1
00:00:00,160 --> 00:00:02,720
Speaker 1: We can make a very good prediction as to how

2
00:00:02,720 --> 00:00:04,800
Speaker 1: many sixty nine year olds will be alive in the

3
00:00:04,880 --> 00:00:06,880
Speaker 1: United States next year. You just look at this year

4
00:00:06,920 --> 00:00:10,280
Speaker 1: sixty eight year olds and do a mortality adjustment. Next

5
00:00:10,360 --> 00:00:17,040
Speaker 1: year's productivity growth is anyone's gas. Hi, and welcome back

6
00:00:17,040 --> 00:00:20,000
Speaker 1: to Bloomberg Benchmark, a podcast about the global economy. It

7
00:00:20,120 --> 00:00:24,000
Speaker 1: is Thursday, March three. I'm Tori Stillwell and economics reporter

8
00:00:24,079 --> 00:00:26,840
Speaker 1: with Bloomberg News in DC, and I am joined by

9
00:00:27,000 --> 00:00:29,960
Speaker 1: my co host, dam Moss, our executive editor for International

10
00:00:30,000 --> 00:00:33,840
Speaker 1: Economics in New York, Hadian morning. This week, we are

11
00:00:33,880 --> 00:00:36,320
Speaker 1: talking about a topic that's pretty near and dear to

12
00:00:36,360 --> 00:00:39,479
Speaker 1: our hearts as economics reporters, and that is potential growth.

13
00:00:39,760 --> 00:00:42,879
Speaker 1: Potential growth is essentially the speed limit of our economy.

14
00:00:43,120 --> 00:00:46,000
Speaker 1: It's an especially great time to talk about this because

15
00:00:46,159 --> 00:00:49,239
Speaker 1: given the election, we're hearing a lot of promises from

16
00:00:49,360 --> 00:00:52,960
Speaker 1: candidates about growth. My plan can save us this many

17
00:00:53,000 --> 00:00:58,120
Speaker 1: billions of dollars, create X jobs, stimulate y growth. That's right.

18
00:00:58,400 --> 00:01:02,120
Speaker 1: Donald Trump has said that his tax cutting kaboosh GDP

19
00:01:02,320 --> 00:01:06,280
Speaker 1: growth to his highest six percent. Before Jeb Bush dropped out,

20
00:01:06,360 --> 00:01:10,000
Speaker 1: his plan promised at least four percent growth, and Bernie

21
00:01:10,080 --> 00:01:13,520
Speaker 1: Sanders campaign is touted an analysis that says his expansion

22
00:01:13,520 --> 00:01:16,880
Speaker 1: plans could boost economic growth to around five and all

23
00:01:16,959 --> 00:01:19,080
Speaker 1: this sounds leaves and bounds better than the two point

24
00:01:19,160 --> 00:01:21,720
Speaker 1: one percent anal piece that we've averaged during the six

25
00:01:21,760 --> 00:01:24,319
Speaker 1: full years of the recovery. The thing is, these these

26
00:01:24,360 --> 00:01:26,720
Speaker 1: candidates growth plans are also at odds with what we

27
00:01:26,800 --> 00:01:29,399
Speaker 1: keep hearing from economists, which is that potential growth is

28
00:01:29,400 --> 00:01:31,840
Speaker 1: really closer to two percent, and according to them, that's

29
00:01:31,880 --> 00:01:34,360
Speaker 1: about as fast as we can really grow, which would

30
00:01:34,400 --> 00:01:36,920
Speaker 1: make all these political promises pretty hard to keep. So

31
00:01:36,959 --> 00:01:40,080
Speaker 1: we wanted a gift to help us navigate this. We're

32
00:01:40,080 --> 00:01:43,959
Speaker 1: going to walk through potential growth, how it's calculated, what

33
00:01:44,120 --> 00:01:46,920
Speaker 1: it looks like, and how it compares to the past.

34
00:01:47,680 --> 00:01:50,440
Speaker 1: We also want to talk about the implications for American

35
00:01:50,560 --> 00:01:54,080
Speaker 1: society and policy making, given that much of what we've

36
00:01:54,120 --> 00:01:57,640
Speaker 1: come to associate with the US a generous safety net,

37
00:01:58,000 --> 00:02:02,040
Speaker 1: the American dream wasn't at a time when we appeared

38
00:02:02,120 --> 00:02:05,480
Speaker 1: to be growing much faster. So, without further ado, let's

39
00:02:05,480 --> 00:02:08,960
Speaker 1: introduce our guest. It seems like he's worked everywhere from

40
00:02:09,080 --> 00:02:11,959
Speaker 1: Brookings to the Center on budget and policy priorities, the

41
00:02:12,000 --> 00:02:15,680
Speaker 1: World Bank, the National Economic Council. Right now, he works

42
00:02:15,680 --> 00:02:18,280
Speaker 1: down the street from us in the Executive Office Building,

43
00:02:18,320 --> 00:02:21,600
Speaker 1: where he is chairman of President Barack Obama's Council of

44
00:02:21,639 --> 00:02:24,840
Speaker 1: Economic Advisors, and once upon a time he used to

45
00:02:24,840 --> 00:02:28,200
Speaker 1: hang out regularly with Matt Damon, his freshman roommate at Harvard.

46
00:02:28,360 --> 00:02:31,240
Speaker 1: Jason Furman, thanks so much for joining us, Thanks for

47
00:02:31,280 --> 00:02:33,840
Speaker 1: having me. But before we get into the heavy stuff,

48
00:02:33,919 --> 00:02:36,960
Speaker 1: do you get much time for movies these days? I

49
00:02:37,040 --> 00:02:39,480
Speaker 1: get some time for movies. I certainly love the Martian

50
00:02:39,560 --> 00:02:43,400
Speaker 1: wouldn't have missed it. So, Jason, what exactly is the

51
00:02:43,440 --> 00:02:46,080
Speaker 1: CEA For some of our listeners who may not know,

52
00:02:46,160 --> 00:02:47,359
Speaker 1: you know, what do you do with your day to

53
00:02:47,440 --> 00:02:51,040
Speaker 1: day life. The Council of Economic Advisors was created seventy

54
00:02:51,120 --> 00:02:54,800
Speaker 1: years ago, and it is an institution that in many

55
00:02:54,800 --> 00:02:57,679
Speaker 1: ways is unique in the world. UM I report directly

56
00:02:57,840 --> 00:03:02,000
Speaker 1: to the President. I regularly send him memos and advise

57
00:03:02,120 --> 00:03:07,000
Speaker 1: him personally on the full spectrum of economic issues, from

58
00:03:07,000 --> 00:03:10,680
Speaker 1: the more macroeconomic questions of the trajectory of the economy

59
00:03:10,680 --> 00:03:13,480
Speaker 1: that we're going to be talking about today, to you know,

60
00:03:13,520 --> 00:03:20,000
Speaker 1: more microeconomic issues like overtime regulations in labor or technology

61
00:03:20,040 --> 00:03:24,880
Speaker 1: policy or healthcare? Does that mean you see the president

62
00:03:24,960 --> 00:03:28,440
Speaker 1: every day? You send him texts? How doesn't break down?

63
00:03:28,840 --> 00:03:32,079
Speaker 1: We send him at least one memo um a day.

64
00:03:32,160 --> 00:03:34,880
Speaker 1: We have a standing daily update for him and writing.

65
00:03:35,400 --> 00:03:40,680
Speaker 1: We also give him memos interpreting economic data before it's released,

66
00:03:40,720 --> 00:03:42,840
Speaker 1: and we do that a couple of times a week,

67
00:03:43,440 --> 00:03:48,520
Speaker 1: and then see him pretty regularly as well to discuss

68
00:03:48,760 --> 00:03:51,800
Speaker 1: economic issues. And does he call you up and site Hey, Chaison,

69
00:03:52,080 --> 00:03:54,880
Speaker 1: I think your analysis of the monthly trade balance is

70
00:03:54,920 --> 00:03:58,840
Speaker 1: flawed in paragraph too. How does it work? He is

71
00:03:59,000 --> 00:04:02,160
Speaker 1: a careful reader, and when you see him, he'll bring

72
00:04:02,240 --> 00:04:04,280
Speaker 1: up something you wrote about a week ago and want

73
00:04:04,280 --> 00:04:06,880
Speaker 1: to talk to you about it, engage with it. He

74
00:04:06,960 --> 00:04:09,320
Speaker 1: certainly wouldn't be shy if he did see a mistake

75
00:04:09,360 --> 00:04:11,360
Speaker 1: in paragraph two, and if there had been one, he'd

76
00:04:11,360 --> 00:04:15,560
Speaker 1: probably catch it. But we try to be pretty careful. Well,

77
00:04:15,640 --> 00:04:17,800
Speaker 1: let's get to our topic at hand for the day,

78
00:04:17,839 --> 00:04:21,320
Speaker 1: which is potential GDP, and I think a quick definition

79
00:04:21,360 --> 00:04:23,880
Speaker 1: of it is it's essentially the pace at which the

80
00:04:23,920 --> 00:04:27,080
Speaker 1: economy can expand in the long run without generating faster

81
00:04:27,160 --> 00:04:31,760
Speaker 1: inflation and while keeping unemployment steady. So I've always heard

82
00:04:31,760 --> 00:04:34,640
Speaker 1: the rule of thumb for it is growth in labor

83
00:04:34,640 --> 00:04:37,720
Speaker 1: productivity plus growth in the labor force equals potential growth.

84
00:04:37,760 --> 00:04:41,280
Speaker 1: Is that about right? That is about right. There's one

85
00:04:41,360 --> 00:04:44,200
Speaker 1: or two technical measurement issues that intervene, but for the

86
00:04:44,240 --> 00:04:49,760
Speaker 1: most part, output per worker times workers equals output. So

87
00:04:49,760 --> 00:04:51,760
Speaker 1: if you look at the growth of output poor worker,

88
00:04:51,800 --> 00:04:55,280
Speaker 1: that's productivity growth the growth of workers. You know, add

89
00:04:55,320 --> 00:04:59,280
Speaker 1: those two growth rates together you get potential great. And

90
00:04:59,520 --> 00:05:02,800
Speaker 1: so let's talk about sort of where economists have pegged

91
00:05:02,839 --> 00:05:06,000
Speaker 1: potential growth, um where you have it pegged, And I'll

92
00:05:06,040 --> 00:05:09,120
Speaker 1: and I'll also mentioned some others because CBO, the Congressional

93
00:05:09,120 --> 00:05:13,080
Speaker 1: Budget Office puts it around two And actually I saw

94
00:05:13,080 --> 00:05:15,200
Speaker 1: a Morgan Stanley note not too long ago that put

95
00:05:15,200 --> 00:05:17,920
Speaker 1: it at one point five percent, which is compared to

96
00:05:17,960 --> 00:05:20,719
Speaker 1: the growth rates that we've been seeing recently, a good

97
00:05:20,760 --> 00:05:24,080
Speaker 1: deal lower. So where do you see it? If you

98
00:05:24,120 --> 00:05:28,080
Speaker 1: didn't undertake any public policies at all, and you continued

99
00:05:28,120 --> 00:05:31,640
Speaker 1: on the track we're going, we would expect potential growth

100
00:05:32,040 --> 00:05:35,479
Speaker 1: to be about the same two point zero percent that

101
00:05:35,520 --> 00:05:39,440
Speaker 1: the Congressional Budget Office sees it at. But public policies

102
00:05:39,560 --> 00:05:43,760
Speaker 1: can make a difference, and we estimate that incorporating a number,

103
00:05:43,839 --> 00:05:46,480
Speaker 1: but not all, of the policies the President has proposed,

104
00:05:46,839 --> 00:05:50,239
Speaker 1: would get that potential growth rate up to two point three,

105
00:05:51,440 --> 00:05:57,000
Speaker 1: both by increasing labor force growth and by increasing productivity growth.

106
00:05:57,480 --> 00:06:00,400
Speaker 1: And how does this compare with previous Dick, it's how

107
00:06:00,440 --> 00:06:05,680
Speaker 1: are we're doing right now? Relatively speaking? The big difference between,

108
00:06:06,040 --> 00:06:09,000
Speaker 1: you know, what we see going forward and what we've

109
00:06:09,040 --> 00:06:12,920
Speaker 1: seen over the last sixty years is the labor force growth,

110
00:06:13,520 --> 00:06:17,000
Speaker 1: and labor force growth over the next decade will be

111
00:06:17,800 --> 00:06:21,480
Speaker 1: considerably slower than it was over the last sixty years.

112
00:06:21,880 --> 00:06:26,320
Speaker 1: And that's for two reasons. The first is that the

113
00:06:26,360 --> 00:06:30,719
Speaker 1: baby boom is turning into a retirement boom. As people

114
00:06:30,760 --> 00:06:35,720
Speaker 1: reach sixty seventy seventy five, the baby boomers and they retire,

115
00:06:36,279 --> 00:06:39,400
Speaker 1: so that demographic wave which had propelled us forward is

116
00:06:39,480 --> 00:06:44,280
Speaker 1: now moving in reverse. The second thing is from the

117
00:06:44,400 --> 00:06:48,040
Speaker 1: end of World War Two until around the late nine nineties,

118
00:06:48,520 --> 00:06:52,039
Speaker 1: there was a big influx of women into the workforce.

119
00:06:52,440 --> 00:06:54,760
Speaker 1: What percentage of women working went from less than a

120
00:06:54,839 --> 00:07:00,840
Speaker 1: third to um considerably higher than that. That influx has

121
00:07:01,360 --> 00:07:04,479
Speaker 1: leveled off since the late and the absence of the

122
00:07:04,480 --> 00:07:07,640
Speaker 1: baby boomers and an influx of women, we would expect

123
00:07:07,680 --> 00:07:13,560
Speaker 1: to see slowing labor force going forward. I'm also kind

124
00:07:13,600 --> 00:07:16,920
Speaker 1: of curious about the productivity side of this too. We've

125
00:07:16,960 --> 00:07:19,000
Speaker 1: we've had a show on productivity, as some of our

126
00:07:19,000 --> 00:07:22,320
Speaker 1: listeners may remember, how does that play a role into

127
00:07:22,360 --> 00:07:26,520
Speaker 1: potential growth as well? Productivity is much more uncertain, and

128
00:07:26,600 --> 00:07:29,600
Speaker 1: so when you look at differences like between Morgan Stanley,

129
00:07:29,640 --> 00:07:33,840
Speaker 1: who you talked about, Um, they're at the bottom end

130
00:07:33,840 --> 00:07:37,480
Speaker 1: of potential these days. Goldman Sacks is estimating one point

131
00:07:37,520 --> 00:07:40,960
Speaker 1: seven five cbo two point zero. Most of the difference

132
00:07:40,960 --> 00:07:44,800
Speaker 1: between those numbers is differences and projections of productivity growth.

133
00:07:45,240 --> 00:07:48,600
Speaker 1: Productivity growth is really hard to predict. Where we can

134
00:07:48,640 --> 00:07:51,560
Speaker 1: make a very good prediction as to how many sixty

135
00:07:51,640 --> 00:07:53,720
Speaker 1: nine year olds will be alive in the United States

136
00:07:53,720 --> 00:07:55,560
Speaker 1: next year. You just look at this year sixty eight

137
00:07:55,640 --> 00:07:59,400
Speaker 1: year olds and do a mortality adjustment. Next year's productivity

138
00:07:59,400 --> 00:08:02,280
Speaker 1: growth is any one's guess. You're essentially trying to predict

139
00:08:02,320 --> 00:08:05,680
Speaker 1: an innovation, right, yeah, exactly, And how do you predict

140
00:08:05,720 --> 00:08:08,760
Speaker 1: a new idea that someone doesn't have today how many

141
00:08:08,760 --> 00:08:10,480
Speaker 1: of them they are going to have five years from now?

142
00:08:10,480 --> 00:08:15,200
Speaker 1: And there's no natural law of economics that says the

143
00:08:15,320 --> 00:08:17,920
Speaker 1: rate of new idea growth is has to be one

144
00:08:17,960 --> 00:08:19,680
Speaker 1: percent a year or two percent a year or three

145
00:08:19,720 --> 00:08:21,920
Speaker 1: percent a year. There's just nothing that tells you you

146
00:08:21,920 --> 00:08:24,200
Speaker 1: know what has to be. So what people do is

147
00:08:24,240 --> 00:08:27,240
Speaker 1: generally they take averages over the past. And the big

148
00:08:27,320 --> 00:08:30,440
Speaker 1: question is should you look at just the last five years,

149
00:08:30,960 --> 00:08:35,000
Speaker 1: the last ten years, the last fifty years. I personally

150
00:08:35,000 --> 00:08:38,280
Speaker 1: think the further back you go, the more accurate a

151
00:08:38,360 --> 00:08:41,439
Speaker 1: projection you get for the future, because it's very noisy,

152
00:08:41,520 --> 00:08:43,920
Speaker 1: it bounces around a lot, and you don't want to

153
00:08:43,960 --> 00:08:48,160
Speaker 1: place too much weight on any small number of years.

154
00:08:49,160 --> 00:08:54,280
Speaker 1: And how did the recession affect potential growth? I think

155
00:08:54,320 --> 00:08:56,920
Speaker 1: that recession took a real bite out of potential because

156
00:08:56,920 --> 00:09:00,400
Speaker 1: it was a period when um it resulted and less

157
00:09:00,400 --> 00:09:06,079
Speaker 1: business investment, It resulted in less research and development, and

158
00:09:06,280 --> 00:09:10,120
Speaker 1: so I think that lowers your potential growth rate. And

159
00:09:10,160 --> 00:09:13,040
Speaker 1: that's an important question. I mean, in theory and economics,

160
00:09:13,440 --> 00:09:16,080
Speaker 1: potential growth rate is supply and that tells you how

161
00:09:16,120 --> 00:09:19,400
Speaker 1: much you can grow, and then recessions are all about demand.

162
00:09:19,440 --> 00:09:21,640
Speaker 1: They tell you how much of your potential you use.

163
00:09:22,240 --> 00:09:25,280
Speaker 1: I think in reality there's a little bit more of

164
00:09:25,400 --> 00:09:29,720
Speaker 1: a causal arrows running both directions that demand effects supply

165
00:09:29,840 --> 00:09:35,880
Speaker 1: and supply effects demand. You're talking about pretty fundamental long

166
00:09:36,040 --> 00:09:40,160
Speaker 1: term forces here, Jason. Given that, why do all these

167
00:09:40,200 --> 00:09:44,040
Speaker 1: politicians say we should be doing better, we should be

168
00:09:44,120 --> 00:09:49,280
Speaker 1: doing more that some of the trains you've described transcend

169
00:09:49,400 --> 00:09:54,800
Speaker 1: anyone for your term. Um. Absolutely, look, and we should

170
00:09:54,800 --> 00:09:57,480
Speaker 1: be doing everything we can to do better. And that's

171
00:09:57,520 --> 00:10:02,640
Speaker 1: why we're trying to expand trade, invest in infrastructure, have

172
00:10:02,800 --> 00:10:08,520
Speaker 1: more research, get more people into the workforce, and reform

173
00:10:08,559 --> 00:10:11,200
Speaker 1: our business tax system. So there's a lot of things

174
00:10:11,720 --> 00:10:15,320
Speaker 1: we can do. Um. The issue is when you look

175
00:10:15,360 --> 00:10:19,480
Speaker 1: at estimates of those things, they tend to each one

176
00:10:19,480 --> 00:10:23,200
Speaker 1: of them at a couple tenths at most, and that

177
00:10:23,280 --> 00:10:26,880
Speaker 1: couple tens is spread out often over a whole decade.

178
00:10:26,960 --> 00:10:30,800
Speaker 1: So there's no magic bullet, nothing that's going to completely

179
00:10:30,880 --> 00:10:33,040
Speaker 1: change this number. But if you do a lot of

180
00:10:33,040 --> 00:10:35,880
Speaker 1: things and you do them right, you can certainly budget

181
00:10:36,000 --> 00:10:40,959
Speaker 1: up in the right direction. So then why do we

182
00:10:41,000 --> 00:10:45,120
Speaker 1: have a situation we have politicians promising us so much,

183
00:10:45,480 --> 00:10:48,000
Speaker 1: so much better growth. Um, you know, is it is

184
00:10:48,000 --> 00:10:51,280
Speaker 1: it possible that President Obama just hasn't been trying hard

185
00:10:51,400 --> 00:10:54,760
Speaker 1: enough to get growth going faster. I mean sort of

186
00:10:54,800 --> 00:10:58,280
Speaker 1: the results we're getting from the early primary states seem

187
00:10:58,360 --> 00:11:02,080
Speaker 1: to be indicating bad. Voters think that we can do better,

188
00:11:02,120 --> 00:11:05,559
Speaker 1: and they are willing to believe politicians who are promising

189
00:11:05,640 --> 00:11:10,240
Speaker 1: us growth ats in many cases double what we're seeing now. Um,

190
00:11:10,320 --> 00:11:13,360
Speaker 1: so can we can we do six percent? Can we

191
00:11:13,400 --> 00:11:16,680
Speaker 1: do five? We can? We certainly should be trying to

192
00:11:16,720 --> 00:11:20,520
Speaker 1: do as good as we possibly can, and we can

193
00:11:20,559 --> 00:11:24,080
Speaker 1: certainly do better than two point zero percent. But there

194
00:11:24,200 --> 00:11:27,120
Speaker 1: is a real limit to what many of these policies

195
00:11:27,160 --> 00:11:30,199
Speaker 1: would do. And let me give you an example. President

196
00:11:30,360 --> 00:11:35,280
Speaker 1: Bush formed tax reform Commission and they came out with

197
00:11:35,360 --> 00:11:38,480
Speaker 1: a really thoughtful, you know, well thought out plan, you

198
00:11:38,480 --> 00:11:41,040
Speaker 1: know how to pluses and minuses. Was a well thought out,

199
00:11:41,160 --> 00:11:46,719
Speaker 1: really comprehensive plan. And then President Bush's Treasury Department estimated

200
00:11:46,760 --> 00:11:48,840
Speaker 1: what it would do to the growth rate, and they

201
00:11:48,840 --> 00:11:52,040
Speaker 1: said it would add less than one tenth of one

202
00:11:52,120 --> 00:11:56,040
Speaker 1: percent to the growth rate each year. Now, might still

203
00:11:56,080 --> 00:11:59,040
Speaker 1: be worth doing. Um, I'd take anything that adds a

204
00:11:59,080 --> 00:12:01,760
Speaker 1: tenth to our growth rate it a year. But you know,

205
00:12:01,840 --> 00:12:04,880
Speaker 1: a tax plan like that added less than a tenth

206
00:12:04,880 --> 00:12:07,040
Speaker 1: of a percent. If you have a tax plan that

207
00:12:07,080 --> 00:12:10,080
Speaker 1: adds trillions of dollars to the deficit. That's not going

208
00:12:10,160 --> 00:12:12,560
Speaker 1: to add to our growth. That's going to subtract from

209
00:12:12,559 --> 00:12:16,040
Speaker 1: our growth because the cost of those deficits is going

210
00:12:16,080 --> 00:12:19,480
Speaker 1: to outweigh any benefit that you know, the tax reform

211
00:12:19,559 --> 00:12:23,160
Speaker 1: itself might have had. So the CEI, the team that

212
00:12:23,240 --> 00:12:27,600
Speaker 1: you lead, projects two point three percent potential growth over

213
00:12:27,640 --> 00:12:31,520
Speaker 1: the next ten years. Correct, Correct, And that's incorporating the

214
00:12:31,559 --> 00:12:34,959
Speaker 1: effect of most of the policies proposed by the president. Right,

215
00:12:35,400 --> 00:12:39,080
Speaker 1: how likely is it that all of those policies come

216
00:12:39,080 --> 00:12:43,400
Speaker 1: to pass? And is this the problem with making projections

217
00:12:43,400 --> 00:12:46,520
Speaker 1: over such a long period of time. Well, our job

218
00:12:46,640 --> 00:12:50,079
Speaker 1: is to say, if we did this, what would happen?

219
00:12:50,240 --> 00:12:52,959
Speaker 1: And this underlies the budget and so it fits together

220
00:12:53,000 --> 00:12:57,079
Speaker 1: as a coherent hole. Um. So it's a conditional forecast,

221
00:12:57,160 --> 00:12:59,920
Speaker 1: as opposed to trying to you know, saying, if blank happen,

222
00:13:00,400 --> 00:13:03,080
Speaker 1: then what will be the result? As supposed to unconditional.

223
00:13:03,559 --> 00:13:05,880
Speaker 1: We basically say as well, that if you didn't do

224
00:13:05,960 --> 00:13:08,760
Speaker 1: any of these policies, we didn't reform our business access,

225
00:13:08,840 --> 00:13:11,760
Speaker 1: and we didn't liberalize trade, we didn't invest in infrastructure,

226
00:13:12,280 --> 00:13:14,640
Speaker 1: we'd have a two point zero percent growth rate, and

227
00:13:14,720 --> 00:13:18,840
Speaker 1: I think that two point zero is conceptually comparable to

228
00:13:18,920 --> 00:13:21,160
Speaker 1: some of the numbers you had cited the Morgan Stanley

229
00:13:21,200 --> 00:13:24,000
Speaker 1: and the CBO, who I think of generally not assuming

230
00:13:24,480 --> 00:13:28,240
Speaker 1: that all of those policies are coming to pass. So, Jason,

231
00:13:28,280 --> 00:13:30,440
Speaker 1: it is an election year, so I feel like I

232
00:13:30,520 --> 00:13:33,319
Speaker 1: have to ask this question. You know, what would you

233
00:13:33,360 --> 00:13:37,480
Speaker 1: say to conservatives or just general skeptics out there who

234
00:13:37,520 --> 00:13:40,120
Speaker 1: may have a hard time trusting econmist working for a

235
00:13:40,120 --> 00:13:43,840
Speaker 1: Democratic president, who would argue, maybe this potential GDP number

236
00:13:43,920 --> 00:13:46,920
Speaker 1: is being loobal to make the current growth rate sound better.

237
00:13:48,760 --> 00:13:52,360
Speaker 1: You know, we do a very rigorous job at the

238
00:13:52,400 --> 00:13:55,800
Speaker 1: Council of Economic Advisors. You can look at the Economic

239
00:13:55,840 --> 00:13:58,559
Speaker 1: Report of the President which we put out last week,

240
00:13:59,200 --> 00:14:03,000
Speaker 1: and chapter or two gives a detailed accounting. We have

241
00:14:04,440 --> 00:14:08,280
Speaker 1: ten different lines, each of which we estimate separately, that

242
00:14:08,360 --> 00:14:11,440
Speaker 1: combine together for that estimate of potential. So it's something

243
00:14:11,480 --> 00:14:14,960
Speaker 1: we do very rigorously, and we also benchmark and compare

244
00:14:15,000 --> 00:14:18,800
Speaker 1: ourselves to other forecasters to make sure we're not no

245
00:14:18,920 --> 00:14:22,240
Speaker 1: way out of line. We have this idea of the

246
00:14:22,240 --> 00:14:25,520
Speaker 1: American dream, and even people like me who were born

247
00:14:25,560 --> 00:14:29,800
Speaker 1: outside the United States have heard about the American dream,

248
00:14:29,960 --> 00:14:32,600
Speaker 1: the idea that the US was leading the world in

249
00:14:32,680 --> 00:14:35,280
Speaker 1: the pace of growth, and the idea that if you

250
00:14:35,440 --> 00:14:38,200
Speaker 1: come to the United States, or even if you're born here,

251
00:14:38,360 --> 00:14:41,960
Speaker 1: you work hard, you can get along. Now, there's been

252
00:14:41,960 --> 00:14:47,120
Speaker 1: this narrative that that's all dead. How does that fit

253
00:14:47,200 --> 00:14:50,120
Speaker 1: in with what we've been talking about today. I don't

254
00:14:50,120 --> 00:14:52,480
Speaker 1: think that dream is dead at all. Um. I think

255
00:14:52,600 --> 00:14:56,000
Speaker 1: the future generations are going to have much better living

256
00:14:56,040 --> 00:15:00,920
Speaker 1: standards than we have today. Product Ativity growth is the

257
00:15:00,960 --> 00:15:03,760
Speaker 1: important thing to look at, because that's how much output

258
00:15:04,440 --> 00:15:09,040
Speaker 1: per hour is growing. The population isn't growing as quickly

259
00:15:09,040 --> 00:15:11,440
Speaker 1: in the future, you don't actually need as much economic

260
00:15:11,480 --> 00:15:13,840
Speaker 1: growth for people to be better off. It's really how

261
00:15:13,920 --> 00:15:18,560
Speaker 1: much you're getting per person. The United States is still

262
00:15:19,360 --> 00:15:23,680
Speaker 1: among the strongest growth rates of any of the advanced economies,

263
00:15:24,240 --> 00:15:29,480
Speaker 1: the fastest productivity growth of any of the major advanced economies,

264
00:15:30,040 --> 00:15:33,680
Speaker 1: and there's a lot more we can do to strengthen

265
00:15:34,120 --> 00:15:38,080
Speaker 1: that growth going forward. So I don't think any of

266
00:15:38,120 --> 00:15:41,600
Speaker 1: this is a reason for despair. But there are certain

267
00:15:41,640 --> 00:15:46,600
Speaker 1: demographic facts. The baby boomers were a tremendous force in

268
00:15:46,600 --> 00:15:49,640
Speaker 1: the economy. They're not going to be going forward, so

269
00:15:49,680 --> 00:15:51,800
Speaker 1: we're gonna need to find new forces in the economy.

270
00:15:51,840 --> 00:15:56,720
Speaker 1: That's why immigration reform, for example, could be so important economically.

271
00:15:58,160 --> 00:16:01,360
Speaker 1: I mean, is it a situation there where we as

272
00:16:01,360 --> 00:16:06,160
Speaker 1: American people need to adjust our beliefs on on what

273
00:16:06,240 --> 00:16:10,320
Speaker 1: growth looks like and what constitutes good growth in order

274
00:16:10,360 --> 00:16:14,760
Speaker 1: to better align with potential Because I think the sense

275
00:16:14,760 --> 00:16:17,520
Speaker 1: that I get from just looking at reports from the

276
00:16:17,560 --> 00:16:19,720
Speaker 1: campaign trails that people still continue to believe we can

277
00:16:19,760 --> 00:16:22,560
Speaker 1: do much faster. And perhaps it's a situation where you

278
00:16:22,600 --> 00:16:27,080
Speaker 1: have people benchmarking off with the past for the future. Um,

279
00:16:27,120 --> 00:16:28,920
Speaker 1: maybe maybe that's not the case. Maybe we don't need

280
00:16:28,960 --> 00:16:31,320
Speaker 1: to realignment. What do you think? Look, I think we

281
00:16:31,320 --> 00:16:33,560
Speaker 1: should be trying to do as well as we possibly can.

282
00:16:33,680 --> 00:16:36,320
Speaker 1: We shouldn't just accept reality and take it as given.

283
00:16:36,360 --> 00:16:39,040
Speaker 1: We should be trying to reshape it. But we also

284
00:16:39,120 --> 00:16:42,120
Speaker 1: can't be unrealistic about how you're reshaping it. So if

285
00:16:42,120 --> 00:16:44,400
Speaker 1: you think you're getting a growth rate of four or five, six,

286
00:16:44,440 --> 00:16:48,160
Speaker 1: seven percent um, you're going to end up not getting

287
00:16:48,200 --> 00:16:51,080
Speaker 1: that growth rate and having a much larger budget deficit

288
00:16:51,120 --> 00:16:55,240
Speaker 1: than you've projected. That budget deficit will then further hurt

289
00:16:55,280 --> 00:16:57,240
Speaker 1: your growth right and you'll be in a in a

290
00:16:57,320 --> 00:17:00,680
Speaker 1: negative spiral. So I think it's really important to be

291
00:17:01,400 --> 00:17:05,760
Speaker 1: honest and realistic while aspiring to strengthen the economy as

292
00:17:05,840 --> 00:17:09,280
Speaker 1: much as you possibly can, Tori. I wonder whether it's

293
00:17:09,320 --> 00:17:13,399
Speaker 1: a question of adjusting our beliefs or adjusting the context

294
00:17:13,480 --> 00:17:16,960
Speaker 1: in which we hold our beliefs. Well. To come back

295
00:17:16,960 --> 00:17:19,560
Speaker 1: to something that Jason said earlier, and I was in

296
00:17:19,600 --> 00:17:26,040
Speaker 1: Europe the week before last, Eurozone economic growth anemic that's

297
00:17:26,080 --> 00:17:29,040
Speaker 1: probably a little unfair, but not too wide of the mark.

298
00:17:29,760 --> 00:17:34,840
Speaker 1: Japan in and out of recession, China not hitting it

299
00:17:34,840 --> 00:17:37,480
Speaker 1: out of the park the way they did for much

300
00:17:37,480 --> 00:17:41,919
Speaker 1: of the past two decades. So you know, maybe this

301
00:17:42,080 --> 00:17:45,240
Speaker 1: isn't such a terrible place to be. I mean, one

302
00:17:45,280 --> 00:17:50,879
Speaker 1: thing that is worthing is that at several points since

303
00:17:50,920 --> 00:17:53,639
Speaker 1: this expansion began in two thousand and nine, people have

304
00:17:53,720 --> 00:17:59,199
Speaker 1: predicted a double dip hasn't come to pass. Jason, what

305
00:17:59,280 --> 00:18:02,840
Speaker 1: do you think I might take you one further and say, um,

306
00:18:02,920 --> 00:18:07,719
Speaker 1: America is a great place to be, and because we

307
00:18:07,800 --> 00:18:13,200
Speaker 1: really do have a lot of innovation here and that

308
00:18:14,160 --> 00:18:18,840
Speaker 1: is resulting right now in wage gains for workers are

309
00:18:18,880 --> 00:18:21,080
Speaker 1: two and a half percent a year. That's the strongest

310
00:18:21,119 --> 00:18:25,480
Speaker 1: it's been since the financial crisis. You see people at

311
00:18:25,560 --> 00:18:29,280
Speaker 1: levels of optimism that you know, reached last year that

312
00:18:29,320 --> 00:18:33,320
Speaker 1: we hadn't seen since two thousand four. And there's a

313
00:18:33,359 --> 00:18:40,000
Speaker 1: lot to be optimistic about. What about our entitlement programs

314
00:18:40,040 --> 00:18:44,879
Speaker 1: given gd potential GDP and current GDP growth UM, how

315
00:18:45,160 --> 00:18:47,560
Speaker 1: does what we're facing in terms of just how fast

316
00:18:47,640 --> 00:18:51,880
Speaker 1: economy can expand affect how we should look at those programs. Yeah,

317
00:18:52,400 --> 00:18:56,040
Speaker 1: if you're looking at the budget balance over let's say

318
00:18:56,080 --> 00:18:58,760
Speaker 1: the next twenty five years, the potential growth rate is

319
00:18:58,760 --> 00:19:01,960
Speaker 1: an important variable. The higher that potential growth rate is,

320
00:19:02,359 --> 00:19:06,959
Speaker 1: the better our budget balance um will be. And so

321
00:19:07,040 --> 00:19:09,919
Speaker 1: that's another reason why it's important to be really realistic,

322
00:19:09,960 --> 00:19:13,080
Speaker 1: so you're honestly facing what the challenges are. We have

323
00:19:13,320 --> 00:19:16,760
Speaker 1: a challenge that I would say is you know, a

324
00:19:16,800 --> 00:19:20,560
Speaker 1: moderate challenge. We've done a lot to bring down the

325
00:19:20,640 --> 00:19:24,120
Speaker 1: growth rate of health costs, we have higher tax rates

326
00:19:24,119 --> 00:19:26,679
Speaker 1: on high income households, We've brought down some other forms

327
00:19:26,720 --> 00:19:29,720
Speaker 1: of spending. So the deficit is not as big as

328
00:19:29,720 --> 00:19:34,360
Speaker 1: it looked seven years ago, but certainly, um, we have one.

329
00:19:34,400 --> 00:19:36,840
Speaker 1: And that's in part you know a function of these

330
00:19:36,840 --> 00:19:39,960
Speaker 1: potential growth rates that we've been discussing. I wonder whether

331
00:19:40,000 --> 00:19:43,120
Speaker 1: the worst thing about the nineties, Jason, was that they

332
00:19:43,160 --> 00:19:47,480
Speaker 1: actually happened. You know, the nineties was a great nineties.

333
00:19:47,520 --> 00:19:50,520
Speaker 1: I was born in the nineties were a great decade,

334
00:19:50,800 --> 00:19:54,680
Speaker 1: and part of that was things like the baby boomers

335
00:19:54,720 --> 00:19:59,760
Speaker 1: reaching their peak working years, women still entering the workforce,

336
00:19:59,800 --> 00:20:02,960
Speaker 1: so women's labor force participation rate was rising, and that

337
00:20:03,040 --> 00:20:06,200
Speaker 1: happened at the same time that there was a burst

338
00:20:06,240 --> 00:20:11,199
Speaker 1: of innovation, and all of those things came together. Some

339
00:20:11,320 --> 00:20:14,080
Speaker 1: of those things, like the baby boomers, we're not going

340
00:20:14,119 --> 00:20:17,119
Speaker 1: to get again. But you know, the innovation, there's no

341
00:20:17,200 --> 00:20:20,119
Speaker 1: reason why we can't have another wave of it in

342
00:20:20,119 --> 00:20:23,440
Speaker 1: the future. I just wonder whether it's shaped people's expectations

343
00:20:23,480 --> 00:20:25,960
Speaker 1: of what's acceptable when really what you're saying is it

344
00:20:26,000 --> 00:20:29,520
Speaker 1: was an exceptional time, not a regular time. Yeah, And

345
00:20:29,560 --> 00:20:32,439
Speaker 1: I think that's true of of all of the past decades.

346
00:20:32,440 --> 00:20:35,159
Speaker 1: I mean, you don't want to just look at the

347
00:20:35,200 --> 00:20:37,480
Speaker 1: United States at different times, or frankly, even the United

348
00:20:37,520 --> 00:20:40,640
Speaker 1: States compared to other economies. Whenever I compare our growth

349
00:20:40,760 --> 00:20:42,919
Speaker 1: rate to other countries, I like to look at it

350
00:20:42,960 --> 00:20:46,640
Speaker 1: per working age population, and so Japan has a lower

351
00:20:46,680 --> 00:20:50,160
Speaker 1: working age population growth, so they don't need as higher

352
00:20:50,200 --> 00:20:56,320
Speaker 1: growth rate UM as we have. So um Yes, you

353
00:20:56,320 --> 00:20:58,960
Speaker 1: don't want to just naively compare numbers over different periods.

354
00:20:58,960 --> 00:21:00,919
Speaker 1: You want to make sure you're a sting at the

355
00:21:01,000 --> 00:21:04,600
Speaker 1: very least for demography. Okay, well, before we wrap up,

356
00:21:05,240 --> 00:21:08,679
Speaker 1: I have to do one thing. I'm an economic indicators reporter,

357
00:21:08,760 --> 00:21:11,439
Speaker 1: so I have to know what your favorite economic indicator is.

358
00:21:13,560 --> 00:21:19,280
Speaker 1: I like, um looking, I mean, I hate to say it,

359
00:21:19,359 --> 00:21:22,439
Speaker 1: the Job's report, and the establishment number is the single

360
00:21:22,480 --> 00:21:27,920
Speaker 1: most accurate number every month that payrolls number. The payroll number.

361
00:21:28,359 --> 00:21:31,840
Speaker 1: But in the GDP report, I love looking at what

362
00:21:31,880 --> 00:21:34,720
Speaker 1: we call private domestic final purchases, which is the sum

363
00:21:34,760 --> 00:21:38,080
Speaker 1: of consumption and fixed investment, which I think is the

364
00:21:38,119 --> 00:21:41,120
Speaker 1: most inertial part of GDP and gives you the best

365
00:21:41,160 --> 00:21:44,400
Speaker 1: prediction as to what GDP is going to be going forward.

366
00:21:44,800 --> 00:21:47,920
Speaker 1: All right, that's good to know. I'll write that one down. Well,

367
00:21:47,960 --> 00:21:50,200
Speaker 1: thanks so much for joining us today, Jason. It was

368
00:21:50,240 --> 00:21:53,760
Speaker 1: great to have you. Great talking to you, and thanks

369
00:21:53,800 --> 00:21:55,840
Speaker 1: to you all for listening to Bloomberg Benchmark. We'll be

370
00:21:55,840 --> 00:21:57,960
Speaker 1: back next week and until then you can find us

371
00:21:57,960 --> 00:22:00,600
Speaker 1: on the Bloomberg Terminal and Bloomberg dot Com, as well

372
00:22:00,640 --> 00:22:04,200
Speaker 1: as on iTunes, pocket Cast, Stitcher, and Google Play. While

373
00:22:04,280 --> 00:22:06,199
Speaker 1: you're there, you can take a minute to rate and

374
00:22:06,240 --> 00:22:08,760
Speaker 1: review the show so more listeners can find us and

375
00:22:08,840 --> 00:22:10,600
Speaker 1: do let us know what you thought of the show.

376
00:22:10,960 --> 00:22:14,639
Speaker 1: Our guest Jason is on Twitter at at C chair,

377
00:22:15,040 --> 00:22:17,040
Speaker 1: and you can reach the rest of us at at

378
00:22:17,119 --> 00:22:20,280
Speaker 1: Daniel Mars d C and at Tory Stillwell. See you

379
00:22:20,320 --> 00:22:20,760
Speaker 1: next week.