,680
Speaker 1: Joe Biden is not an economist, but I've been talking

632
00:39:30,800 --> 00:39:33,520
Speaker 1: with him about this since we sat down in his

633
00:39:34,040 --> 00:39:36,719
Speaker 1: in his house in in November of two thousand and

634
00:39:36,800 --> 00:39:40,040
Speaker 1: eight and talked about me perhaps coming on as his

635
00:39:40,120 --> 00:39:43,600
Speaker 1: chief economists. The very first thing we talked about, he

636
00:39:43,680 --> 00:39:46,520
Speaker 1: pulled out a graph that I've made with Larry Michelle,

637
00:39:46,960 --> 00:39:52,160
Speaker 1: which showed the gap between productivity growth and median compensation. Okay,

638
00:39:52,200 --> 00:39:55,160
Speaker 1: so productivity growth gros grows, grows, not as fast as

639
00:39:55,160 --> 00:39:58,240
Speaker 1: we'd like, but it does grow, you know, of percent

640
00:39:58,400 --> 00:40:01,839
Speaker 1: percent and a half per year on trend, and the

641
00:40:01,920 --> 00:40:05,080
Speaker 1: median compensation, the compensation workers right in the middle of

642
00:40:05,080 --> 00:40:08,759
Speaker 1: the scale was flat, flat, flat for you know, not

643
00:40:08,800 --> 00:40:10,719
Speaker 1: all of those years. And in fact, in the latter

644
00:40:10,840 --> 00:40:14,080
Speaker 1: nineties when the job market really tightened up precisely like

645
00:40:14,239 --> 00:40:20,480
Speaker 1: my earlier theories, you know, we're trying to uh predict that.

646
00:40:20,560 --> 00:40:23,040
Speaker 1: Then you saw some action at the median but for

647
00:40:23,080 --> 00:40:24,920
Speaker 1: the most part. And by the way, Larry Michelle and

648
00:40:25,000 --> 00:40:27,680
Speaker 1: Josh Bibbins have a forthcoming paper on this which is

649
00:40:27,760 --> 00:40:30,160
Speaker 1: really elucidating. You need to get get him on here

650
00:40:30,160 --> 00:40:32,120
Speaker 1: and talk to them about it, you know. And and

651
00:40:32,320 --> 00:40:35,400
Speaker 1: Joe Biden, who's the vice president elect, then pointed to

652
00:40:35,440 --> 00:40:38,520
Speaker 1: that graph and said, this is what I want us

653
00:40:38,560 --> 00:40:42,200
Speaker 1: to work on. I want middle class people to get

654
00:40:42,200 --> 00:40:45,560
Speaker 1: a fair shake. I want to think about the policy

655
00:40:45,560 --> 00:40:50,160
Speaker 1: agenda that's going to in my words, relink median compensation

656
00:40:50,239 --> 00:40:53,239
Speaker 1: and overall economic growth. And that agenda is a deep

657
00:40:53,280 --> 00:40:55,799
Speaker 1: one and now that now that you see what the

658
00:40:55,840 --> 00:41:00,760
Speaker 1: president is up to, that's what he's doing. So unions

659
00:41:01,000 --> 00:41:04,120
Speaker 1: are part of that because the as as Bibbins and

660
00:41:04,160 --> 00:41:07,359
Speaker 1: Michelle will show, have shown in various papers, and it's

661
00:41:07,360 --> 00:41:08,800
Speaker 1: going to be part of this new one as well.

662
00:41:09,160 --> 00:41:13,360
Speaker 1: The loss of bargaining power for workers in the middle

663
00:41:13,360 --> 00:41:17,360
Speaker 1: class has certainly put downward pressure on wages. The absence

664
00:41:17,440 --> 00:41:21,759
Speaker 1: of persistent full employment, as Joe's question suggested, is very

665
00:41:21,840 --> 00:41:26,960
Speaker 1: much in that mix. The inaccessibility for women too, in

666
00:41:27,000 --> 00:41:31,719
Speaker 1: particular caretakers to have a clear line of access into

667
00:41:31,719 --> 00:41:35,960
Speaker 1: the job market because there's a childcare sector that's affordable

668
00:41:35,960 --> 00:41:41,440
Speaker 1: and accessible. The absence of investment in in good middle

669
00:41:41,480 --> 00:41:45,080
Speaker 1: class jobs, and new expanding areas of the economy, including

670
00:41:45,120 --> 00:41:51,120
Speaker 1: advanced manufacturing, clean energy, electric vehicles, these are all parts

671
00:41:51,600 --> 00:41:54,839
Speaker 1: of the plan, and at least from a kind of

672
00:41:55,080 --> 00:42:02,480
Speaker 1: macro labor perspective, it's all about trying to reconnect middle

673
00:42:02,520 --> 00:42:08,719
Speaker 1: class working families to the overall prosperity in the economy.

674
00:42:08,760 --> 00:42:11,879
Speaker 1: And then I'll finish up that. That's that's why well,

675
00:42:11,960 --> 00:42:14,240
Speaker 1: you know, we started this conversation saying, boy, we're getting

676
00:42:14,280 --> 00:42:16,879
Speaker 1: some good growth numbers. You know, g d P north

677
00:42:16,960 --> 00:42:19,759
Speaker 1: of six percent in Q one. That's great, We're all

678
00:42:19,800 --> 00:42:23,680
Speaker 1: for it. It does not obviate the work that I

679
00:42:23,800 --> 00:42:27,239
Speaker 1: just described, because at the end of the day, if

680
00:42:27,280 --> 00:42:32,520
Speaker 1: this administration achieves high GDP growth, low unemployment, of booming

681
00:42:32,560 --> 00:42:36,239
Speaker 1: stock market, but it doesn't reach the middle class in

682
00:42:36,280 --> 00:42:38,400
Speaker 1: the way that the President has set out for us,

683
00:42:38,640 --> 00:42:41,319
Speaker 1: we have we will have failed to march to his

684
00:42:41,400 --> 00:42:44,520
Speaker 1: marching orders, and that's not something I want to do.

685
00:43:02,400 --> 00:43:05,799
Speaker 1: Just on the subject of the FED more widely, so,

686
00:43:06,040 --> 00:43:09,000
Speaker 1: you've emphasized in this conversation a number of times the

687
00:43:09,040 --> 00:43:14,160
Speaker 1: importance of the central bank being independent from government, but

688
00:43:14,520 --> 00:43:17,720
Speaker 1: we're also talking about the importance of fiscal space. I'm wondering,

689
00:43:17,920 --> 00:43:23,520
Speaker 1: do you see scope for monetary policy to enhance or

690
00:43:23,680 --> 00:43:28,080
Speaker 1: work in some way together with fiscal stimulus. How do

691
00:43:28,120 --> 00:43:32,120
Speaker 1: you see those two things interacting. Well, I think that

692
00:43:32,200 --> 00:43:36,480
Speaker 1: they just naturally interact all the time. And I think

693
00:43:36,520 --> 00:43:41,680
Speaker 1: that what we've seen in the current recovery, largely from

694
00:43:41,680 --> 00:43:45,040
Speaker 1: a macro sense, is the importance of the one to

695
00:43:45,320 --> 00:43:50,000
Speaker 1: punch of fiscal and monetary policy. There is a risk,

696
00:43:50,080 --> 00:43:53,440
Speaker 1: going back to games if if you're relying on monetary

697
00:43:53,480 --> 00:43:56,440
Speaker 1: policy alone of pushing on a string. That is, you

698
00:43:56,480 --> 00:43:59,920
Speaker 1: can make credit as accessible as you want, but if

699
00:44:00,040 --> 00:44:03,359
Speaker 1: people don't have direct impact payments or checks, you know,

700
00:44:03,480 --> 00:44:06,400
Speaker 1: money in their pockets, uh, they won't have the resources

701
00:44:06,440 --> 00:44:10,359
Speaker 1: take to take advantage of those low rates. So I

702
00:44:10,400 --> 00:44:13,400
Speaker 1: think one of the lessons of the last couple of

703
00:44:13,440 --> 00:44:17,320
Speaker 1: downturns is that fiscal and monetary have to work together.

704
00:44:17,400 --> 00:44:21,160
Speaker 1: By the way, it One way to just underscore this

705
00:44:21,239 --> 00:44:23,920
Speaker 1: point is to go back and listen what ben Burnanki

706
00:44:24,040 --> 00:44:27,399
Speaker 1: was saying to Congress back in two thousand nine, two

707
00:44:27,480 --> 00:44:30,320
Speaker 1: thousand ten, when he was going up to Congress saying,

708
00:44:30,640 --> 00:44:33,880
Speaker 1: we're doing everything we can to make sure the credit

709
00:44:33,920 --> 00:44:37,319
Speaker 1: markets are fluid and that borrowing costs are low. But

710
00:44:37,560 --> 00:44:41,480
Speaker 1: unless people have the resources that they need, which is

711
00:44:41,520 --> 00:44:45,480
Speaker 1: going to involve temporary fiscal policy because the economy is

712
00:44:45,480 --> 00:44:48,720
Speaker 1: still climbing back slowly, we'll be pushing on a string.

713
00:44:48,840 --> 00:44:53,960
Speaker 1: So there's that. I also think that if properly implemented,

714
00:44:54,360 --> 00:44:58,880
Speaker 1: fiscal policy and monetary policy can be complementary in terms

715
00:44:59,040 --> 00:45:02,600
Speaker 1: of a regime we're in. The Federal Reserve is not

716
00:45:02,680 --> 00:45:05,319
Speaker 1: always looking over its shoulder at the at the at

717
00:45:05,360 --> 00:45:08,680
Speaker 1: the lower at the zero lower bound. You have robust

718
00:45:08,719 --> 00:45:11,960
Speaker 1: fiscal policy, and you have a monetary regime that looks

719
00:45:12,080 --> 00:45:14,319
Speaker 1: less like what we've seen over the last you know,

720
00:45:14,640 --> 00:45:19,320
Speaker 1: decade or even more, where where the interest rate is uh,

721
00:45:19,360 --> 00:45:22,200
Speaker 1: you know, at zero most of the time. I want

722
00:45:22,239 --> 00:45:24,200
Speaker 1: to ask you another question, and I kind of have

723
00:45:24,239 --> 00:45:26,800
Speaker 1: a feeling you might have to answer in two ways

724
00:45:26,880 --> 00:45:30,880
Speaker 1: between your economist pund itself versus your employee of the

725
00:45:30,920 --> 00:45:34,799
Speaker 1: White House self. But when thinking about creating a sort

726
00:45:34,800 --> 00:45:38,799
Speaker 1: of sustained high level of activity and not having these

727
00:45:38,800 --> 00:45:42,960
Speaker 1: downturns that create slack to take years to overcome, should

728
00:45:43,000 --> 00:45:46,279
Speaker 1: we have automatic stabilizers such that so that we don't

729
00:45:46,280 --> 00:45:49,200
Speaker 1: have to hope that Congress, that the political alignment of

730
00:45:49,239 --> 00:45:51,080
Speaker 1: Congress is such that they can pass a bill like

731
00:45:51,080 --> 00:45:53,600
Speaker 1: the Caaras Act when there's a downturn, but rather that

732
00:45:53,880 --> 00:45:58,120
Speaker 1: checks automatically go out to start balancing contacting a downturn

733
00:45:58,239 --> 00:46:01,200
Speaker 1: right away. Well that really this is something that the

734
00:46:01,239 --> 00:46:06,320
Speaker 1: President has leaned into on occasion. In some of his speeches,

735
00:46:06,360 --> 00:46:10,600
Speaker 1: he's talked about the importance of that, and there have

736
00:46:10,680 --> 00:46:14,719
Speaker 1: been various pieces of legislation. I think the again, I

737
00:46:14,719 --> 00:46:19,360
Speaker 1: think the political economy of that is challenging because there's

738
00:46:19,440 --> 00:46:23,120
Speaker 1: the discretion that Congress likes to hold onto. But I

739
00:46:23,160 --> 00:46:26,960
Speaker 1: think there are there are politicians, quite a few, um

740
00:46:27,080 --> 00:46:30,279
Speaker 1: prominent folks. I don't remember names right now, because this

741
00:46:30,360 --> 00:46:33,839
Speaker 1: is in some bills that agree with this proposition and

742
00:46:33,880 --> 00:46:37,319
Speaker 1: that recognize that when you hit a downturn, when the

743
00:46:37,360 --> 00:46:39,520
Speaker 1: economy hits a shock, it could be a you know,

744
00:46:39,520 --> 00:46:42,360
Speaker 1: whether it's a housing or a financial bubble, or a pandemic,

745
00:46:42,480 --> 00:46:44,760
Speaker 1: or the kind of thing that hits us hard and fast.

746
00:46:45,360 --> 00:46:48,880
Speaker 1: Sometimes the political process can be too cumbersome. So the

747
00:46:48,960 --> 00:46:51,920
Speaker 1: idea of these triggers is something that the President, as

748
00:46:51,920 --> 00:46:56,200
Speaker 1: I've mentioned, has talked about on occasion. But I think

749
00:46:56,239 --> 00:46:59,600
Speaker 1: that where we go from there, I can't speak to

750
00:46:59,640 --> 00:47:05,279
Speaker 1: it this one. Do you think there's an expectation now that,

751
00:47:05,480 --> 00:47:09,080
Speaker 1: having you know, sent out direct payments uh recently, that

752
00:47:09,200 --> 00:47:12,520
Speaker 1: in the next crisis or the next time the economy falters,

753
00:47:12,960 --> 00:47:16,919
Speaker 1: people will expect that kind of stimulus again. I guess

754
00:47:16,920 --> 00:47:19,000
Speaker 1: what I'm asking is, do you think there's a sea

755
00:47:19,160 --> 00:47:24,919
Speaker 1: change in attitudes among US voters towards phiscal stimulus and

756
00:47:25,320 --> 00:47:30,200
Speaker 1: especially direct payments. I think there might be, But just

757
00:47:30,200 --> 00:47:33,719
Speaker 1: just for the record, we should recognize that this isn't

758
00:47:33,719 --> 00:47:35,560
Speaker 1: the first time we've done that by a long shot.

759
00:47:36,000 --> 00:47:40,560
Speaker 1: And in fact, I remember checks going out under under

760
00:47:40,560 --> 00:47:46,160
Speaker 1: George Bush before the financial crisis, uh, and earlier checks

761
00:47:46,160 --> 00:47:49,680
Speaker 1: as well. I think what happened this round is that

762
00:47:49,719 --> 00:47:52,040
Speaker 1: they got out really quickly, and they were of a

763
00:47:52,080 --> 00:47:56,120
Speaker 1: magnitude that made a real difference to people. And and

764
00:47:56,120 --> 00:47:58,840
Speaker 1: and the president was talking, you know, I think before

765
00:47:58,880 --> 00:48:02,040
Speaker 1: he was president, in November and December, after he won

766
00:48:02,080 --> 00:48:05,040
Speaker 1: the election, he was talking about how important it was

767
00:48:05,120 --> 00:48:08,319
Speaker 1: to not just get these checks out, but to get

768
00:48:08,360 --> 00:48:11,160
Speaker 1: another round of checks out. So I think your prediction

769
00:48:11,239 --> 00:48:15,680
Speaker 1: about future expectations is probably correct. And I think one

770
00:48:15,680 --> 00:48:19,359
Speaker 1: thing the compliments that prediction is the fact that, uh,

771
00:48:19,440 --> 00:48:22,759
Speaker 1: the I R. S infrastructure was was stood up, you know,

772
00:48:22,920 --> 00:48:25,879
Speaker 1: I think, pretty pretty handily and quickly to get out

773
00:48:25,880 --> 00:48:28,920
Speaker 1: at this point over a hundred sixty million checks. So

774
00:48:29,000 --> 00:48:31,200
Speaker 1: it's it's made a real difference. All right. I just

775
00:48:31,239 --> 00:48:34,000
Speaker 1: have one more question. There's a topic very near and

776
00:48:34,080 --> 00:48:36,840
Speaker 1: dear to me. Maybe it's my only single thing that

777
00:48:36,880 --> 00:48:40,960
Speaker 1: I really care about. If there's ever another dead ceiling impasse,

778
00:48:41,719 --> 00:48:44,360
Speaker 1: is the president prepared to mint a trillion dollar coin

779
00:48:44,520 --> 00:48:48,000
Speaker 1: to get to circumvented or at a minimum at least

780
00:48:48,000 --> 00:48:51,680
Speaker 1: take advantage of this brief window where there's control of

781
00:48:51,880 --> 00:48:54,960
Speaker 1: both Houses of Congress to at least abolish the dead

782
00:48:54,960 --> 00:48:58,600
Speaker 1: sailing permanently. Yeah, that's one of those things I'm not

783
00:48:58,600 --> 00:49:02,800
Speaker 1: going to lean into, uh, but it's a fair question,

784
00:49:02,880 --> 00:49:06,520
Speaker 1: fair question. Had a feeling. All right, Well, Jared, thank

785
00:49:06,560 --> 00:49:09,040
Speaker 1: you so much for joining us. We really appreciate you, uh,

786
00:49:09,320 --> 00:49:12,560
Speaker 1: take your time to come on oddline, my pleasure. Thanks

787
00:49:12,560 --> 00:49:34,760
Speaker 1: for inviting me. That was great. Thanks. Jared really enjoyed that. Tracy.

788
00:49:34,800 --> 00:49:37,600
Speaker 1: I thought that was really awesome getting to speak to

789
00:49:38,320 --> 00:49:40,759
Speaker 1: Jared on that. You know, the terms that he kept

790
00:49:40,880 --> 00:49:43,960
Speaker 1: using over and over again was political economy, And I

791
00:49:44,000 --> 00:49:48,040
Speaker 1: think that's what our discussions that we keep having are

792
00:49:48,080 --> 00:49:50,960
Speaker 1: really all about. It really is about It's like, Okay,

793
00:49:51,400 --> 00:49:53,720
Speaker 1: we know what the theory is, what does it actually

794
00:49:53,800 --> 00:49:56,680
Speaker 1: take to get something past or make something sustainable in

795
00:49:56,760 --> 00:50:00,680
Speaker 1: d C? And I feel like Jared, just by dint

796
00:50:00,719 --> 00:50:03,440
Speaker 1: of his career, just has such a great perspective on

797
00:50:03,480 --> 00:50:06,240
Speaker 1: all that. Yeah, it's kind of a shame we didn't

798
00:50:06,280 --> 00:50:08,279
Speaker 1: really get into the debt ceiling, but in one way,

799
00:50:08,280 --> 00:50:11,480
Speaker 1: it's the perfect example of that, right, so the suspension

800
00:50:11,560 --> 00:50:14,960
Speaker 1: is supposed to end by August, and like, clearly it's

801
00:50:14,960 --> 00:50:16,760
Speaker 1: going to have to be dealt with at some point.

802
00:50:16,960 --> 00:50:20,520
Speaker 1: But for years now, Congress has been suspending rather than

803
00:50:20,680 --> 00:50:23,880
Speaker 1: actually raising the limit. So even if someone can make

804
00:50:23,880 --> 00:50:27,560
Speaker 1: a rational argument for why they should permanently raise the limit,

805
00:50:27,600 --> 00:50:32,080
Speaker 1: there's already you know, people are clearly reluctant to do that,

806
00:50:32,600 --> 00:50:34,719
Speaker 1: and it's going to be interesting to see how that

807
00:50:34,760 --> 00:50:40,880
Speaker 1: plays out. Well. It's also like, even more importantly, almost

808
00:50:40,920 --> 00:50:46,920
Speaker 1: everyone will agree, especially if they're not in politics, that

809
00:50:47,040 --> 00:50:49,360
Speaker 1: the law is bad, that the idea of like a

810
00:50:49,560 --> 00:50:54,920
Speaker 1: statutory debt ceiling that's disconnected from the budget is not

811
00:50:55,040 --> 00:50:58,080
Speaker 1: a good system. But it's the But we can't but

812
00:50:58,120 --> 00:50:59,839
Speaker 1: we can't get rid of it. And there's various reasons

813
00:50:59,880 --> 00:51:01,680
Speaker 1: we can't get rid of it, and there's various reasons

814
00:51:01,680 --> 00:51:04,640
Speaker 1: no one has ever tried to like actually or there's

815
00:51:04,680 --> 00:51:07,040
Speaker 1: been no real attempt to abolish it. But I do

816
00:51:07,160 --> 00:51:10,760
Speaker 1: think you know, again, it speaks to the capital p

817
00:51:10,760 --> 00:51:13,120
Speaker 1: politics of all this that here's this thing. It gets

818
00:51:13,120 --> 00:51:16,879
Speaker 1: in the way. It almost created a crisis inn when

819
00:51:16,920 --> 00:51:18,920
Speaker 1: people might think that it was going to lead to

820
00:51:19,280 --> 00:51:22,120
Speaker 1: a default on the US debt. So it's it's kind

821
00:51:22,120 --> 00:51:24,799
Speaker 1: of this weird, little annoying thing, but it speaks to

822
00:51:24,880 --> 00:51:29,520
Speaker 1: where there is this um conflict between what makes sense

823
00:51:29,520 --> 00:51:33,319
Speaker 1: on paper economically versus political will. It goes back to

824
00:51:33,560 --> 00:51:36,279
Speaker 1: that theory versus practice point, which was sort of the

825
00:51:36,320 --> 00:51:39,319
Speaker 1: foundation of our conversation. Uh, you know, this idea that

826
00:51:39,360 --> 00:51:43,880
Speaker 1: even if you have a big new economic thought, actually

827
00:51:43,920 --> 00:51:47,080
Speaker 1: putting it into practice and coming up with specific policies

828
00:51:47,120 --> 00:51:50,920
Speaker 1: to enact it might be more difficult and does require,

829
00:51:51,440 --> 00:51:55,360
Speaker 1: as Jared said, an intimate knowledge of the political economy

830
00:51:55,400 --> 00:51:57,880
Speaker 1: and the way things actually were. Yeah, exactly right. And

831
00:51:57,960 --> 00:52:00,840
Speaker 1: of course, so it's like this microcosm, but the bigger,

832
00:52:01,280 --> 00:52:04,920
Speaker 1: you know, the bigger story is this sort of question

833
00:52:05,080 --> 00:52:08,399
Speaker 1: of what can get passed on the spending side. And

834
00:52:08,600 --> 00:52:12,720
Speaker 1: it's interesting to hear sort of Jared's perspective and also

835
00:52:12,840 --> 00:52:15,880
Speaker 1: his I guess, I guess I would say translation or

836
00:52:16,640 --> 00:52:20,319
Speaker 1: insight into President Biden's thinking about Okay, like if you

837
00:52:20,360 --> 00:52:23,440
Speaker 1: want to like do this, like maybe economists can make

838
00:52:23,480 --> 00:52:25,680
Speaker 1: this case and they probably can that a lot of

839
00:52:25,719 --> 00:52:29,800
Speaker 1: this spending, particularly the investment spending, doesn't need to quote

840
00:52:29,800 --> 00:52:33,120
Speaker 1: be paid for in the traditional sense. But it's interesting

841
00:52:33,160 --> 00:52:37,080
Speaker 1: to hear this sort of the politics perspective that on

842
00:52:37,239 --> 00:52:41,840
Speaker 1: some level, yes, it does, but I guess that's it's uh.

843
00:52:41,880 --> 00:52:44,240
Speaker 1: I thought that was very useful. Yeah, I'm also curious

844
00:52:44,320 --> 00:52:49,000
Speaker 1: to see what happens on healthcare because that's another topic

845
00:52:49,280 --> 00:52:53,160
Speaker 1: that's politically loaded. There seems to be consensus building in

846
00:52:53,200 --> 00:52:55,839
Speaker 1: the States that there is something wrong with the US

847
00:52:55,880 --> 00:52:59,880
Speaker 1: healthcare system, but actually fixing it, I mean, as we

848
00:53:00,120 --> 00:53:02,640
Speaker 1: seen over and over and over again, tends to be

849
00:53:03,040 --> 00:53:05,319
Speaker 1: much more difficult. So that's also going to be an

850
00:53:05,360 --> 00:53:07,319
Speaker 1: interesting thing to watch. Yeah. No, it should be an

851
00:53:07,360 --> 00:53:11,319
Speaker 1: interesting summer to see, like what eventually what aventers, you know,

852
00:53:11,440 --> 00:53:14,840
Speaker 1: that's it seems like that's the timeline that we're looking for. Okay,

853
00:53:14,840 --> 00:53:17,440
Speaker 1: the next few months of negotiations and then maybe something

854
00:53:17,440 --> 00:53:20,160
Speaker 1: gets passed in September or after that. So should have

855
00:53:20,160 --> 00:53:22,880
Speaker 1: an interesting a few months ahead of us watching to

856
00:53:22,960 --> 00:53:25,759
Speaker 1: see like what these policies get put into place. And

857
00:53:25,800 --> 00:53:28,080
Speaker 1: as Jared said, you know, like okay, we have the stimulus,

858
00:53:28,120 --> 00:53:31,320
Speaker 1: but it does feel like to some extent, the legacy

859
00:53:31,400 --> 00:53:34,680
Speaker 1: of the Biden administration will be much you know, less

860
00:53:34,719 --> 00:53:37,600
Speaker 1: about the recovery and more about what the what the

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Speaker 1: sustained future economy. Uh looks like after that? Yeah? Absolutely,

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Speaker 1: on that happy note. Should we leave it there? Let's

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Speaker 1: see it there. This has been another episode of The

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Speaker 1: Odd Lots Podcast. I'm Tracy Alloway. You can follow me

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Speaker 1: on Twitter at Tracy Alloway, and I'm Joe Wisntal. You

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00:53:56,360 --> 00:53:59,440
Speaker 1: could follow me on Twitter at the Stalwart. Follow our

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Speaker 1: guest Twitter, Jared Bernstein. He's at econ Jared. Follow our

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Speaker 1: producer Laura Carlson. She's at Laura M. Carlson. Follow the

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Speaker 1: Bloomberg head of podcast, Francesco Levi at Francesco Today, and

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Speaker 1: check out all of our podcasts at Bloomberg under the

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Speaker 1: handle at podcasts. Thanks for listening.