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Speaker 1: This is a special podcast rebroadcast in the wake of

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Speaker 1: the passing of economist Alan Krueger. Earlier this week, we

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Speaker 1: learned some unfortunate news. Uh. He took his own life,

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Speaker 1: and we were deeply sinned by the loss. I wanted

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Speaker 1: to revisit the interview I did with him in the

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Speaker 1: spring of It was a fascinating conversation. So much has

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Speaker 1: changed since then. Uh, the economy has clearly gotten much better. Uh,

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Speaker 1: we're further away from the financial crisis. But we discussed

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Speaker 1: his background in economics, the Federal Reserve, his research on

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Speaker 1: minimum wage. I was astonished at what a fantastic conversation

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Speaker 1: he was and and just privileged to spend time with

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Speaker 1: Alan and discussing what he knew best, which was economics. So,

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Speaker 1: with no further ado, my conversation with the late great

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Speaker 1: Alan Krueger from the spring of my guest today is

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Speaker 1: a what can I say about Professor Allan Krueger of Princeton.

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Speaker 1: He was the chief Economist for the Treasury Department and

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Speaker 1: Assistant Secretary of of Treasury. He was also Chairman of

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Speaker 1: the Council of Economic Advisors under President Obama. Professor Krueger,

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Speaker 1: welcome to Bloomberg my pleasure. So I didn't want to

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Speaker 1: spend too much time waxing eloquent on your curriculum, Vita.

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Speaker 1: But suffice it to say, you've pretty much won just

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Speaker 1: about every award you can come up with, at least

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Speaker 1: in the United States, UH for economics, and you've had

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Speaker 1: a number of just really incredible UH posts. When both

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Speaker 1: within the government and out in the early nineties, you

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Speaker 1: were chief Economist at the Department of Labor. I was,

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Speaker 1: and and what does the chief economist for um, the

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Speaker 1: Labor Department actually do? That's a good question. Uh. It

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Speaker 1: was a new position. Secretary Rice created it, and I

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Speaker 1: was the second one to hold it. Uh. I was

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Speaker 1: very Who's the first first was my good friend Larry

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Speaker 1: Cats from Harvard. Larry did a brilliant job, and he

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Speaker 1: left very big shoes to fill. I'll give you an example.

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Speaker 1: One of the reasons why Secretary Rice created the job

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Speaker 1: was he wanted to have involvement with the National Economic Council,

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Speaker 1: which was also Clinton innovation. And the way the NBC

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Speaker 1: was set up at that time, Bob Reuben was chairman,

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Speaker 1: and Treasury Omb Labor Commerce were the members. So this

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Speaker 1: was like a think tank, but with the old government

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Speaker 1: representatives who are they would advised the president and the cabinet.

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Speaker 1: It was the place that ran the policy process, and

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Speaker 1: it's different from a think tank because it produced proposals

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Speaker 1: that really mattered and it had a direct connection to

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Speaker 1: the president. So the way that Bob Rubin ran this

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Speaker 1: process was very organized. UH budget went through the NYC process,

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Speaker 1: UM trade issues went through, and ANYC was divided into

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Speaker 1: domestic issues and international issues. Other departments had a separate

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Speaker 1: person who would represent them on domestic and international issues.

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Speaker 1: Larry Katz was so UH skilled that he did both.

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Speaker 1: So I had to fill those issues and do both,

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Speaker 1: which meant being involved in NAFTA as well as UH

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Speaker 1: domestic issues like the minimum wage. So so what were

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Speaker 1: some of the policies that came out of that Economic Council?

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Speaker 1: So NAFTA clearly was a big issue in the nineties.

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Speaker 1: NAFTA was a very big issue the first Clinton budget,

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Speaker 1: which was after UH sorry, before I arrived, which I

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Speaker 1: think put us on a much stronger path in the

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Speaker 1: early nineteen nineties. The one significant domestic policy that did

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Speaker 1: not come from it was healthcare reform, and I think

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Speaker 1: one of the reasons why healthcare reform in that period

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Speaker 1: UH didn't do as well as it should have was

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Speaker 1: because it didn't come through the NBC process, in other words,

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Speaker 1: the way it was formulated with the thought process of

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Speaker 1: what's the impact, what's the cost, what's the benefit? What?

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Speaker 1: What is the thinking behind how some of these policies

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Speaker 1: are developed. Well. Economists have I think, very systematic approach

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Speaker 1: to think about policy. To thinking about policy issues, we

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Speaker 1: think about efficiency, we think about equity, we think about

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Speaker 1: what's gonna user resources most efficiently, and we think about

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Speaker 1: what's fair, and we divide issues quite clearly in that way,

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Speaker 1: and we make trade offs and UM, now it might

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Speaker 1: mean that uh a lot of our proposals are not

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Speaker 1: politically feasible, but I think this is a very coherent framework,

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Speaker 1: and the process that was used for healthcare reform was

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Speaker 1: UM much more at hoc I would say, not nearly systematic.

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Speaker 1: So there's pretty much an ever going trade off between

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Speaker 1: what's optimal and what's politically feasible and what's financially doable.

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Speaker 1: Is that sort of the factors that that get twisted about.

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Speaker 1: Sometimes you hit the sweet spot and good policy is

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Speaker 1: good politics and it's nice when that works out. Other

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Speaker 1: times you have to make compromises between what's politically feasible

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Speaker 1: and what we'll do the most good for the economy.

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Speaker 1: And one of the lessons I learned from having served

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Speaker 1: in the government for five years in my career is that,

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Speaker 1: you know, compromises not such a bad thing as long

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Speaker 1: as compromise leads to better policy, to improvement for the

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Speaker 1: American people. We shouldn't let the best be the enemy

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Speaker 1: of the good. That that's the classic line. So you

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Speaker 1: were at the Labor Department, and the Bureau of Labor

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Speaker 1: Statistics also has a huge group of statisticians, economists, econometric

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Speaker 1: model lers tell for people who may not be quite

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Speaker 1: as wonky as some of us are, tell us what

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Speaker 1: the BLS actually does over the course of any given

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Speaker 1: month or or quarter. The BLS is housed within the

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Speaker 1: Labor Department, but it has a tremendous amount of independence.

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Speaker 1: For example, there's only one employee of the BLS who

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Speaker 1: is a presidential appointee. That's the UM Commissioner. Everyone else

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Speaker 1: is a career civil servant. The Bureau of list Labor Statistics,

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Speaker 1: together with the Census Bureau, conducts the monthly household Survey,

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Speaker 1: the current Population Survey, which produces the unemployment rate. It

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Speaker 1: also does a survey of establishments. Nearly four hundred thousand

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Speaker 1: establishments are interviewed on a monthly basis. And what is

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Speaker 1: amazing to me about the BLS those are its two

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Speaker 1: most important products, although it has many others, is that

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Speaker 1: on an ongoing basis, it collects analysis and releases those

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Speaker 1: data every month. And if you think about one, an

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Speaker 1: enormous effort, that is, and to do it as carefully

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Speaker 1: as they do it is quite impressive. And I think

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Speaker 1: they are given a tremendous amount of respect and they've

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Speaker 1: earned a great deal of credibility because they do it

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Speaker 1: in such a professional way. They collect other data also,

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Speaker 1: I would highlight the Employment Cost Index and I think

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Speaker 1: the employment costs in dex. What exactly is that the

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Speaker 1: e c I Employment Cost Index is a measure of

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Speaker 1: how much it is costing for employers to pay pay

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Speaker 1: their workers, and it includes not only wages, but also

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Speaker 1: health insurance benefits, pension benefits, vacation time. It's calculated very

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Speaker 1: much like the Consumer Price Index in that the BLS

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Speaker 1: goes back to the same companies quarter after quarter, looks

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Speaker 1: at the same jobs and looks at what's happening to

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Speaker 1: compensation costs within those very narrow categories. We left will

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Speaker 1: earlier talking about UM the Economic Council as chairman of

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Speaker 1: the President's Economic Advisors, that's also part of that council.

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Speaker 1: Is that? Is that correct? That's right? The chairman of

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Speaker 1: the c e A place an important role within the

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Speaker 1: National Economic Council. So I think people are aware of,

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Speaker 1: UM what the c e A is. They know they're

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Speaker 1: the you as the chairperson is the advisor to the president.

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Speaker 1: But I don't think people have a clue as to

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Speaker 1: how that works either within the White House. Are you

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Speaker 1: guys proactively suggesting policy? Is the President coming to the

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Speaker 1: Council and saying, hey have a question about this, uh,

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Speaker 1: this minimum wage issue? What does it mean if we

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Speaker 1: raise the minimum How does that work? What's the back

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Speaker 1: and forth with that? It works in both directions. There

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Speaker 1: are instances where the Council of Economic Advisors would make proposals,

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Speaker 1: typically within the NBC process, where they get vetted and

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Speaker 1: reviewed UH and other relevant departments would add to the

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Speaker 1: analysis and help put together their proposal. UH. And then

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Speaker 1: there are other times where the president says, Look, go

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Speaker 1: back to the drawing board, come up with more suggestions

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Speaker 1: in this area, or uh, you know. The way I

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Speaker 1: think about education is like this, Here's what I think

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Speaker 1: you should develop a proposal on. So it works in

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Speaker 1: both directions. So I was I mentioned the minimum wage

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Speaker 1: earlier and and you have an expertise in not only UH,

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Speaker 1: labor economics, but you've studied the minimum wage extensively. Let's

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Speaker 1: let's start out with Walmart in February, and then a

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Speaker 1: month later it was Target and t J Max. And

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Speaker 1: then after that McDonald's just announced an increase in in

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Speaker 1: their low wage workers too up the minimum wage. In fact,

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Speaker 1: they want to pay a dollar above the minimum wage.

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Speaker 1: What does this say about the economy today? What does

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Speaker 1: it say about where we are in the economic cycle?

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Speaker 1: I think it says a couple of things. First of all,

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Speaker 1: when it comes to the labor market, the invisible hand

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Speaker 1: doesn't always work perfectly. Sometimes the invisible hand needs a

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Speaker 1: little bit of help. In the past, when we're in

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Speaker 1: a situation like we are today, where the economy is

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Speaker 1: getting stronger, the job market is clearly tightening, a minimum

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Speaker 1: wage increase helped the labor market to clear, and what

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Speaker 1: we're seeing from companies like McDonald's and from Walmart is

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Speaker 1: they are stepping in and they're raising their wages across

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Speaker 1: the board. They are stepping into set a minimum wage,

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Speaker 1: imposing on themselves. That's not only market forces, that's also

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Speaker 1: I think a reflection of the fact that the labor

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Speaker 1: market is a social entity and worker morale is important.

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Speaker 1: I think these companies will find that when they raise

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Speaker 1: when they raise wages, they're going to get greater productivity

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Speaker 1: from the workers, will have lower turnover. Uh. So I

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Speaker 1: think we're in a situation in the economy now where

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Speaker 1: things are getting tight enough that companies are raising wages,

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Speaker 1: and I think they're doing it in a very interesting way,

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Speaker 1: which is imposing a floor on themselves, which highlights the

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Speaker 1: way the job market works, which is uh, social factors

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Speaker 1: have a role to play in the job market. So

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Speaker 1: there are a couple of interesting things with both Walmart

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Speaker 1: and McDonald's. Um With Walmart, the data was that two

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Speaker 1: thirds of the are employees already working states that have

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Speaker 1: a significantly higher minimum wage than the federal government, so

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Speaker 1: this only affected a third of their employees. And with

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Speaker 1: McDonald's it was only a company owned stores, which are

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Speaker 1: of their all the McDonald's in the country, there's there's

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Speaker 1: almost fifteen thousand McDonald's restaurants are are company owned, and

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Speaker 1: so of the stores, and assuming the math holds up,

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Speaker 1: the employees are not necessarily affected by this company owned mandate.

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Speaker 1: So how significant is what these companies are doing? Does

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Speaker 1: it vitiate the need for the minimum wage, which is

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Speaker 1: still at seven in a quarter and has seemingly been

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Speaker 1: there for decades for there to be an increase in

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Speaker 1: the minimum wage? And then we'll discuss what does raising

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Speaker 1: the minimum wage due to the economy. I think what

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Speaker 1: these companies have done is an important step. I think

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Speaker 1: it's an important symbol. McDonald's, for example, cannot dictate wages

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Speaker 1: to their franchise e's. Uh, there're separate businesses in the

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Speaker 1: legal sense, So the same way that they can't dictate prices.

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Speaker 1: They always say at participating franchisees, it's the same thing. Now.

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Speaker 1: I hope that many of the franchises follow suit. And

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Speaker 1: do we do we have any history what happens when

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Speaker 1: McDonald's does this do Obviously not every franchise, but you

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Speaker 1: would assume that this sort of leadership is going to

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Speaker 1: drive a little more action amongst the non company owned stores.

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Speaker 1: We don't really have much experience with this. H This

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Speaker 1: is an unusual step that they've done. I hope it

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Speaker 1: does drive action with franchises. Uh, but it also highlights

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Speaker 1: the need for the federal minimum wage to increase. That

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Speaker 1: was my My next question is, so what would happen

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Speaker 1: if the Feds took the minimum wage up to you know,

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Speaker 1: I've seen three numbers get bantied about, and they're all

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Speaker 1: kind of interesting. At ten dollars an hour, it's a

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Speaker 1: significant increase in the states that haven't read, is the

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Speaker 1: minimum wage at twelve dollars an hour? Essentially you get

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Speaker 1: the inflation adjusted number from pick your point sixty eight,

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Speaker 1: seventy two, whatever it is, and then fifteen dollars an

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Speaker 1: hour takes a full time person working forty hours a

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Speaker 1: week and pretty much gets them up to a level.

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Speaker 1: And we could talk about Walmart as well as the

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Speaker 1: fast food industry where they're no longer dependent on state

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Speaker 1: and federal aid. I think doubling or more than doubling

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Speaker 1: the minimum wage, it's a big step at once for

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Speaker 1: companies to absorb what we've seen in the past if

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Speaker 1: the minimum wage went up to the equivalent of ten

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Speaker 1: dollars an hour, that's something that companies mostly can absorb.

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Speaker 1: And in the past when states have raised their minimum

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Speaker 1: wage to that level, after adjusting for inflation, we haven't

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Speaker 1: seen job losses. In fact, what we've seen is that

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Speaker 1: employees have more money in their pockets than they spend

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Speaker 1: that money in That tends to help the economy over

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Speaker 1: and it's a modest increase in minimum wage or at

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Speaker 1: least keeping up with inflation, isn't a job killer, because

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Speaker 1: that's always the issue. Right. People always say there was

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Speaker 1: a great study done where there was a change at

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Speaker 1: a border I think was New Jersey and Pennsylvania, and

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Speaker 1: on one side of the border the minimum wage went up,

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Speaker 1: and a mile across the border there was another one.

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Speaker 1: Describe what happened there, Well, that was the study I

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Speaker 1: did in the early nineteen nineties with my colleague David

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Speaker 1: cart and to our surprise, I thought we were going

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Speaker 1: to find that when New Jersey raised its minimum wage,

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Speaker 1: the fast food restaurants would have grown more slowly, fewer

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Speaker 1: of them would have opened, and in fact we saw

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Speaker 1: the opposite. They grew at least as much probably a

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Speaker 1: little bit more than the fast food restaurants on the

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Speaker 1: other side of the border. And we also found if

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Speaker 1: you look within the state, within New Jersey, the areas

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Speaker 1: of the state where the minimum wage was already above

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Speaker 1: the new minimum uh and wages didn't rise. Uh, they

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Speaker 1: didn't grow as quickly as the parts of the state

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Speaker 1: where wages were low and wages were boosted by the

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Speaker 1: minimum wage. And I should add Barry that that was study.

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Speaker 1: I think that study was a turning point in research

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Speaker 1: on the minimum wage. Most of the subsequent studies have

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Speaker 1: reached the same conclusion. And there's been some work, very

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Speaker 1: careful work looking across count knees using government reported data

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Speaker 1: from government tax records, for example, which tends to find

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Speaker 1: the exact same result, UH that at modest levels, the

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Speaker 1: kinds of levels that we've historically seen in the United States,

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Speaker 1: minimum wage increases do not have an adverse effect unemployment.

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Speaker 1: Let's talk a little bit about the Federal Reserve. What

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Speaker 1: started in the weeks before we recorded this was former

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Speaker 1: Federal Reserve Chairman Ben Bernanke launched a blog, Go figure

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Speaker 1: the Fed Chairman is blogging and kind of got into

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Speaker 1: this epic debate with Lauren Summers, Secretary of the Treasury

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Speaker 1: in the first Obama White House, about the concept of

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Speaker 1: secular stagnation. So, so let's talk about all this stuff. First,

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Speaker 1: what do you think about the FED chief blogging. I

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Speaker 1: think it's terrific that Ben Bernanke has started a blog. Um,

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Speaker 1: he has I think quite a bit to add to

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Speaker 1: the public debate on these issues. Ben was a colleague

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Speaker 1: of mine at Princeton for two decades. I learned a

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Speaker 1: tremendous amount from him at the university. I worked with

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Speaker 1: him when he was chairman of the FED. So I

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Speaker 1: look forward to reading what he has to say. So

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Speaker 1: and that Princeton Economics department, mur Nankee, Krueger, Krugman, who else?

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Speaker 1: Who else is in that department? Alan Binder Blind. I mean,

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Speaker 1: that's like the you know, the murders row on the

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Speaker 1: Yankees back in the in the old days. So let's

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Speaker 1: talk secular stagnation. Larry Summer's thesis, and it's been Bill

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Speaker 1: Gross the new normal, and a lot of people have

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Speaker 1: said this is, Hey, We've come off a multi decade

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Speaker 1: period of growth and expansion and now post crisis, it's

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Speaker 1: gonna be ugly for decades. What do you say about that.

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Speaker 1: I'm skeptical of of that view. I think the US

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Speaker 1: economy historically has managed to grow against a lot of obstacles.

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Speaker 1: I think that will happen again. I think the financial

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Speaker 1: crisis did have a last effect. On the other hand,

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Speaker 1: I put a lot of confidence in the ingenuity of

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Speaker 1: American entrepreneurs. You know, the sensation I always had coming

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Speaker 1: out of the financial crisis that was very nineteen seventies.

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Speaker 1: Like I was a teenager in the seventies and I

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Speaker 1: just the word malaise really sums it up. And people

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Speaker 1: in the seventies thought America was over. They never regained

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Speaker 1: their mojo. And then the next thing, you know, the

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Speaker 1: eighties hit and everything from technology to semiconductors to the

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Speaker 1: Internet to mobile the universe exploded. And and that it's

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Speaker 1: always been a bad bet, says my pal Lowry Cudlow.

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Speaker 1: Betting against America? Is that a Is that a fair statement?

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Speaker 1: I think that's absolutely right. I mean, if you go

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Speaker 1: back UH to uh the end of World War Two,

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Speaker 1: there were economists who thought exactly what you just said,

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Speaker 1: that malays would set in. Even Paul Samuelis and thought

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Speaker 1: we would slip back to a recession, and then others said,

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Speaker 1: you know what, we've got very creative entrepreneur oars, they'll

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Speaker 1: figure out new products. There was a lot of pent

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Speaker 1: up demand coming out of the war. Then immigration helped

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Speaker 1: to fuel the US economy, and I think those forces

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Speaker 1: can can work again. And you know, you go look

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Speaker 1: at the equity markets from y six to nineteen sixty six.

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Speaker 1: That's an epic bull market. That's a huge run, only

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Speaker 1: surpassed by the next malaise at two to two thousand,

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Speaker 1: another epic bull market. So let's turn our attention now

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Speaker 1: to interest rates. Rates are low, they seem to be

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Speaker 1: going lower. They're low around the world. Germany's interest rates

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Speaker 1: are now below Japan's interest rates. If you want to

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Speaker 1: buy bonds um from the Swiss, they will charge you

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Speaker 1: for the privilege. It's a negative interest rate. We've never

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Speaker 1: really seen an environment where rates are this low, and

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Speaker 1: what does that mean about the economy and what does

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Speaker 1: it say to us about the impact of central banks.

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Speaker 1: This has been an extraordinary period. There's no question. It's

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Speaker 1: hard to believe there aren't sufficient investments that could be

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Speaker 1: taken by private companies or by the government at such

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Speaker 1: low interest rates. That that they would make a lot

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Speaker 1: of sense. I think we're seeing some big imbalances in

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Speaker 1: the world economy. Uh. This is a point that Ben

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Speaker 1: Bernanke made about the global savings squat, where we have

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Speaker 1: countries which are running up very big current accounts surpluses

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Speaker 1: and that's depressing interest rates. Uh. But I think if

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Speaker 1: you look at countries like say China, there's tremendous amount

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Speaker 1: of scope for them to increase their domestic consumption. I

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Speaker 1: think as they slow and I think here Larry Summers

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Speaker 1: has done very good work predicting a slowdown in growth

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Speaker 1: rates in in China. Uh. I think they're going to

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Speaker 1: turn more towards domestic consumption to continue to keep people happy,

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Speaker 1: to make them feel like their situation is improving. I've

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Speaker 1: heard the complaint that, oh, it's the Federal Reserve that

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Speaker 1: has driven rates so low around the world. How do

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Speaker 1: you respond to that. The Federal Reserve has carried out

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Speaker 1: its dual mandate extremely well. It has a dual mandate

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Speaker 1: to try to create maximum employment and stable prices um

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Speaker 1: full so create jobs and reduce inflation and keep inflation

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Speaker 1: steady and shooting for around two percent. It's not too

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Speaker 1: far off of that in the grand scheme of things. So,

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Speaker 1: I think the Federal Reserve has helped the economy tremendously

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Speaker 1: over the past five years. I think we're in a

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Speaker 1: much stronger position than say, Europe because of the actions

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Speaker 1: are are central back has taken. You have a background

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Speaker 1: in labor economics. You've done a lot of studies, a

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Speaker 1: lot of really interesting things UM with labor. So let's

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Speaker 1: talk a little bit about the labor force this whole recovery.

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Speaker 1: One of the things we hear all the time is, Gee,

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Speaker 1: there's a lot of slack in the labor force. What

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Speaker 1: does that mean for a lay person? Slack means that

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Speaker 1: we're not using all the resources that we can be using.

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Speaker 1: And the implication of slack is that it put downward

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Speaker 1: pressure on ages, which would then put downward pressure on inflation.

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Speaker 1: Are we coming to the end of the slack period

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Speaker 1: of of the cycle for for labor? Is that the

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Speaker 1: positive reading this? I think we are. I think what

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Speaker 1: we've seen with the decline in labor force participation is

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Speaker 1: what you would expect giving the aging of the workforce,

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Speaker 1: Given that women's labor force participation peaked in the early

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Speaker 1: two thousands, UM and given that we had so many

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Speaker 1: long term unemployed, it's the natural evolution of the job

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Speaker 1: market that they exit the labor force, and that's what's

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Speaker 1: been taking place. So so let's describe this. When when

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Speaker 1: we look at the population, you have the total civilian

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Speaker 1: population in the United States is three hundred and ten

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Speaker 1: or so million people. We then have a labor force

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Speaker 1: all the people who were either working or essentially looking

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Speaker 1: for work at a hundred and fifty five or so,

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Speaker 1: where are we Bullpark hundred fifty five million, And then

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Speaker 1: you have people who are leaving the labor force. They

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Speaker 1: basically said either they're retiring or they just kind of

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Speaker 1: give up on looking for a job. And people have

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Speaker 1: been making a big deal about the declining participation right

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Speaker 1: in the labor force. If I'm hearing you correctly, you're

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Speaker 1: saying some of this is a function of just the

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Speaker 1: aging of the baby boomers. You have sixty people a

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Speaker 1: day retiring, and some of them is just the peak

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Speaker 1: participation of women. Explained that a little bit. What had

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Speaker 1: been fueling our rise in labor force participation from the

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Speaker 1: nineteen fifties up until two thousand was more and more

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Speaker 1: women joined the labor force that reached a peak in

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Speaker 1: two thousand. The puzzle y labor force participation has since declined.

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Speaker 1: For women, it declined in the last recovery, so this

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Speaker 1: is not new in the current recovery, and it's declined

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Speaker 1: an approach pretty broad base, well educated women as well

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Speaker 1: as less educated women, women with children, women who were

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Speaker 1: not married and don't have children. So it's been a

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Speaker 1: pretty ubiquitous phenomenon and that had been fueling the rides

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Speaker 1: in labor force participation, and now we're starting to see

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Speaker 1: a little bit of a reversal of that. We've seen

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Speaker 1: a little bit of a reversal over the last decade.

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Speaker 1: So more recently, the labor force participation rates seemed to

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Speaker 1: stop falling and actually started to increase. Is this just

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Speaker 1: a little noise in the data series, or or perhaps

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Speaker 1: we're seeing that drop come to a halt. I think

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Speaker 1: that's noise. I think at best we could say labor

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Speaker 1: for its participation is stabilized. Maybe some of the young

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Speaker 1: people who left the labor force to go back to

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Speaker 1: school are coming back. I think that's a positive sign.

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Speaker 1: But that's against the backdrop, as you said, of increasing

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Speaker 1: number of baby boomers reaching the retirement age and retiring.

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Speaker 1: So we've been talking a little bit about baby boomers,

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Speaker 1: and we've been talking about that post War War two era.

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Speaker 1: Let's talk a bit about the middle class, which, based

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Speaker 1: on what we've seen recently, almost appears to be a

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Speaker 1: post War War two phenomena. Following World War Two, yet

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Speaker 1: everybody come back. You had all these UH servicemen come

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Speaker 1: back on the g I Bill, and it seemed we

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Speaker 1: had this giant, multi decade boom and the middle class

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Speaker 1: just exploded in terms of size and wealth, and that

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Speaker 1: seems to be unwinding. What's really going on with the

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Speaker 1: middle class these days. The middle class has been under

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Speaker 1: a lot of pressure, and we've seen the middle class shrink.

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Speaker 1: I think that's unhealthy for the economy. I think it's

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Speaker 1: it's one of the reasons why we are facing problems

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Speaker 1: when it comes to aggregate demand, because the middle class

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Speaker 1: tends to spend their income unlike very high income people

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Speaker 1: who have a higher savings rate. And I think it's

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Speaker 1: bad for the country because I think our country works

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Speaker 1: better when we have a broad middle with a common interest.

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Speaker 1: So when we look at the people who are doing

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Speaker 1: best in the country, the top one percent has done

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Speaker 1: really well. Top ten percent has done pretty well. But

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Speaker 1: when we take the top one percent of the top

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Speaker 1: one percent, the point oh one percent, they've done phenomenally well.

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Speaker 1: What what is behind that? Friends? They've done well in

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Speaker 1: part because uh, there are people there have come up

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Speaker 1: with new products, very innovative people. In part because there

432
00:25:11,200 --> 00:25:14,440
Speaker 1: are people who inherited wealth, and increasingly that top tenth

433
00:25:14,520 --> 00:25:16,800
Speaker 1: of one percent are going to be those who inherited

434
00:25:16,800 --> 00:25:21,000
Speaker 1: their wealth as opposed to those who were successful entrepreneurs.

435
00:25:21,040 --> 00:25:24,280
Speaker 1: But also we've seen enormous changes in the bottom nine.

436
00:25:25,000 --> 00:25:28,040
Speaker 1: You know, if you look along education lines, Uh, I

437
00:25:28,080 --> 00:25:31,159
Speaker 1: find the following calculation quite revealing. If you took the

438
00:25:31,200 --> 00:25:33,160
Speaker 1: top one percent and said we're going to keep their

439
00:25:33,280 --> 00:25:35,800
Speaker 1: income at the same shares as it was nineteen seventy

440
00:25:35,880 --> 00:25:40,320
Speaker 1: nine and redistributed that to the bottom nine, if one could, uh,

441
00:25:40,359 --> 00:25:43,160
Speaker 1: that would raise the average families income by about seven

442
00:25:43,160 --> 00:25:47,080
Speaker 1: thousand dollars a year. But if you then compare a

443
00:25:47,160 --> 00:25:50,439
Speaker 1: family where you have a household headed by a college

444
00:25:50,440 --> 00:25:53,320
Speaker 1: graduate versus a household headed by a high school graduate,

445
00:25:53,760 --> 00:25:57,480
Speaker 1: the difference in their earnings since nineteen seventy nine has

446
00:25:57,600 --> 00:26:00,240
Speaker 1: increased by twenty three thousand dollars over three time times

447
00:26:00,240 --> 00:26:03,080
Speaker 1: as much. So it's not only the top one percent

448
00:26:03,160 --> 00:26:06,440
Speaker 1: that's causing the shifts and inequality that we're seeing and

449
00:26:06,480 --> 00:26:08,879
Speaker 1: putting pressure on the middle class. You know. One of

450
00:26:08,880 --> 00:26:12,000
Speaker 1: the fascinating stats I saw related to that was the

451
00:26:12,119 --> 00:26:15,639
Speaker 1: unemployment rate amongst people with college degrees, and then the

452
00:26:15,720 --> 00:26:20,840
Speaker 1: unemployment rate amongst people with graduate degrees or science, technology, engineering,

453
00:26:20,840 --> 00:26:25,000
Speaker 1: and mathematics degrees. It was low, low single digits. Even

454
00:26:25,040 --> 00:26:27,720
Speaker 1: when the unemployment rate was eight nine percent, it was

455
00:26:27,920 --> 00:26:32,040
Speaker 1: in the Two's quite amazing that there's such a strong

456
00:26:32,080 --> 00:26:37,360
Speaker 1: demand for those sort of employees. Increasingly, the US economy

457
00:26:37,440 --> 00:26:40,000
Speaker 1: has been demanding workers with higher levels of skills, and

458
00:26:40,040 --> 00:26:43,720
Speaker 1: you see that really throughout the distribution, not just graduate degrees,

459
00:26:43,760 --> 00:26:47,120
Speaker 1: but if you compare people who have skills in manufacturing

460
00:26:47,160 --> 00:26:50,960
Speaker 1: skills and welding, they're doing better than people who have, uh,

461
00:26:51,000 --> 00:26:53,520
Speaker 1: just a high school degree and not a specific training

462
00:26:53,520 --> 00:26:56,680
Speaker 1: in an area BLS. One of the things we talked

463
00:26:56,680 --> 00:26:58,960
Speaker 1: a little bit about the Bureau of Labor Statistics earlier.

464
00:26:59,800 --> 00:27:02,000
Speaker 1: I found that any time I had a question about

465
00:27:02,000 --> 00:27:04,520
Speaker 1: a report or anything that came out, I had the

466
00:27:04,560 --> 00:27:06,760
Speaker 1: ability to pick up the phone and actually get that

467
00:27:06,840 --> 00:27:09,919
Speaker 1: economist on the phone who would walk me through what

468
00:27:10,119 --> 00:27:13,600
Speaker 1: they did. Is this pretty standard operating procedure there? I

469
00:27:13,680 --> 00:27:17,520
Speaker 1: was astonished by that. BLS is a very transparent organization.

470
00:27:17,680 --> 00:27:20,119
Speaker 1: They're there to help. They want people to understand what

471
00:27:20,160 --> 00:27:22,199
Speaker 1: it is that they're doing. They don't want people to

472
00:27:22,240 --> 00:27:25,239
Speaker 1: misinterpret their data, so they're very open in that. In

473
00:27:25,240 --> 00:27:28,520
Speaker 1: that way, what is it like producing the sort of

474
00:27:28,640 --> 00:27:32,760
Speaker 1: data they crank out every month? How many economists and

475
00:27:32,760 --> 00:27:37,400
Speaker 1: statisticians work there? And what is the process like creating

476
00:27:37,440 --> 00:27:41,520
Speaker 1: those models? Well, it's more data than models, you know,

477
00:27:41,560 --> 00:27:46,520
Speaker 1: it's really more Uh, interviewing households, interviewing businesses for the

478
00:27:47,440 --> 00:27:51,239
Speaker 1: unemployment report, the Census Bureau on the behalf of the

479
00:27:51,240 --> 00:27:55,440
Speaker 1: BLS goes door to door to over fifty households. That's

480
00:27:55,480 --> 00:27:57,919
Speaker 1: every month, every month. Now, they don't go door to

481
00:27:57,960 --> 00:27:59,600
Speaker 1: door every month. They go door to door the first

482
00:27:59,600 --> 00:28:01,679
Speaker 1: time they interview them. Then they say next month is

483
00:28:01,720 --> 00:28:05,400
Speaker 1: it okay? We call you. But on a rotating basis,

484
00:28:05,440 --> 00:28:09,760
Speaker 1: they're interviewing over fifty households a month, giving them a

485
00:28:09,760 --> 00:28:14,640
Speaker 1: short questionnaire, and then they're processing the data h screening

486
00:28:14,640 --> 00:28:20,280
Speaker 1: out mistakes. Uh uh. If somebody misreported their income, for example,

487
00:28:21,119 --> 00:28:25,840
Speaker 1: and then producing the unemployment rate and related statistics. This

488
00:28:25,920 --> 00:28:30,320
Speaker 1: is all done by career employees. Uh. They don't inform

489
00:28:30,600 --> 00:28:35,439
Speaker 1: the administration about the results until the night before the

490
00:28:35,520 --> 00:28:37,600
Speaker 1: data are released to the public. So the so the

491
00:28:37,640 --> 00:28:42,640
Speaker 1: President gets a phone call, Hey, tomorrow's nonfon payroll. He

492
00:28:42,760 --> 00:28:45,880
Speaker 1: finds that out twelve hours before everybody else. The President

493
00:28:46,560 --> 00:28:48,440
Speaker 1: receives a visit from the Chairman of the Council of

494
00:28:48,480 --> 00:28:53,880
Speaker 1: Economic Advisors with a memo in hand describing what the

495
00:28:53,880 --> 00:28:56,280
Speaker 1: next day's report will be. The Chairman of the Federal

496
00:28:56,320 --> 00:29:02,040
Speaker 1: Reserve receives a one page sheet called the Chairman's Data

497
00:29:02,120 --> 00:29:04,160
Speaker 1: Sheet with some of the key statistics that are going

498
00:29:04,200 --> 00:29:06,840
Speaker 1: to come out the next day, also provided by the

499
00:29:06,920 --> 00:29:09,320
Speaker 1: Chairman of the Council of Economic Advisors, as does the

500
00:29:09,400 --> 00:29:12,640
Speaker 1: Treasury Secretary. So I picture someone with the briefcase that's

501
00:29:12,680 --> 00:29:16,920
Speaker 1: handcuffed to the the the secret agent walking into the

502
00:29:16,920 --> 00:29:19,560
Speaker 1: Federal Reserve, walking into the White House. It's really not

503
00:29:19,760 --> 00:29:23,560
Speaker 1: that cloaken dagger, is it. Well, it's a secure facts,

504
00:29:24,040 --> 00:29:27,920
Speaker 1: a secure facts. Oh that's fascinating and um, one of

505
00:29:27,960 --> 00:29:32,880
Speaker 1: the things I found fascinating about the BLS was about

506
00:29:32,920 --> 00:29:36,000
Speaker 1: ten years ago, maybe a little longer, they changed the

507
00:29:36,120 --> 00:29:39,320
Speaker 1: birth death model and this caused all sorts of of

508
00:29:39,760 --> 00:29:44,959
Speaker 1: mayhem amongst the tinfoil hat types for people who aren't

509
00:29:45,240 --> 00:29:48,880
Speaker 1: economic wanks. What is the birth death adjustment? Well, this

510
00:29:48,960 --> 00:29:51,600
Speaker 1: is really inside baseball, But in the establishment survey that

511
00:29:51,640 --> 00:29:54,560
Speaker 1: the BLS does every month, they don't do a very

512
00:29:54,600 --> 00:29:59,720
Speaker 1: good job bringing in new companies. Where the company has failed,

513
00:30:00,080 --> 00:30:02,120
Speaker 1: they don't know for sure that it failed. Maybe it

514
00:30:02,200 --> 00:30:05,080
Speaker 1: just failed to respond. It doesn't mean necessarily it's kind

515
00:30:05,080 --> 00:30:08,120
Speaker 1: of out of business. So to adjust for the births

516
00:30:08,120 --> 00:30:11,480
Speaker 1: and the deaths, they have an additive factor. Could be positive,

517
00:30:11,560 --> 00:30:15,360
Speaker 1: could be negative, And that's based on information that's coming

518
00:30:15,400 --> 00:30:17,840
Speaker 1: in from payroll tax records, where the b l as

519
00:30:17,880 --> 00:30:20,560
Speaker 1: could judge how far off it's been in recent months

520
00:30:20,560 --> 00:30:23,400
Speaker 1: and use that to make an adjustment. I think the

521
00:30:23,560 --> 00:30:26,360
Speaker 1: outside world tends to focus a lot on the birth

522
00:30:26,440 --> 00:30:32,320
Speaker 1: death model as opposed to uh, the data that's coming

523
00:30:32,360 --> 00:30:35,200
Speaker 1: in and the data that's coming in from the establishments

524
00:30:35,240 --> 00:30:37,880
Speaker 1: are really much more important than the birth death adjustment.

525
00:30:38,760 --> 00:30:41,120
Speaker 1: We had terrible news this week with the passing of

526
00:30:41,160 --> 00:30:44,320
Speaker 1: the great economist Alan Krueger. It was my privilege of

527
00:30:44,360 --> 00:30:47,640
Speaker 1: speaking with him in the spring of and this is

528
00:30:47,680 --> 00:30:50,560
Speaker 1: a continuation of that conversation when we get more in

529
00:30:50,640 --> 00:30:55,120
Speaker 1: depth and get into the weeds about economics, the Federal Reserve,

530
00:30:55,640 --> 00:31:00,560
Speaker 1: and the labor markets. My guest today Professor Alan Krueger,

531
00:31:00,880 --> 00:31:05,600
Speaker 1: not Krugman, not Alan Blinder, Professor Alan Krueger. People get

532
00:31:05,600 --> 00:31:07,600
Speaker 1: that wrong all the time, don't they all the time?

533
00:31:07,760 --> 00:31:10,880
Speaker 1: Krugman and I we get each other's mail. True story

534
00:31:11,480 --> 00:31:14,719
Speaker 1: about ten years ago. I my office was three Park Avenue.

535
00:31:15,160 --> 00:31:16,920
Speaker 1: I have a cousin with the same name as me,

536
00:31:17,040 --> 00:31:20,280
Speaker 1: Barry Riddoltz. He's a lawyer. He was working for Golden

537
00:31:20,280 --> 00:31:22,960
Speaker 1: Tree Mutual Funds. There's no tea at the end of

538
00:31:22,960 --> 00:31:25,640
Speaker 1: his name, so he's O l Z. And we're in

539
00:31:25,680 --> 00:31:27,440
Speaker 1: the same building. We would get each other's male. What

540
00:31:27,480 --> 00:31:29,800
Speaker 1: are the odds that someone with the same name and

541
00:31:29,800 --> 00:31:33,080
Speaker 1: it's not, you know, if you're John Smith, statistically right.

542
00:31:33,520 --> 00:31:36,360
Speaker 1: But it was just always always sort of sort of fun.

543
00:31:36,480 --> 00:31:39,720
Speaker 1: So Krueger, not Kruegman. Um, I have so many other

544
00:31:39,760 --> 00:31:41,200
Speaker 1: things I want to I want to talk to you

545
00:31:41,240 --> 00:31:44,560
Speaker 1: about before we have to send you on on your way.

546
00:31:45,520 --> 00:31:47,960
Speaker 1: We talked a lot of a lot of misconceptions, a

547
00:31:47,960 --> 00:31:50,440
Speaker 1: lot of heras people have what what do you think

548
00:31:50,520 --> 00:31:54,080
Speaker 1: about economics or the BLS data or whatever. What do

549
00:31:54,120 --> 00:32:00,640
Speaker 1: you think is the biggest misconception about economics out there? Well,

550
00:32:00,960 --> 00:32:02,920
Speaker 1: I don't know if it's a misconception. There's kind of

551
00:32:03,120 --> 00:32:07,680
Speaker 1: uh paranoia that the BLS is a tool of the

552
00:32:07,720 --> 00:32:12,040
Speaker 1: administration and is pressured to come up with uh particular results.

553
00:32:12,960 --> 00:32:17,160
Speaker 1: And you know former I'll say this, former g E

554
00:32:17,240 --> 00:32:24,120
Speaker 1: CEO Jack Welsh, Right before the November twenty twelve election,

555
00:32:24,680 --> 00:32:29,200
Speaker 1: there was a fairly decent employment number, and he infamously

556
00:32:29,240 --> 00:32:32,320
Speaker 1: tweeted out, Hey, those Chicago guys will do anything to

557
00:32:32,360 --> 00:32:35,720
Speaker 1: win election. They doctored these numbers and and people were

558
00:32:35,800 --> 00:32:40,400
Speaker 1: really astonished about it. He ultimately ended up getting pissy

559
00:32:40,480 --> 00:32:44,880
Speaker 1: with fortune quitting, storming off, how often do you run

560
00:32:44,920 --> 00:32:50,680
Speaker 1: into Oh, the president is manipulating these numbers? What was

561
00:32:50,760 --> 00:32:53,400
Speaker 1: unusual about that episode? And I remember it very well.

562
00:32:53,480 --> 00:32:58,600
Speaker 1: It was October of two thousand twelve. The unaployment rate

563
00:32:58,640 --> 00:33:02,000
Speaker 1: fell from eight point one to say, and he's not

564
00:33:02,080 --> 00:33:06,720
Speaker 1: a giant drop, a fairly a healthy full, but not

565
00:33:06,840 --> 00:33:11,880
Speaker 1: anything ridiculous, So certainly not unprecedented. Look at it with hindsight.

566
00:33:12,240 --> 00:33:14,320
Speaker 1: Is now five and a half percent. We were clearly

567
00:33:14,360 --> 00:33:16,640
Speaker 1: on a path then when the economy was getting better

568
00:33:16,680 --> 00:33:21,040
Speaker 1: and he was denying it um and I was asked

569
00:33:21,040 --> 00:33:23,600
Speaker 1: to respond to what he said, and I'll I said

570
00:33:23,640 --> 00:33:26,840
Speaker 1: then what I'll say today. No serious person doubts the

571
00:33:26,840 --> 00:33:30,440
Speaker 1: credibility of the Bureau of Labor Statistics. That it's it's

572
00:33:30,440 --> 00:33:34,560
Speaker 1: a civil sermon group. It's not political appointees. Only one

573
00:33:34,680 --> 00:33:38,920
Speaker 1: person BLS is a presidential appointee that earlier, the commissioner,

574
00:33:39,320 --> 00:33:45,920
Speaker 1: and all these people are just lifetime economist, statisticians and others. Look,

575
00:33:46,000 --> 00:33:50,080
Speaker 1: the numbers may not be perfect, but it's not some

576
00:33:50,320 --> 00:33:55,400
Speaker 1: grand the president is telling them. Now, we've to be fair.

577
00:33:56,000 --> 00:33:59,320
Speaker 1: We've seen massive changes in the way things are done

578
00:33:59,440 --> 00:34:02,480
Speaker 1: that have had a tendency to have an upward bias.

579
00:34:02,960 --> 00:34:07,400
Speaker 1: We we talk about the civilian labor force. When you

580
00:34:07,520 --> 00:34:09,440
Speaker 1: had a chain was it, I don't remember if it

581
00:34:09,480 --> 00:34:12,879
Speaker 1: was Korean War or Vietnam vietnamee War. Somebody changed how

582
00:34:12,880 --> 00:34:16,000
Speaker 1: that was counted to not include military and it had

583
00:34:16,040 --> 00:34:19,359
Speaker 1: a beneficial effect. There have been tweaks like that. Look,

584
00:34:19,360 --> 00:34:21,919
Speaker 1: when the Beer of Labor Statistics makes changes, it does

585
00:34:21,960 --> 00:34:24,800
Speaker 1: it in a very deliberate fashion, usually with an outside

586
00:34:24,840 --> 00:34:29,160
Speaker 1: group giving it advice. It made a major change when

587
00:34:29,160 --> 00:34:33,560
Speaker 1: it redesigned the survey, which probably raised the measured unemployment rate.

588
00:34:34,160 --> 00:34:38,080
Speaker 1: So uh, it certainly makes changes to try to keep

589
00:34:38,120 --> 00:34:40,160
Speaker 1: up with changes that are going on in the economy

590
00:34:40,320 --> 00:34:42,960
Speaker 1: or to improve its measures, but it would not make

591
00:34:43,000 --> 00:34:46,399
Speaker 1: a change in the middle of an election. And I've

592
00:34:46,440 --> 00:34:49,759
Speaker 1: noticed that whenever they make a change, there's an there's

593
00:34:49,800 --> 00:34:54,360
Speaker 1: a footnote six months before we're reviewing this, we're taking

594
00:34:54,360 --> 00:34:58,359
Speaker 1: comments about that. Here's the proposed set of changes. I've

595
00:34:58,400 --> 00:35:02,480
Speaker 1: been critical of the or focus on the BLS number

596
00:35:02,520 --> 00:35:06,560
Speaker 1: because it's a series and everybody obsesses about each month

597
00:35:06,880 --> 00:35:08,680
Speaker 1: when you really have to look at the long term

598
00:35:08,719 --> 00:35:11,279
Speaker 1: trend and you could have a really good number, a

599
00:35:11,280 --> 00:35:14,360
Speaker 1: really bad number in any given month that's still within

600
00:35:14,480 --> 00:35:18,960
Speaker 1: that channel and being off of the average very often

601
00:35:18,960 --> 00:35:22,640
Speaker 1: as just noisy. And as you've mentioned the upward revisions.

602
00:35:22,680 --> 00:35:26,480
Speaker 1: So so the most recent non farm payroll UM I

603
00:35:26,560 --> 00:35:29,360
Speaker 1: believe was a pretty soft number and some of the

604
00:35:29,400 --> 00:35:32,200
Speaker 1: revisions were kind of negative. Also, now, is that the

605
00:35:32,239 --> 00:35:34,359
Speaker 1: beginning of the end or does that look just like

606
00:35:34,440 --> 00:35:37,960
Speaker 1: it's a noisy data series. I thought we were due

607
00:35:38,000 --> 00:35:41,000
Speaker 1: for a singer and uh, you know, what are the

608
00:35:41,000 --> 00:35:43,120
Speaker 1: odds that you'd get twelve months in a row over

609
00:35:43,160 --> 00:35:46,160
Speaker 1: twohund thousand if the true underlying growth was over two

610
00:35:46,320 --> 00:35:50,600
Speaker 1: dred thousand. It's not all that high. So uh, it's

611
00:35:50,640 --> 00:35:52,840
Speaker 1: not a surprise to me in a way that we

612
00:35:53,000 --> 00:35:56,440
Speaker 1: see one number which is out of line. Um, we

613
00:35:56,520 --> 00:35:58,680
Speaker 1: get two or three more in a row, Hey, that's

614
00:35:58,680 --> 00:36:01,600
Speaker 1: a problem. Two or three more aboutnemployment insurance claims start

615
00:36:01,640 --> 00:36:03,799
Speaker 1: to pick up if some of the other indicators come in.

616
00:36:04,400 --> 00:36:06,960
Speaker 1: Let me jump in on that, because before in my

617
00:36:07,080 --> 00:36:11,439
Speaker 1: office we were previewing these numbers and talking about this conversation,

618
00:36:12,040 --> 00:36:14,279
Speaker 1: and my head of research said, hey, be sure to

619
00:36:14,360 --> 00:36:17,359
Speaker 1: say to Professor Krueger, see if he's familiar with the

620
00:36:17,400 --> 00:36:21,840
Speaker 1: fact that we're at some crazy record low for initial

621
00:36:21,920 --> 00:36:25,080
Speaker 1: unemployment claims. I think you said, it's back to where

622
00:36:25,120 --> 00:36:27,680
Speaker 1: we haven't seen lows like this in fifteen years. Is

623
00:36:27,920 --> 00:36:33,960
Speaker 1: that accurate? Weekly initial claims are very low? Uh. I

624
00:36:34,000 --> 00:36:35,799
Speaker 1: think we have seen them this low in the in

625
00:36:35,800 --> 00:36:37,799
Speaker 1: the recovery, but they're at the lowest point that they've

626
00:36:37,800 --> 00:36:40,280
Speaker 1: been in the recovery. You know one thing I'll add, Barry,

627
00:36:40,480 --> 00:36:44,600
Speaker 1: when I worked in the administration, I reached the conclusion

628
00:36:44,880 --> 00:36:47,720
Speaker 1: that the UI claims are very informative, and we haven't

629
00:36:47,800 --> 00:36:50,279
Speaker 1: changed the information that are coming out with the UI

630
00:36:50,320 --> 00:36:54,760
Speaker 1: claims in fifty years. Why don't we try to extract

631
00:36:54,800 --> 00:36:57,640
Speaker 1: more from it? Which industries are laying off people, what

632
00:36:57,880 --> 00:37:00,319
Speaker 1: education groups, which age groups, And that's something in which

633
00:37:00,320 --> 00:37:03,640
Speaker 1: the Labor Department has been looking into into doing so,

634
00:37:03,680 --> 00:37:06,800
Speaker 1: in other words, take the data and try and slice

635
00:37:06,800 --> 00:37:10,200
Speaker 1: it a little finer, by by sector, by education level,

636
00:37:10,400 --> 00:37:13,759
Speaker 1: by geography. Exactly what else do you look at their Well,

637
00:37:13,760 --> 00:37:17,440
Speaker 1: those are the main things, and um, they do produce

638
00:37:17,440 --> 00:37:19,880
Speaker 1: it by geography already, they do that with a weak delay,

639
00:37:20,640 --> 00:37:23,279
Speaker 1: so that's already available. But I think we could learn

640
00:37:23,280 --> 00:37:25,960
Speaker 1: a lot from industry because we know that manufacturing and

641
00:37:26,000 --> 00:37:28,799
Speaker 1: construction tend to be more cyclical industries, and in some

642
00:37:28,840 --> 00:37:31,960
Speaker 1: sense they're leading indicators. So I think we can extract

643
00:37:32,080 --> 00:37:35,520
Speaker 1: more from these data. And also knowing about the demographics

644
00:37:36,120 --> 00:37:39,160
Speaker 1: I think would be very helpful. So let's talk briefly

645
00:37:39,160 --> 00:37:42,320
Speaker 1: about the non farm payroll. You know, it's considered a

646
00:37:42,680 --> 00:37:46,520
Speaker 1: coincidental or lagging indicator. It lags the business cycle. But

647
00:37:46,560 --> 00:37:49,040
Speaker 1: there are parts of it that I always find fascinating

648
00:37:49,560 --> 00:37:53,480
Speaker 1: within within the non farm payroll data. I've always found

649
00:37:53,680 --> 00:37:57,560
Speaker 1: the numbers for temp help to be very insightful because

650
00:37:58,160 --> 00:38:01,560
Speaker 1: if companies are un sure about where we are in

651
00:38:01,560 --> 00:38:04,799
Speaker 1: the economic growth cycle, but they're starting to see a

652
00:38:04,880 --> 00:38:07,320
Speaker 1: slide uptick in demand, they might hire a bunch of

653
00:38:07,440 --> 00:38:10,120
Speaker 1: temp workers and hey, if it works out, they become

654
00:38:10,160 --> 00:38:13,080
Speaker 1: full time workers. I've argued that that's a little bit

655
00:38:13,120 --> 00:38:16,360
Speaker 1: of a leading indicator. How wrong am I? I was

656
00:38:16,360 --> 00:38:18,920
Speaker 1: gonna say, You're pretty much in line with the research,

657
00:38:19,600 --> 00:38:22,719
Speaker 1: and the research has found that temporary help trends are

658
00:38:22,880 --> 00:38:26,719
Speaker 1: leading indicator. And then what about hours work? That's another thing.

659
00:38:26,760 --> 00:38:29,200
Speaker 1: When you start to see the hours tick up, it's

660
00:38:29,200 --> 00:38:31,640
Speaker 1: always easier to say to somebody who's got twenty or

661
00:38:31,680 --> 00:38:34,799
Speaker 1: thirty hours, hey, here's a little more time, instead of

662
00:38:34,840 --> 00:38:37,840
Speaker 1: going out and hiring a brand new person. Well, hours

663
00:38:37,880 --> 00:38:40,799
Speaker 1: worked are extremely important for a number of reasons. One

664
00:38:41,480 --> 00:38:44,280
Speaker 1: because it says how much labor is being utilized in production,

665
00:38:44,640 --> 00:38:46,360
Speaker 1: and that could be more important. If you have a

666
00:38:46,400 --> 00:38:50,520
Speaker 1: two tense three tents of an hour increase in weekly hours,

667
00:38:50,520 --> 00:38:52,920
Speaker 1: that could be more important than the headline jobs number

668
00:38:53,160 --> 00:38:55,799
Speaker 1: in terms of total labor input. It's also important to

669
00:38:55,800 --> 00:38:58,520
Speaker 1: people because it affects the income that they're receiving. So

670
00:38:58,600 --> 00:39:01,439
Speaker 1: I closely watch hours worked. And one thing I'll mention,

671
00:39:01,440 --> 00:39:04,400
Speaker 1: which I don't think it's gotten enough attention, is everyone's

672
00:39:04,440 --> 00:39:07,839
Speaker 1: focused on the slack that's coming from workers who are

673
00:39:07,880 --> 00:39:10,080
Speaker 1: part time who wanted to be full time. But hours

674
00:39:10,120 --> 00:39:12,719
Speaker 1: worked are actually reasonably high and back to where they

675
00:39:12,719 --> 00:39:15,080
Speaker 1: were before the recession. That was a question. So where

676
00:39:15,080 --> 00:39:18,399
Speaker 1: hours work? Because I remember, oh, nine ten, when you're

677
00:39:18,440 --> 00:39:21,680
Speaker 1: coming out of the we were in like thirty point

678
00:39:21,760 --> 00:39:23,759
Speaker 1: one in that ring. I don't remember if we got

679
00:39:23,760 --> 00:39:27,200
Speaker 1: below thirty, but it was really the bottom of the thirties.

680
00:39:27,560 --> 00:39:29,920
Speaker 1: We're we're hours work now they're back to where they

681
00:39:29,960 --> 00:39:32,640
Speaker 1: were in two thousand and eight, and if you draw

682
00:39:32,920 --> 00:39:36,279
Speaker 1: crisis pre crisis, uh two thousand seven, they're back to

683
00:39:36,280 --> 00:39:37,800
Speaker 1: where they were in two thousands. How many is that

684
00:39:37,880 --> 00:39:43,479
Speaker 1: per week? On average? It's in the thirties bies. Because

685
00:39:43,520 --> 00:39:45,359
Speaker 1: I normally should know this off the top of my head,

686
00:39:45,360 --> 00:39:48,600
Speaker 1: and I don't. So he's going for the secret facts

687
00:39:48,600 --> 00:39:51,440
Speaker 1: that he got from the labor department. I was we

688
00:39:51,520 --> 00:39:53,880
Speaker 1: just saw this teen show. I got some blue sheets

689
00:39:53,880 --> 00:39:57,880
Speaker 1: which had it, but I don't. I'll build up. So

690
00:39:57,960 --> 00:40:01,080
Speaker 1: but it's a significant improvement, and we're back the signs

691
00:40:01,160 --> 00:40:02,920
Speaker 1: and it's back to the trend that we were on

692
00:40:02,960 --> 00:40:08,280
Speaker 1: prior to the crisis. Yes, so we've returned to trend

693
00:40:08,440 --> 00:40:11,080
Speaker 1: and so that's kind of that's kind of fascinating. So

694
00:40:11,120 --> 00:40:13,319
Speaker 1: I don't think there's that much hidden slack in terms

695
00:40:13,320 --> 00:40:17,239
Speaker 1: of work hours. So you had mentioned, um, let's let's

696
00:40:17,280 --> 00:40:19,120
Speaker 1: talk a little bit about the FED. You had mentioned

697
00:40:19,160 --> 00:40:21,720
Speaker 1: you thought the FED had done a really good job.

698
00:40:22,400 --> 00:40:26,319
Speaker 1: You know what didn't happen this recovery, whether it's the

699
00:40:26,320 --> 00:40:29,520
Speaker 1: federal Congress or what have you, that would have made

700
00:40:29,520 --> 00:40:36,319
Speaker 1: it better, faster, stronger. Well, I think Congress made a

701
00:40:36,360 --> 00:40:40,800
Speaker 1: major mistake with the sequester. We cut back discretionary spending.

702
00:40:40,960 --> 00:40:44,480
Speaker 1: We did it in an arbitrary way. We should be

703
00:40:44,480 --> 00:40:48,600
Speaker 1: investing more in research and development, more in infrastructure, more

704
00:40:48,600 --> 00:40:53,200
Speaker 1: in education, and Congress cut that back. On top of that,

705
00:40:53,360 --> 00:40:55,879
Speaker 1: I think Congress could have extended the payroll tax cut

706
00:40:56,440 --> 00:41:04,040
Speaker 1: into we had it in Uh, why is this still

707
00:41:04,120 --> 00:41:08,360
Speaker 1: that just mad pursuit of austerity, that misguided pursuit of austerity?

708
00:41:08,400 --> 00:41:11,120
Speaker 1: Has that argument been laid to rest when you see

709
00:41:11,560 --> 00:41:15,120
Speaker 1: the austerity put in place by Europe and the much

710
00:41:15,200 --> 00:41:17,839
Speaker 1: more moderate austerity in the United States. How the two

711
00:41:17,960 --> 00:41:21,759
Speaker 1: two regions had recovered. I don't know if it's been

712
00:41:21,760 --> 00:41:24,600
Speaker 1: put to rest, but I certainly take that as pretty

713
00:41:24,600 --> 00:41:27,360
Speaker 1: strong evidence that the US is doing better because we

714
00:41:27,440 --> 00:41:30,280
Speaker 1: pursued a different fiscal policy and a different monetary policy

715
00:41:30,360 --> 00:41:33,400
Speaker 1: for that matter, but we were pretty in terms of

716
00:41:33,480 --> 00:41:38,600
Speaker 1: historical fiscal stimulations. You had the stimulus plan, but it

717
00:41:38,680 --> 00:41:42,080
Speaker 1: was different than previous stimulus plans, and that a big

718
00:41:42,160 --> 00:41:44,640
Speaker 1: chunk of it was temporary, was temporary tax cuts, it

719
00:41:44,680 --> 00:41:49,360
Speaker 1: was temporary unemployment extensions. It wasn't like a massive infrastructure

720
00:41:49,400 --> 00:41:53,120
Speaker 1: build out, and then you had all these ongoing layoffs

721
00:41:53,160 --> 00:41:56,560
Speaker 1: at the state and local level. So net net up

722
00:41:56,640 --> 00:42:00,680
Speaker 1: until only a few months ago, told government meant hiring.

723
00:42:01,120 --> 00:42:04,799
Speaker 1: Um has been a drag unemployment absolutely, you know, if

724
00:42:04,800 --> 00:42:07,120
Speaker 1: you look at the big picture, which is government spending,

725
00:42:07,840 --> 00:42:11,440
Speaker 1: including state and local together with federal, the stimulus only

726
00:42:11,520 --> 00:42:15,319
Speaker 1: lasted about three quarters It was just uh the end

727
00:42:15,320 --> 00:42:18,880
Speaker 1: of two thousand nine early, and since then it's been

728
00:42:18,880 --> 00:42:23,080
Speaker 1: phasing out. One might have said in two thousand nine

729
00:42:23,080 --> 00:42:25,200
Speaker 1: that a risk of this stimulus was that it would

730
00:42:25,239 --> 00:42:28,440
Speaker 1: become permanent, but that hasn't happened. And if you look

731
00:42:28,480 --> 00:42:31,640
Speaker 1: at state and local governments. While they were receiving support

732
00:42:31,680 --> 00:42:34,360
Speaker 1: from the Recovery Act, from the Stimulus Bill, they weren't

733
00:42:34,440 --> 00:42:37,719
Speaker 1: laying off teachers and firefighters and police. And it was

734
00:42:37,800 --> 00:42:40,360
Speaker 1: only after that money ran out that we saw layoffs

735
00:42:40,680 --> 00:42:43,960
Speaker 1: reach really historically high levels in the state and local

736
00:42:44,000 --> 00:42:45,920
Speaker 1: government sector. Right, And when we look at the two

737
00:42:45,960 --> 00:42:48,960
Speaker 1: thousand one recovery, that was a huge additive to to

738
00:42:49,160 --> 00:42:51,640
Speaker 1: what the economy was doing two thousand one and the

739
00:42:51,640 --> 00:42:56,800
Speaker 1: early eighties. So only Democrats seem to be uh president

740
00:42:57,000 --> 00:43:00,160
Speaker 1: when fiscal policy is working against the recovery. Well, well,

741
00:43:00,200 --> 00:43:03,240
Speaker 1: my argument has long been that the party out of power,

742
00:43:03,360 --> 00:43:06,000
Speaker 1: and I hope I'm not engaging in any false equivalency here,

743
00:43:06,280 --> 00:43:09,280
Speaker 1: but the party out of power always complains about budgets

744
00:43:09,280 --> 00:43:12,759
Speaker 1: and deficits, and you know they're arguing. What they're really

745
00:43:12,760 --> 00:43:17,280
Speaker 1: doing is arguing against the policy of the opposing party,

746
00:43:17,360 --> 00:43:19,880
Speaker 1: and Republicans do it and Democrats do it. It just

747
00:43:19,920 --> 00:43:22,719
Speaker 1: seems that this time, with this president, it was an

748
00:43:22,760 --> 00:43:27,000
Speaker 1: effective argument that had gained traction from people who previously

749
00:43:27,160 --> 00:43:30,200
Speaker 1: were the furthest thing in the world from deficit hawks.

750
00:43:30,280 --> 00:43:34,040
Speaker 1: You know, if you supported Medicare Section D and unfunded

751
00:43:34,040 --> 00:43:37,760
Speaker 1: tax cuts, and and a war of choice in Iraq.

752
00:43:37,920 --> 00:43:40,600
Speaker 1: You're spending a lot of money. I'm not arguing about

753
00:43:40,640 --> 00:43:43,799
Speaker 1: those policies. You're not a deficit hawk if you're gonna

754
00:43:43,840 --> 00:43:47,160
Speaker 1: deficit spend for those things. When the roles reverse, who's

755
00:43:47,160 --> 00:43:50,160
Speaker 1: in the White House, Suddenly you become very concerned about

756
00:43:50,160 --> 00:43:53,520
Speaker 1: debt and deficits. It seems a little disingenuous. Oh, it's

757
00:43:53,520 --> 00:43:56,040
Speaker 1: even worse than that, in that it wasn't only the

758
00:43:56,080 --> 00:43:58,640
Speaker 1: war that was costing money. It was also adding Medicare

759
00:43:58,760 --> 00:44:02,160
Speaker 1: Part D prescriptions you without paying for it, and cutting

760
00:44:02,160 --> 00:44:05,680
Speaker 1: taxes in large measure for high income earners, and also

761
00:44:05,719 --> 00:44:09,880
Speaker 1: without off setting that with spending cuts elsewhere. So I

762
00:44:10,200 --> 00:44:12,640
Speaker 1: guess I'd take a somewhat more partisan view. Having worked

763
00:44:12,640 --> 00:44:16,040
Speaker 1: for President Clinton and President Obama. You know, President Clinton

764
00:44:16,120 --> 00:44:20,800
Speaker 1: signed a balanced Budget Act, uh, physically responsible Act. President

765
00:44:20,800 --> 00:44:24,120
Speaker 1: Obama wanted to address the drivers of our deficit, which

766
00:44:24,120 --> 00:44:27,160
Speaker 1: is healthcare costs and entitlements. That was part of the

767
00:44:27,200 --> 00:44:32,200
Speaker 1: Grand Bargain negotiations, along with military spending. Was was a

768
00:44:32,239 --> 00:44:35,759
Speaker 1: big issue that had had an impact in the sequester. Right,

769
00:44:36,400 --> 00:44:39,680
Speaker 1: that's right, um, But military spending is winding down on

770
00:44:39,760 --> 00:44:41,719
Speaker 1: its own. It's been coming down on its own as

771
00:44:41,719 --> 00:44:48,319
Speaker 1: we um reduce our engagement in the Middle East. So uh,

772
00:44:48,800 --> 00:44:50,279
Speaker 1: you know, actually, if you look at the trends, it's

773
00:44:50,320 --> 00:44:53,560
Speaker 1: quite remarkable because we saw a pretty sharp decline in

774
00:44:53,600 --> 00:44:58,200
Speaker 1: military spending in two thousand and uh twelve, two thousand

775
00:44:58,280 --> 00:45:01,680
Speaker 1: and thirteen, and that was the got the economy. Ultimately,

776
00:45:01,760 --> 00:45:03,839
Speaker 1: I think it's better for those resources to be used

777
00:45:03,840 --> 00:45:09,200
Speaker 1: for civilian purposes. Uh. But we haven't really addressed the

778
00:45:09,320 --> 00:45:13,440
Speaker 1: drivers of the deficit in spite of the emphasis and austerity,

779
00:45:13,520 --> 00:45:16,359
Speaker 1: because we haven't done much to address the long run

780
00:45:16,719 --> 00:45:19,799
Speaker 1: entitlement costs and health care costs. So that seems to

781
00:45:19,840 --> 00:45:25,040
Speaker 1: be a partisan policy debate where the philosophies are so

782
00:45:25,120 --> 00:45:29,640
Speaker 1: far apart there's almost not a you know, normally you

783
00:45:29,680 --> 00:45:31,640
Speaker 1: can horse trade a little bit. Back in the days

784
00:45:31,719 --> 00:45:34,960
Speaker 1: of of Ronald Reagan and Tip O'Neill, there was a

785
00:45:34,960 --> 00:45:36,960
Speaker 1: lot of back and forth, and they weren't so far

786
00:45:37,000 --> 00:45:39,640
Speaker 1: apart that I got something, you've got something. All right,

787
00:45:39,719 --> 00:45:42,880
Speaker 1: we come up with some a policy that everybody can

788
00:45:42,960 --> 00:45:45,200
Speaker 1: live with, declare victory and move on to the next thing.

789
00:45:45,600 --> 00:45:48,400
Speaker 1: As the parties get further and further apart and I

790
00:45:48,400 --> 00:45:51,640
Speaker 1: don't know if I would argue that both parties aren't

791
00:45:51,680 --> 00:45:54,160
Speaker 1: moving away from the center at an equal pace. As

792
00:45:54,200 --> 00:45:58,319
Speaker 1: a former Republican, I could tell you that the right

793
00:45:58,480 --> 00:46:01,520
Speaker 1: has moved further away from the middle much faster than

794
00:46:01,600 --> 00:46:04,920
Speaker 1: the left has. Um, I haven't changed my you know,

795
00:46:04,960 --> 00:46:09,080
Speaker 1: I grew up a Jacob Javits Republican, which today puts

796
00:46:09,120 --> 00:46:12,080
Speaker 1: me too far to the left of you know, anybody

797
00:46:12,120 --> 00:46:15,239
Speaker 1: who's a Democrat in half of the anyone who is

798
00:46:15,239 --> 00:46:18,000
Speaker 1: a Republican and half of the Democrats. By the way,

799
00:46:18,040 --> 00:46:22,200
Speaker 1: I just pulled up the BLS data, manufacturing work week

800
00:46:22,239 --> 00:46:26,239
Speaker 1: decrease at point one hours to forty point nine. Manufacturing

801
00:46:26,280 --> 00:46:31,480
Speaker 1: work work weeks always longer, and then um total employees

802
00:46:31,520 --> 00:46:34,640
Speaker 1: on private non front pay rolls thirty four declined point

803
00:46:34,719 --> 00:46:37,399
Speaker 1: one to thirty four point five. So but that's still

804
00:46:37,440 --> 00:46:40,319
Speaker 1: substantially above where we began thirty four and a half

805
00:46:40,360 --> 00:46:44,240
Speaker 1: as normal, that's about that. That's I would say, that's

806
00:46:44,640 --> 00:46:47,279
Speaker 1: about where you would predict we should be based on

807
00:46:47,320 --> 00:46:51,280
Speaker 1: the trend before the recession. Factory over time three point

808
00:46:51,320 --> 00:46:55,920
Speaker 1: four hours, is that considered substantial? That's high? And you know,

809
00:46:56,440 --> 00:47:00,080
Speaker 1: the adorable good sector has made a remarkable recrd for

810
00:47:00,200 --> 00:47:02,279
Speaker 1: you look at the auto sector, it's made a remarkable

811
00:47:02,320 --> 00:47:06,680
Speaker 1: recovery in this uh economic climate. Let's let's talk about

812
00:47:06,680 --> 00:47:09,440
Speaker 1: that because it brings to mind a really fascinating conversation

813
00:47:09,480 --> 00:47:12,800
Speaker 1: I had with Jonathan Miller, who is UM one of

814
00:47:12,880 --> 00:47:15,520
Speaker 1: the best known real estate appraisers. He's on all the

815
00:47:15,560 --> 00:47:20,239
Speaker 1: time with Tom and others. Wherever credit is tight, that

816
00:47:20,360 --> 00:47:25,440
Speaker 1: sector is doing poorly. And wherever there's loosening of credit,

817
00:47:26,239 --> 00:47:28,799
Speaker 1: such as automobiles, you know, people are now saying, hey,

818
00:47:28,800 --> 00:47:31,560
Speaker 1: we have a subprime problem in automobiles. We're on a

819
00:47:31,600 --> 00:47:34,560
Speaker 1: pace to sell seventeen million automobiles in the United States.

820
00:47:35,000 --> 00:47:39,480
Speaker 1: That's a record number, even as total miles driving still

821
00:47:39,520 --> 00:47:42,080
Speaker 1: I think, are we still below where we were pre crisis?

822
00:47:43,040 --> 00:47:45,200
Speaker 1: There was a huge dip. We've recovered some of it.

823
00:47:45,239 --> 00:47:48,520
Speaker 1: I think we're about halfway back, but that's a massive number,

824
00:47:48,560 --> 00:47:51,960
Speaker 1: seventeen million. It's remarkable. I mean, it shows how much

825
00:47:52,000 --> 00:47:54,319
Speaker 1: pent up demand there was, and it also shows I

826
00:47:54,360 --> 00:47:56,479
Speaker 1: think that our auto companies are doing a better job.

827
00:47:56,680 --> 00:47:59,400
Speaker 1: They're producing better cars. If you look at Chrysler today,

828
00:47:59,719 --> 00:48:02,080
Speaker 1: to totally different kind of car and now owned by

829
00:48:02,120 --> 00:48:05,080
Speaker 1: Fiat instead of H and same thing with GM. When

830
00:48:05,080 --> 00:48:08,080
Speaker 1: you look at GM. I'm not a GM guy, but

831
00:48:08,120 --> 00:48:11,360
Speaker 1: I have to tell you the the Catalacs that have

832
00:48:11,440 --> 00:48:13,920
Speaker 1: come out are really nice. The new Corvette is a

833
00:48:13,960 --> 00:48:18,880
Speaker 1: spectacular car. And their competition for the camera and the accord.

834
00:48:19,560 --> 00:48:22,040
Speaker 1: Um it begins with an al and I'm not accessing

835
00:48:22,040 --> 00:48:26,120
Speaker 1: that word. No, no, no, that's Chevy Lumina, is it?

836
00:48:26,200 --> 00:48:29,360
Speaker 1: Maybe it's Lumina. Oh no, it's the um Impala and

837
00:48:29,360 --> 00:48:32,000
Speaker 1: the new Impala. You think of Impali, think of a

838
00:48:32,000 --> 00:48:36,160
Speaker 1: giant car, but it's their Camray slash Honda chord competitor.

839
00:48:37,120 --> 00:48:40,080
Speaker 1: They're winning all sorts of awards. It's amazing how far

840
00:48:40,120 --> 00:48:44,920
Speaker 1: the US owner industry has come post bailout. Absolutely. I

841
00:48:44,960 --> 00:48:47,760
Speaker 1: actually just wrote a new study together with Austin Gulsby,

842
00:48:47,760 --> 00:48:50,080
Speaker 1: who was my predecessor as chairman of the c e A.

843
00:48:50,560 --> 00:48:53,640
Speaker 1: I'm the Auto bellout and it has been far more

844
00:48:53,640 --> 00:48:57,560
Speaker 1: successful than we expected in two thousand nine. UM. I

845
00:48:57,600 --> 00:48:59,320
Speaker 1: find Austin to be a fascinating guy. Who was on

846
00:48:59,360 --> 00:49:01,879
Speaker 1: a panel with him in Las Vegas some years ago

847
00:49:02,040 --> 00:49:08,200
Speaker 1: about the bailouts, and the conversation was, why don't we

848
00:49:08,239 --> 00:49:10,800
Speaker 1: do for the banks what we had done for GM

849
00:49:10,800 --> 00:49:13,479
Speaker 1: and Chrysler. You know, it always seems that when there's

850
00:49:13,520 --> 00:49:18,560
Speaker 1: a Wall Street person as UM Treasury in the Chief

851
00:49:18,600 --> 00:49:21,560
Speaker 1: Treasury Department, Wall Street gets treated well. When you get

852
00:49:21,560 --> 00:49:24,640
Speaker 1: a like you did in the most of the prior century,

853
00:49:24,680 --> 00:49:28,319
Speaker 1: when you have an industrialist or a manufacturer, somebody from

854
00:49:28,360 --> 00:49:33,479
Speaker 1: that side of UM the economy, Wall Street doesn't seem

855
00:49:33,520 --> 00:49:35,799
Speaker 1: to get bailed out. The manufacturers get bailed out. Is

856
00:49:35,840 --> 00:49:39,400
Speaker 1: that just the nature of people protecting their own industry?

857
00:49:39,960 --> 00:49:43,240
Speaker 1: Or asked differently, why did we not treat the banks

858
00:49:43,320 --> 00:49:47,440
Speaker 1: the way we treated GM and Chrysler. Well, it's a

859
00:49:47,520 --> 00:49:51,880
Speaker 1: very good question. Uh. First of all, I was involved

860
00:49:51,920 --> 00:49:54,799
Speaker 1: when Tim Geitner was Secretary, and Tim really is not

861
00:49:54,880 --> 00:49:57,480
Speaker 1: a Wall Street person. He was a public servant. He

862
00:49:57,560 --> 00:50:00,200
Speaker 1: spent his whole career at that Treasury or of the

863
00:50:00,239 --> 00:50:02,200
Speaker 1: I m F for than the New York Fed. But

864
00:50:02,320 --> 00:50:04,919
Speaker 1: people have accused him as president of the New York

865
00:50:04,920 --> 00:50:07,640
Speaker 1: Fed being very close to Wall Street. Is that not

866
00:50:07,800 --> 00:50:11,960
Speaker 1: an accurate description? You know, I think he should be

867
00:50:12,040 --> 00:50:16,000
Speaker 1: judged by his actions, and I think he was consistent

868
00:50:16,480 --> 00:50:19,400
Speaker 1: in the principles that he applied to the bailout to

869
00:50:19,440 --> 00:50:21,880
Speaker 1: the extent that he could have been he was constrained

870
00:50:21,920 --> 00:50:25,959
Speaker 1: by the law. UM, I think he did a remarkable

871
00:50:26,040 --> 00:50:30,120
Speaker 1: job protecting taxpayers. You know, all of the money came

872
00:50:30,160 --> 00:50:32,200
Speaker 1: back and then some the money that went to the

873
00:50:32,200 --> 00:50:37,200
Speaker 1: financial sector during the bailout. He protected our system of

874
00:50:37,480 --> 00:50:45,120
Speaker 1: the hierarchy for investors and bond investors and senior creditors. Uh.

875
00:50:45,160 --> 00:50:48,440
Speaker 1: And I think our recovery is a lot stronger because

876
00:50:48,480 --> 00:50:51,240
Speaker 1: of the very difficult decisions that he he was forced

877
00:50:51,239 --> 00:50:57,200
Speaker 1: to make. UM. The role of banks, I think it's

878
00:50:57,280 --> 00:50:59,560
Speaker 1: pretty special in the economy, So I think one could

879
00:50:59,600 --> 00:51:03,960
Speaker 1: make a case for treating the financial sector differently in

880
00:51:04,000 --> 00:51:07,800
Speaker 1: the midst of a financial panic. Um, the problems that

881
00:51:07,880 --> 00:51:10,640
Speaker 1: the auto companies were facing were very long in the making,

882
00:51:11,200 --> 00:51:13,719
Speaker 1: and they needed to restructure. It was not just a

883
00:51:13,920 --> 00:51:17,640
Speaker 1: temporary problem that they were facing because of a run

884
00:51:17,719 --> 00:51:23,160
Speaker 1: on banks, which was uh, in some sense the issue

885
00:51:23,200 --> 00:51:26,800
Speaker 1: in the financial sector. So I think one could fault

886
00:51:27,239 --> 00:51:30,880
Speaker 1: the financial bailout. Personally, I would have liked to have

887
00:51:30,880 --> 00:51:34,279
Speaker 1: seen us put more restrictions on the banks when it

888
00:51:34,320 --> 00:51:36,520
Speaker 1: came to lending. I would have liked to have seen

889
00:51:36,600 --> 00:51:40,239
Speaker 1: some requirements which eventually were put on there We're done.

890
00:51:40,480 --> 00:51:43,160
Speaker 1: For example, in the small business lending fund to encourage

891
00:51:43,160 --> 00:51:46,759
Speaker 1: banks to lend more to small businesses. UM. I would

892
00:51:46,760 --> 00:51:52,279
Speaker 1: have liked to have seen the executive compensation restrictions last longer. UM.

893
00:51:52,320 --> 00:51:55,880
Speaker 1: But having said that, UH, I think the stress tests

894
00:51:56,239 --> 00:52:02,359
Speaker 1: and the um UH use of TARP funds UH did

895
00:52:02,600 --> 00:52:06,880
Speaker 1: rescue the system, did make it possible for the recovery

896
00:52:06,880 --> 00:52:12,520
Speaker 1: to begin. So to two bullet points, one observation and

897
00:52:12,960 --> 00:52:16,200
Speaker 1: then a question. I have to ask you one of

898
00:52:16,400 --> 00:52:20,080
Speaker 1: I'm an automotive enthusiast. I love cars. My mother will

899
00:52:20,080 --> 00:52:23,280
Speaker 1: tell you car was literally the first word I ever said.

900
00:52:23,880 --> 00:52:25,879
Speaker 1: And one of the sites I used to read all

901
00:52:25,880 --> 00:52:29,560
Speaker 1: the time, I mean, long before the financial crisis was

902
00:52:29,600 --> 00:52:31,880
Speaker 1: called The Truth about Cars. And they had a segment

903
00:52:31,920 --> 00:52:37,080
Speaker 1: called GM Bankruptcy Watch Part one through you know, two

904
00:52:37,160 --> 00:52:40,439
Speaker 1: hundred and they were saying, here's the math. It's unsustainable.

905
00:52:40,520 --> 00:52:46,520
Speaker 1: GM can't keep generous pension, generous healthcare, nine levels of executives.

906
00:52:46,880 --> 00:52:49,440
Speaker 1: They can operate like this, that it's a house of cards.

907
00:52:49,440 --> 00:52:52,920
Speaker 1: That asked the collapse, and it turned out that was accurate.

908
00:52:53,000 --> 00:52:56,759
Speaker 1: But so the restructuring and the bailout and the resurrection

909
00:52:57,239 --> 00:52:59,440
Speaker 1: of GM and Christ will tend out to be a

910
00:52:59,600 --> 00:53:01,640
Speaker 1: great thing. For the economy, a great thing for the

911
00:53:01,680 --> 00:53:05,160
Speaker 1: auto sector. So here's the question I always ask about

912
00:53:05,360 --> 00:53:11,000
Speaker 1: the banks. Yes, banks are important, banks are special, and

913
00:53:11,080 --> 00:53:15,080
Speaker 1: that's why we can allow insolvent banks to put the

914
00:53:15,239 --> 00:53:19,120
Speaker 1: entire system at risk. We can't allow crazy leverage. We

915
00:53:19,160 --> 00:53:24,759
Speaker 1: can't allow reckless spending and lending and speculation to put

916
00:53:24,800 --> 00:53:28,319
Speaker 1: the economy at risk. So here's what the counterfact rule

917
00:53:28,400 --> 00:53:31,880
Speaker 1: I want to ask is what would have happened early

918
00:53:32,000 --> 00:53:36,560
Speaker 1: in the financial crisis. If so, let's refresh people's timeline.

919
00:53:37,000 --> 00:53:40,160
Speaker 1: You had March O eight, You had Bear Stearns go under,

920
00:53:40,760 --> 00:53:45,000
Speaker 1: and and the Federal Reserve essentially guaranteed to JP Morgan.

921
00:53:45,080 --> 00:53:49,040
Speaker 1: They would backstop Bears books and it was sold first

922
00:53:49,080 --> 00:53:50,640
Speaker 1: for two dollars a year, then ten dollars a share.

923
00:53:50,680 --> 00:53:54,000
Speaker 1: It turned out to be a phenomenal acquisition for JP Morgan,

924
00:53:54,080 --> 00:53:57,319
Speaker 1: a huge home run. Then as we worked our way

925
00:53:57,320 --> 00:53:59,920
Speaker 1: through the summer, things started to get a little dicey.

926
00:54:00,080 --> 00:54:02,560
Speaker 1: We had issues with Fannie and Freddie and the g

927
00:54:02,800 --> 00:54:06,080
Speaker 1: s c S. I'm still not convinced that the American

928
00:54:06,120 --> 00:54:09,600
Speaker 1: taxpayer's been made whole. There were tax waivers given um

929
00:54:09,680 --> 00:54:12,160
Speaker 1: and offsets, and Fannie and Freddie's have been throwing off

930
00:54:12,200 --> 00:54:14,120
Speaker 1: a lot of money. I don't know if that's break even.

931
00:54:14,480 --> 00:54:17,560
Speaker 1: I think a I G is now break even even

932
00:54:17,600 --> 00:54:20,319
Speaker 1: including the tax benefits they got. I'm not positive about that.

933
00:54:20,719 --> 00:54:24,240
Speaker 1: So we're almost but not quite made whole. We certainly

934
00:54:24,280 --> 00:54:27,920
Speaker 1: didn't get the benefits of that very risky investment. If

935
00:54:27,960 --> 00:54:32,280
Speaker 1: I was an investor, Hey, here's a billions of dollars

936
00:54:32,640 --> 00:54:35,360
Speaker 1: one day, I hope to break even on it. Not

937
00:54:35,360 --> 00:54:38,520
Speaker 1: not what Wall Street typically looks for, but the counter

938
00:54:38,560 --> 00:54:41,040
Speaker 1: factual is what would have happened if we would have

939
00:54:41,080 --> 00:54:44,680
Speaker 1: set to City Bank. Okay, you guys have had problems

940
00:54:44,719 --> 00:54:50,080
Speaker 1: every twenty years, it seems. Let's temporarily put you into

941
00:54:50,239 --> 00:54:56,040
Speaker 1: receivership with Uncle Sam acting as the debtor, you know,

942
00:54:56,080 --> 00:55:00,360
Speaker 1: creditor in possession, the the provider of UM. The creditor

943
00:55:00,400 --> 00:55:05,040
Speaker 1: acting as UM offering all of the debt funding. During

944
00:55:05,080 --> 00:55:09,000
Speaker 1: this reorganization, will wipe out the shareholders, will give a

945
00:55:09,040 --> 00:55:12,560
Speaker 1: haircut to the bond holders, will fire fire that top

946
00:55:12,680 --> 00:55:16,400
Speaker 1: level of senior management who clearly have driven the bus

947
00:55:16,440 --> 00:55:19,560
Speaker 1: off the off the road, into the into the lake,

948
00:55:20,200 --> 00:55:23,080
Speaker 1: and we'll spin them out as a as a brand

949
00:55:23,080 --> 00:55:25,800
Speaker 1: new entity. Same thing with Bank of America. The argument

950
00:55:25,800 --> 00:55:28,480
Speaker 1: I used to say is, we'll clean up Merrill Lynch,

951
00:55:28,520 --> 00:55:30,120
Speaker 1: We'll get rid of their debt, will spin them out

952
00:55:30,120 --> 00:55:33,160
Speaker 1: as a free standing anthony. We'll take countrywide the biggest

953
00:55:33,160 --> 00:55:36,080
Speaker 1: mortgage underwriters, will clean them up, will spend them out

954
00:55:36,120 --> 00:55:40,959
Speaker 1: there now freestanding debt, free clean company. Will take Bank

955
00:55:40,960 --> 00:55:43,279
Speaker 1: of America, same thing. Then we'll take all of this

956
00:55:43,360 --> 00:55:47,080
Speaker 1: what people are calling toxic debt, which is on toxic assets,

957
00:55:47,080 --> 00:55:49,760
Speaker 1: which is really a bit that's toxic at hundred cents

958
00:55:49,760 --> 00:55:53,560
Speaker 1: on the dollar, but there's some price ten fifty cents

959
00:55:53,920 --> 00:55:56,319
Speaker 1: where that's a good investment, and we'll auction that off

960
00:55:56,840 --> 00:55:59,719
Speaker 1: and net net will go. We'll tear the band aid off.

961
00:55:59,719 --> 00:56:02,400
Speaker 1: We'll go through this painful process, but then will be

962
00:56:02,600 --> 00:56:06,680
Speaker 1: much healthier on the other side. What's wrong with that counterfactual?

963
00:56:07,400 --> 00:56:10,640
Speaker 1: I think there are a few things, and fortunately the

964
00:56:10,719 --> 00:56:14,680
Speaker 1: economy didn't get so bad that that was necessary. There

965
00:56:14,719 --> 00:56:16,759
Speaker 1: was something. How close will we to that point? Though

966
00:56:16,800 --> 00:56:19,600
Speaker 1: people have said we were The phrase I heard from

967
00:56:19,800 --> 00:56:23,680
Speaker 1: Ben Bernanki was we were staring into the abyss. We

968
00:56:23,680 --> 00:56:25,680
Speaker 1: were staring into the abyss. There's no question we were

969
00:56:25,719 --> 00:56:30,120
Speaker 1: staring into the abyss. How close did we come. Well,

970
00:56:30,160 --> 00:56:32,600
Speaker 1: the turning point was the stress tests. So had the

971
00:56:32,600 --> 00:56:37,399
Speaker 1: stress tests shown that the city was as insolvent as

972
00:56:37,440 --> 00:56:41,399
Speaker 1: you uh suggested, I think in different course of action

973
00:56:41,440 --> 00:56:44,120
Speaker 1: would have been taken. But given that the stress tests

974
00:56:44,120 --> 00:56:46,720
Speaker 1: helped things to turn around, given that the stress tests

975
00:56:47,120 --> 00:56:50,000
Speaker 1: provided investors with the information that they needed and the

976
00:56:50,040 --> 00:56:52,520
Speaker 1: confidence that they had that they can invest, given that

977
00:56:52,600 --> 00:56:54,920
Speaker 1: city was able to raise money at that time, was

978
00:56:54,960 --> 00:56:58,600
Speaker 1: able to uh, we'll raise money from the government, or

979
00:56:58,840 --> 00:57:01,040
Speaker 1: which which stress test to be talking about? What this

980
00:57:01,080 --> 00:57:04,319
Speaker 1: stress test was at the March of oh nine, But

981
00:57:04,400 --> 00:57:07,799
Speaker 1: I'm talking October in October eight, when the when the

982
00:57:07,840 --> 00:57:10,799
Speaker 1: tarp was first past. If that money didn't go to

983
00:57:10,840 --> 00:57:13,279
Speaker 1: these banks, if the money go to the banks, the

984
00:57:13,800 --> 00:57:18,360
Speaker 1: but but had we pursued the strategy that you laid out, uh,

985
00:57:18,440 --> 00:57:21,480
Speaker 1: taxpayers would have paid much much more instead of actually

986
00:57:21,480 --> 00:57:24,200
Speaker 1: making money on these TARP investments. They would have lost

987
00:57:24,440 --> 00:57:26,960
Speaker 1: hundreds of billions of dollars. When I are where would

988
00:57:27,000 --> 00:57:30,320
Speaker 1: those losses have come from. The losses would have come

989
00:57:30,320 --> 00:57:33,320
Speaker 1: from wiping out the debt that you mentioned, from recapitalizing

990
00:57:33,320 --> 00:57:36,600
Speaker 1: the banks with government money. On top of that, I

991
00:57:36,640 --> 00:57:38,880
Speaker 1: think you would be looking at at least five years,

992
00:57:38,920 --> 00:57:42,440
Speaker 1: maybe a decade of having having those companies under government receivership.

993
00:57:42,600 --> 00:57:44,720
Speaker 1: That long. It's not a twelve month or an eighteen

994
00:57:44,720 --> 00:57:47,720
Speaker 1: month process, clean them up and then take them public again.

995
00:57:48,440 --> 00:57:50,440
Speaker 1: Look at some of the bank failures that we've seen,

996
00:57:50,480 --> 00:57:53,960
Speaker 1: they've taken they've taken years, and that's banks that are

997
00:57:54,080 --> 00:57:58,120
Speaker 1: one hundred is large as a city. On top of that,

998
00:57:59,200 --> 00:58:03,440
Speaker 1: had UH Treasury done what some people were in my

999
00:58:03,560 --> 00:58:06,720
Speaker 1: view irresponsibly urging the Treasury to do, which was to

1000
00:58:06,800 --> 00:58:08,680
Speaker 1: take over those banks, we would have seen a run

1001
00:58:08,680 --> 00:58:10,680
Speaker 1: on other banks, and it would have made the problem

1002
00:58:10,800 --> 00:58:13,480
Speaker 1: much worse. If you're gonna wipe out the shareholders of city,

1003
00:58:13,520 --> 00:58:15,560
Speaker 1: what are you gonna do. If you're a shareholder Bank

1004
00:58:15,600 --> 00:58:17,720
Speaker 1: of America, you're gonna sell. That's gonna make Bank of

1005
00:58:17,720 --> 00:58:20,760
Speaker 1: America's problems much worse. Uh, and then so on down

1006
00:58:20,760 --> 00:58:23,280
Speaker 1: the line. So I think we would have seen um

1007
00:58:23,920 --> 00:58:27,880
Speaker 1: a UM a wave of bank failures which would have

1008
00:58:27,880 --> 00:58:30,560
Speaker 1: cost the taxpayers billions of dollars and which would have

1009
00:58:30,600 --> 00:58:33,440
Speaker 1: set the recovery back years. So you think this was

1010
00:58:33,520 --> 00:58:37,880
Speaker 1: the healthier way to proceed. So I only think in retrospect,

1011
00:58:37,880 --> 00:58:42,080
Speaker 1: there's no question. I mean, you could say, um u

1012
00:58:42,280 --> 00:58:44,640
Speaker 1: that it was a mistake because it costs taxpayers so

1013
00:58:44,720 --> 00:58:46,760
Speaker 1: much money, but it hasn't in the end, well that

1014
00:58:47,400 --> 00:58:50,000
Speaker 1: the taxpayers had a lot of money at risk, and

1015
00:58:50,040 --> 00:58:53,200
Speaker 1: now we know what the benefit of hindsight, all or

1016
00:58:53,280 --> 00:58:55,760
Speaker 1: nearly all, or maybe even a little more than all

1017
00:58:55,800 --> 00:58:58,960
Speaker 1: have has been recovered. So net net, the cost to

1018
00:58:58,960 --> 00:59:02,600
Speaker 1: the taxpayers was not great. The risk to test payer

1019
00:59:02,640 --> 00:59:05,040
Speaker 1: money was fairly high. So the question I want to

1020
00:59:05,040 --> 00:59:08,800
Speaker 1: ask is, you know, pre crisis we had and I

1021
00:59:08,880 --> 00:59:11,120
Speaker 1: understand Sweden is much smaller in the United States, but

1022
00:59:11,120 --> 00:59:14,160
Speaker 1: we had the Swedish approach, which was throw everybody into

1023
00:59:14,200 --> 00:59:16,360
Speaker 1: receiver ship, clean them up, spin them out. And then

1024
00:59:16,360 --> 00:59:19,240
Speaker 1: we had the Japanese approach, which is, hey, we have

1025
00:59:19,320 --> 00:59:22,160
Speaker 1: these vertically stacked Kurt Susan, you can't kill back of

1026
00:59:22,240 --> 00:59:26,360
Speaker 1: Minsubishi because you have Mitsubishi heavy industries in Mrsubishi Aerospace

1027
00:59:26,400 --> 00:59:29,960
Speaker 1: and MSUBSI real estate on top of that. And to

1028
00:59:29,960 --> 00:59:32,480
Speaker 1: to go Swedish and the United States would have wiped

1029
00:59:32,520 --> 00:59:37,800
Speaker 1: out Goldman sachs um Macy's general mode it right too.

1030
00:59:38,080 --> 00:59:40,680
Speaker 1: It would have been that sort of collapse. But why

1031
00:59:40,680 --> 00:59:44,040
Speaker 1: did this sort of thing work? In other countries with

1032
00:59:44,120 --> 00:59:48,040
Speaker 1: financial crises. Is it just that Sweden is so much

1033
00:59:48,080 --> 00:59:51,439
Speaker 1: smaller than us, Their financial crisis was just so much

1034
00:59:51,480 --> 00:59:56,959
Speaker 1: more you know, manageable or or what is philosophically different there?

1035
00:59:57,040 --> 00:59:59,760
Speaker 1: I think Sweden had maybe four major banks, you know,

1036
01:00:00,120 --> 01:00:04,160
Speaker 1: just a totally different scale. And don't delude yourself, taxpayers

1037
01:00:04,200 --> 01:00:06,479
Speaker 1: would have been a tremendous risk if the government would

1038
01:00:06,480 --> 01:00:09,440
Speaker 1: have taken over the major banks in the US. So

1039
01:00:09,520 --> 01:00:12,360
Speaker 1: it's not as if a risky strategy was pursued and

1040
01:00:12,400 --> 01:00:14,400
Speaker 1: it paid off and you got it take into account

1041
01:00:14,400 --> 01:00:16,880
Speaker 1: the cost of the risk. There was risk on either side.

1042
01:00:17,160 --> 01:00:19,960
Speaker 1: So it's it was a choice amongst risky strategies. It

1043
01:00:20,000 --> 01:00:24,160
Speaker 1: was the least bad solution, the least that had solutions.

1044
01:00:24,200 --> 01:00:26,680
Speaker 1: So let's let's go back to the FED a second.

1045
01:00:27,040 --> 01:00:29,960
Speaker 1: What else should the FED have done? And I have

1046
01:00:30,000 --> 01:00:35,240
Speaker 1: to remind people there were many very creative, very innovative

1047
01:00:36,320 --> 01:00:40,240
Speaker 1: policies put into place. If anybody was going to be

1048
01:00:40,400 --> 01:00:42,920
Speaker 1: the perfect FED chairman, it was the guy who was

1049
01:00:42,960 --> 01:00:45,600
Speaker 1: the student of the Great Depression and who was committed

1050
01:00:45,640 --> 01:00:49,440
Speaker 1: to not repeating those mistakes. So what else could or

1051
01:00:49,480 --> 01:00:53,560
Speaker 1: should the FED have done post crisis? A couple of things.

1052
01:00:54,000 --> 01:00:58,080
Speaker 1: And Uh, first of all, I think the FED could

1053
01:00:58,120 --> 01:01:00,520
Speaker 1: have done more to prevent the crisis. It could have

1054
01:01:00,600 --> 01:01:03,640
Speaker 1: raised lending standards, and that's something that Ned Gramlck had

1055
01:01:03,720 --> 01:01:07,240
Speaker 1: absolutely within the FED. And I think it had to

1056
01:01:07,240 --> 01:01:09,520
Speaker 1: do with the mindset of the FED, which is probably

1057
01:01:09,560 --> 01:01:12,400
Speaker 1: still there, that the banks could regulate themselves, that it

1058
01:01:12,480 --> 01:01:14,600
Speaker 1: didn't need to be very So let's let's back. Let

1059
01:01:14,640 --> 01:01:17,160
Speaker 1: me interrupt you right here. Ed Gramleck was a FED

1060
01:01:17,200 --> 01:01:19,520
Speaker 1: governor who had gone to Alan Greenspan, who was the

1061
01:01:19,520 --> 01:01:22,120
Speaker 1: FED chairman, and said, we have a problem. We have

1062
01:01:22,120 --> 01:01:23,880
Speaker 1: a problem with some problem lending. We have a problem

1063
01:01:23,880 --> 01:01:27,440
Speaker 1: with predatory loans. We have banks mending making loans to

1064
01:01:27,560 --> 01:01:30,880
Speaker 1: people who clearly can't pay them back, and when these default,

1065
01:01:30,920 --> 01:01:34,160
Speaker 1: it's going to cause a domino cascade. And and Ed

1066
01:01:34,280 --> 01:01:37,920
Speaker 1: unfortunately passed away before the crisis. But it turned out

1067
01:01:38,160 --> 01:01:41,560
Speaker 1: all of his warnings were tremendously precedent. He was a

1068
01:01:41,640 --> 01:01:45,080
Speaker 1: hundred percent correct, that's absolutely right. And the FED had

1069
01:01:45,120 --> 01:01:47,400
Speaker 1: it within their preview to say we're gonna require ten

1070
01:01:47,440 --> 01:01:50,320
Speaker 1: percent down payment, and if you had ten percent down payment,

1071
01:01:51,000 --> 01:01:53,320
Speaker 1: the value of a house falls by six seven percent.

1072
01:01:54,600 --> 01:01:57,840
Speaker 1: Owners not underwater and you're in a very different situation

1073
01:01:57,880 --> 01:02:00,680
Speaker 1: than if you have loans with nothing down or one

1074
01:02:00,720 --> 01:02:05,160
Speaker 1: two down. They were actually cash out homeport purchases where

1075
01:02:05,160 --> 01:02:07,520
Speaker 1: you could buy a house and take a second at

1076
01:02:07,520 --> 01:02:10,320
Speaker 1: the same time. So you walk into the house fifty

1077
01:02:10,720 --> 01:02:14,080
Speaker 1: dollars richer, no skin in the game, and every incentive

1078
01:02:14,160 --> 01:02:17,280
Speaker 1: to walk away. That's right. So I do hold the

1079
01:02:17,320 --> 01:02:22,560
Speaker 1: FED responsible UH for a very core component of the crisis.

1080
01:02:22,720 --> 01:02:26,520
Speaker 1: Not not exclusively, but they certainly were a major factor. Look,

1081
01:02:26,720 --> 01:02:28,920
Speaker 1: I mean if the private sector didn't have the collective

1082
01:02:28,920 --> 01:02:31,720
Speaker 1: delusion that home prices would continue to grow, we wouldn't

1083
01:02:31,720 --> 01:02:34,240
Speaker 1: have had the crisis too. So that there were many

1084
01:02:34,520 --> 01:02:36,800
Speaker 1: uh factors that led to the crisis. I don't think

1085
01:02:36,840 --> 01:02:39,160
Speaker 1: that one could say there was a single cause on

1086
01:02:39,200 --> 01:02:42,440
Speaker 1: the recovery. UM. I think where I would fault the

1087
01:02:42,480 --> 01:02:47,760
Speaker 1: FED was in prematurely ending UH quantitative easing. You would

1088
01:02:47,760 --> 01:02:52,160
Speaker 1: have extended it further, uh not QUE three, but say

1089
01:02:52,240 --> 01:02:54,280
Speaker 1: q E two, so I would have had a more

1090
01:02:54,320 --> 01:02:57,160
Speaker 1: continuous QUE two. I think they took the photo off

1091
01:02:57,200 --> 01:03:01,080
Speaker 1: the gas a little bit too soon, and that's led

1092
01:03:01,120 --> 01:03:03,439
Speaker 1: to this stop and start in terms of in terms

1093
01:03:03,440 --> 01:03:05,520
Speaker 1: of QWI. So I I know we don't have you

1094
01:03:05,560 --> 01:03:08,480
Speaker 1: for very much longer. Let let me ask you one

1095
01:03:08,520 --> 01:03:11,920
Speaker 1: more related question on the FED. Bill Gross had an

1096
01:03:11,920 --> 01:03:15,680
Speaker 1: interesting observation about FED rates, and he said, you know,

1097
01:03:15,720 --> 01:03:18,400
Speaker 1: if the FED didn't take rates down to zero, had

1098
01:03:18,440 --> 01:03:21,920
Speaker 1: they stopped at one percent, it would have allowed the

1099
01:03:21,920 --> 01:03:24,360
Speaker 1: economy to appear a little more normal. It would have

1100
01:03:24,400 --> 01:03:27,200
Speaker 1: allowed them to have a little more flexibility, and then

1101
01:03:27,240 --> 01:03:29,880
Speaker 1: all the screaming about zurup and zero bound and everything

1102
01:03:29,920 --> 01:03:33,800
Speaker 1: else would have gone away, and the process of normalizing

1103
01:03:34,640 --> 01:03:37,640
Speaker 1: of federal reserve policy would have been a little easier.

1104
01:03:38,160 --> 01:03:43,120
Speaker 1: What are your thoughts on that. I find that argument

1105
01:03:43,160 --> 01:03:46,000
Speaker 1: hard to accept, given that the tailor rule says we

1106
01:03:46,040 --> 01:03:48,800
Speaker 1: should have negative rates, so the FED went as far

1107
01:03:48,840 --> 01:03:50,960
Speaker 1: as it could go, and then it actually reinvented the

1108
01:03:51,000 --> 01:03:56,160
Speaker 1: playbook by going a quantitative easing. So uh, to me,

1109
01:03:56,200 --> 01:03:58,320
Speaker 1: that argument doesn't make much sense. And I think we've

1110
01:03:58,360 --> 01:04:00,840
Speaker 1: seen some countries make that miss stake and then they

1111
01:04:01,000 --> 01:04:02,640
Speaker 1: decided to go all the way down to zero or

1112
01:04:02,640 --> 01:04:05,400
Speaker 1: as close as they can go. So in the final

1113
01:04:05,480 --> 01:04:08,080
Speaker 1: few minutes we have let me ask you um one

1114
01:04:08,160 --> 01:04:10,640
Speaker 1: or two more questions, and and I have my favorite question.

1115
01:04:10,680 --> 01:04:14,600
Speaker 1: I ask everybody first, UM, what shifts do you see

1116
01:04:14,640 --> 01:04:17,880
Speaker 1: coming up? What? What are people not really thinking about

1117
01:04:18,360 --> 01:04:21,800
Speaker 1: that they really might should be aware of. Well, I'm

1118
01:04:21,800 --> 01:04:24,800
Speaker 1: sure people are thinking about it, but demographic shifts are

1119
01:04:24,800 --> 01:04:27,960
Speaker 1: having a tremendous effect on the US. Slower growth in

1120
01:04:28,000 --> 01:04:31,920
Speaker 1: the working age population, uh, slower rate of immigration to

1121
01:04:32,040 --> 01:04:37,439
Speaker 1: the US. I think, uh, we missed a major opportunity

1122
01:04:37,480 --> 01:04:41,400
Speaker 1: to reform our immigration system. Disappointed that Congress wasn't able

1123
01:04:41,440 --> 01:04:43,880
Speaker 1: to pass the bill. The Senate bill, which was not

1124
01:04:44,000 --> 01:04:46,400
Speaker 1: a perfect bill, would have been a big improvement over

1125
01:04:46,400 --> 01:04:50,120
Speaker 1: our current system. Um. And I think businesses need to

1126
01:04:50,120 --> 01:04:53,440
Speaker 1: give a lot of thought to how the aging of

1127
01:04:53,440 --> 01:04:58,720
Speaker 1: the US population, the slower UH or decline in labor

1128
01:04:58,760 --> 01:05:01,160
Speaker 1: force participation of women, how that's going to affect their

1129
01:05:01,160 --> 01:05:03,680
Speaker 1: business model. How can they make work more flexible so

1130
01:05:03,760 --> 01:05:07,880
Speaker 1: they can attract more workers? And then my final question

1131
01:05:07,920 --> 01:05:10,800
Speaker 1: I ask everybody the same thing, and I'll ask you this,

1132
01:05:11,440 --> 01:05:15,600
Speaker 1: what do you know about your profession about economics today

1133
01:05:15,600 --> 01:05:20,760
Speaker 1: that you wish you understood when you first started out? Oh,

1134
01:05:20,760 --> 01:05:23,520
Speaker 1: there are a lot of things, um uh. You know,

1135
01:05:23,560 --> 01:05:29,240
Speaker 1: the economics profession is an amazing, amazing field. Economics for me,

1136
01:05:29,280 --> 01:05:32,240
Speaker 1: it was attractive because it's about people about what matters

1137
01:05:32,240 --> 01:05:34,560
Speaker 1: in people's lives. And I don't think there's anything more

1138
01:05:34,600 --> 01:05:37,560
Speaker 1: important than having a job so you can support a family.

1139
01:05:38,160 --> 01:05:41,920
Speaker 1: Uh So that's why I went into labor economics. Uh.

1140
01:05:42,160 --> 01:05:44,720
Speaker 1: I think we don't have enough diversity of views in economics.

1141
01:05:44,960 --> 01:05:47,360
Speaker 1: I think people cling very tightly to their views, and

1142
01:05:47,400 --> 01:05:50,480
Speaker 1: maybe that human nature, people are slow to update, to

1143
01:05:50,600 --> 01:05:57,240
Speaker 1: change their mind in spite of evidence. And um, I

1144
01:05:57,280 --> 01:05:59,840
Speaker 1: think it would be healthier for economics if we took

1145
01:05:59,840 --> 01:06:02,600
Speaker 1: a broader view. Just just one very simple area is

1146
01:06:02,760 --> 01:06:07,400
Speaker 1: more economic history. Uh. We tend not to emphasize economic

1147
01:06:07,560 --> 01:06:11,280
Speaker 1: history and graduate education in economics, and the crisis that

1148
01:06:11,320 --> 01:06:14,840
Speaker 1: we lived through had many elements in common with past

1149
01:06:15,240 --> 01:06:18,040
Speaker 1: financial crisis. And I think one would have done very

1150
01:06:18,040 --> 01:06:21,360
Speaker 1: well to understand Charles Kindle Burger's work, work on manyas

1151
01:06:21,400 --> 01:06:26,520
Speaker 1: and panics and crashes, understand the Great Depression. Uh So

1152
01:06:26,560 --> 01:06:31,080
Speaker 1: I'd like to see economic history become a part of

1153
01:06:31,080 --> 01:06:33,400
Speaker 1: the core and economics. You know, there's there's the old

1154
01:06:33,440 --> 01:06:36,880
Speaker 1: quote Wolf Street. People are notorious about failing to learn

1155
01:06:36,920 --> 01:06:39,680
Speaker 1: from the past. Um, And there are all sorts of

1156
01:06:39,760 --> 01:06:43,160
Speaker 1: variations of that. If someone wanted to find your work, UM,

1157
01:06:43,280 --> 01:06:45,320
Speaker 1: where would they go. How do they how do they

1158
01:06:45,360 --> 01:06:48,840
Speaker 1: track down things you're producing? I have a web page

1159
01:06:48,880 --> 01:06:52,240
Speaker 1: which has all of my research on it www dot

1160
01:06:52,400 --> 01:06:55,760
Speaker 1: Krueger k are you e G E R dot Princeton

1161
01:06:55,800 --> 01:06:59,480
Speaker 1: dot e du and the link there will will bring

1162
01:06:59,480 --> 01:07:03,000
Speaker 1: people to research. So that was my interview with Alan

1163
01:07:03,040 --> 01:07:07,720
Speaker 1: Krueger from the spring of Earlier this week, we learned

1164
01:07:07,720 --> 01:07:11,160
Speaker 1: some unfortunate news. Uh. He took his own life and

1165
01:07:11,200 --> 01:07:15,360
Speaker 1: we were deeply sinned by the loss. It really was

1166
01:07:15,400 --> 01:07:18,480
Speaker 1: a privilege being able to sit down with him. One

1167
01:07:18,480 --> 01:07:20,680
Speaker 1: other thing I have to share about Alan Krueger. I

1168
01:07:20,720 --> 01:07:23,600
Speaker 1: was fortunate enough to have lunch with him before my

1169
01:07:23,680 --> 01:07:26,840
Speaker 1: interview with Serena Williams, where he fed me a bunch

1170
01:07:26,880 --> 01:07:30,360
Speaker 1: of of questions. I've only been playing tennis a few years.

1171
01:07:30,360 --> 01:07:33,160
Speaker 1: He's been playing for a lifetime, and he was just

1172
01:07:33,440 --> 01:07:36,680
Speaker 1: so generous with his time and so kind and helpful. Uh.

1173
01:07:36,800 --> 01:07:40,360
Speaker 1: He helped make not only his interview great, but the

1174
01:07:40,440 --> 01:07:44,400
Speaker 1: interview that I did with Serena that much better. Just

1175
01:07:44,480 --> 01:07:49,000
Speaker 1: a charming, generous, wonderful man and he will be greatly missed.

1176
01:07:49,600 --> 01:07:52,840
Speaker 1: I'm Barry Ritults. You're listening to Masters in Business on

1177
01:07:52,960 --> 01:08:01,040
Speaker 1: Bloomberg Radio. Ex