Speaker 1: Pushkin from Pushkin Industries. This is Deep Background, the show
Speaker 1: where we explore the stories behind the stories in the news.
Speaker 1: I'm Noah Feldman. According to a report released by the
Speaker 1: Commerce Department this week, US consumer spending in September sunk
Speaker 1: to its lowest rate in seven months. This is just
Speaker 1: the latest data point of many that seemed to suggest
Speaker 1: we may be headed for a recession. Prakash Langani is
Speaker 1: an advisor at the International Monetary Fund. Before that, he
Speaker 1: was an analyst at the Federal Reserve Board's International Finance Division.
Speaker 1: He has spent a lot of time thinking about recessions
Speaker 1: and how economists predict them or don't. Prakash, thank you
Speaker 1: so much for joining me. I want to start with,
Speaker 1: as it were, recessions one oh one. You know, the
Speaker 1: other day, my fourteen year old son said to me, Dad, actually,
Speaker 1: what's the definition of a recession? And I got up
Speaker 1: to my two quarters in a row of negative growth
Speaker 1: of GDP and then I had to pause. So tell us,
Speaker 1: first of all, you know, what is the definition of
Speaker 1: recession that economists use? And also how did they come
Speaker 1: up with this definition, because you know, two quarters in
Speaker 1: a row seems vaguely arbitrary. Well, I think I think
Speaker 1: the first thing, if I was in charge, I would
Speaker 1: do is to ban the world real GDP. I think
Speaker 1: we should just call it incomes, and that resonates more
Speaker 1: with the general person. So a recession is a year
Speaker 1: in which incomes fall, and you're right that there's nothing
Speaker 1: magical about saying they should fall two quarters in a row.
Speaker 1: We could have picked one, or we could have picked three.
Speaker 1: Two was just kind of a rule of thumb that
Speaker 1: seemed to suggest that bad things were going to happen.
Speaker 1: So I think it's better to just think of a
Speaker 1: recession as a year in which your income is going
Speaker 1: to fall. That's an extremely superior that's definitely a much
Speaker 1: superior definition of recession. Why don't economists all use that,
Speaker 1: considering how much clearer it is. I don't know. I
Speaker 1: think we got addicted to this word real GDP, which
Speaker 1: means nothing to your son or to an ordinary person.
Speaker 1: I think if you told my son his income was
Speaker 1: going to fall, you'll get his attention immediately. But you know,
Speaker 1: I think there is you know, each each profession has
Speaker 1: its jargon. I don't want to be too harsh on
Speaker 1: my fellow economists, but it could be worse. You could
Speaker 1: be lawyers, believe me, right, always get worse. So a
Speaker 1: recession basically is a year in which your income is
Speaker 1: likely to fall. And that's unusual because at least since
Speaker 1: the Industrial Revolution the last two hundred three hundred years,
Speaker 1: incomes generally go up every year. So that's been a
Speaker 1: good thing that's happened to us as a species. But
Speaker 1: so recessions are unusual, but not that rare. Recessions happen
Speaker 1: about twelve fifteen percent of the time, so it's something
Speaker 1: to keep an eye on, and that's why I've been
Speaker 1: trying to study them. Well, that's actually conceptually very interesting
Speaker 1: and also very helpful. So the first point you made,
Speaker 1: namely that we treat a recession, at least colloquially, like
Speaker 1: it's this terrible thing. But that's against the backdrop of
Speaker 1: the assumption that our incomes should somehow always go up.
Speaker 1: And as you say, it's great for our species that
Speaker 1: that be the case. But what underpins that commitment to
Speaker 1: the idea of steady growth? I mean, that's even before
Speaker 1: you reach the thought that nothing grows all the time.
Speaker 1: And as you say, twelve to fifteen percent at the
Speaker 1: time we're actually not growing. But starting with the background assumption,
Speaker 1: this is a good opportunity to ask an economist, why,
Speaker 1: in the view of most people in the field, should
Speaker 1: we assume that somewhere between you know, eighty eight and
Speaker 1: eighty five percent at the time, our incomes will go up.
Speaker 1: I think, you know, what's happened is that since the
Speaker 1: industrial Revolution, we've generally found a way of doing things better.
Speaker 1: Every year, you know, you and I kind of find
Speaker 1: a way of doing our jobs better, aided by technology,
Speaker 1: aided by our own brains. Would say, you know, I
Speaker 1: screwed up on this and that last year. I'm not
Speaker 1: going to repeat it. I think because of what economists
Speaker 1: in their jargon called technological progress, our incomes have been
Speaker 1: going up at about two percent a year in sometimes
Speaker 1: the United States. Now, so the United States has had
Speaker 1: adjusted for inflation, it has had incomes go up two
Speaker 1: percent a year. And so because of technological progress, Now,
Speaker 1: should we always assume that will be the case as
Speaker 1: long as you know, we can find ways of doing
Speaker 1: our jobs better. Probably should we as we grow richer
Speaker 1: gets obsessed about having a two percent increase every year.
Speaker 1: Probably not, But still I think most people would say,
Speaker 1: having incomes go up at some reasonable rate is better
Speaker 1: than having them fall for sure. Yeah. So let me
Speaker 1: ask you a push about cycles. So if we had
Speaker 1: you know, a regular prediction of two percent growth over
Speaker 1: some period of time, you know, over say ten years,
Speaker 1: and yet we had some we knew that with some probability,
Speaker 1: there is going to be you know, randomness in the system,
Speaker 1: and sometimes it would go down, then we would expect that.
Speaker 1: You know, again, if you're around twelve to fifty percent
Speaker 1: more than one in ten times in a ten year period,
Speaker 1: we would have a recession. Right, So is that cyclical
Speaker 1: way of thinking about recessions a healthier way to think
Speaker 1: about it? In other words, don't panic and think that
Speaker 1: every recession is the harbinger of things in general getting worse.
Speaker 1: But just see it as you know, we're flipping the
Speaker 1: coin and you know over time it's going to even out. Yeah.
Speaker 1: I think you know. That's why you're seeing people worry
Speaker 1: about a recession right now, is because we've had an
Speaker 1: expansion of eight, nine, ten years, and people know that
Speaker 1: in the past at least expansions have not gone on
Speaker 1: for twenty years. So I think you're seeing a lot
Speaker 1: of people correctly worrying about the fact that if you
Speaker 1: have an expansion that's long in the tooth, it's about
Speaker 1: time to start worrying about whether it's going to keep going.
Speaker 1: And I think that, as you say that is the
Speaker 1: healthy way to think about it is that you know,
Speaker 1: recessions are kind of like the hurricanes of economic life.
Speaker 1: I mean, you know, with hurricanes, you have a hurricane season,
Speaker 1: so you have a bit of an edge, you know,
Speaker 1: went to look for them. But still we know that
Speaker 1: expansions don't go on forever, so having a long expansion
Speaker 1: means that we should start thinking about is the next
Speaker 1: one around the corner. And I think it's actually healthy
Speaker 1: that there has been all this concern about whether we're
Speaker 1: going into a recession. Speaking about hurricanes and predictions, you
Speaker 1: when your co authors wrote a much cited and very
Speaker 1: interesting paper which you published last year, suggesting that economists
Speaker 1: don't do that well at predicting recessions because they're, on
Speaker 1: the whole economists are too optimistic about growth and so
Speaker 1: they miss a significant number of the recessions that are
Speaker 1: out there. Tell me a little bit about what motivated
Speaker 1: you to do the study and what takeaway we should
Speaker 1: have from it. What sort of motivated me was, frankly,
Speaker 1: my own horrible forecasting record. So twenty years ago, I
Speaker 1: was my job when I was at the FED was
Speaker 1: to forecast economic growth for Korea. And you know, my
Speaker 1: boss had given me the job, saying, you know, God,
Speaker 1: I'm giving you the job of a lifetime. These countries
Speaker 1: grow seven percent a year, nothing changes, and I'm giving
Speaker 1: you the job of forecasting this. You should be thanking me.
Speaker 1: And this was, you know, nineteen ninety seven, and you know,
Speaker 1: people said, oh, something's going wrong in Korea. I said, okay, fine,
Speaker 1: I'll cut my forecast down from seven percent to three percent,
Speaker 1: which for me was like a huge deal. And people said, no, no, no,
Speaker 1: we think there's something else going on. These were, you know,
Speaker 1: people who were not even following Korea. These were people
Speaker 1: who were just talking to friends, reading the newspaper. And
Speaker 1: here I was kind of the sophisticated forecaster, and you know,
Speaker 1: I dug in my heels. I've very grudgingly, towards the end,
Speaker 1: cut my forecast to minus three as the year was ending.
Speaker 1: You know, Korea ended up at minus seven that year.
Speaker 1: So you know, I've always been intrigued about whether it
Speaker 1: was just me being terrible or if this was something
Speaker 1: that all my friends were also subject to. And lo
Speaker 1: and behold, as you said, I found that the record
Speaker 1: is just terrible. I mean, as you saw in that study.
Speaker 1: You know, we studied one hundred and fifty s recessions
Speaker 1: and only five were predicted a year in advance. And
Speaker 1: you might say that's a very very high bar to set,
Speaker 1: but you know, you can lower the bar and still
Speaker 1: the forecasting performance remains really bad. And you know, one
Speaker 1: fourth of recessions remain undetected even as the year is ending.
Speaker 1: So it's like forecasters are just not aware that the economy,
Speaker 1: it will turn out, has been in a recession the
Speaker 1: whole year, and one fourth of we can't even tell
Speaker 1: that the economy. It's only later and then the following year,
Speaker 1: the year after the rains have gone, that people will say, oh,
Speaker 1: it was raining, did you know so? But that makes
Speaker 1: it seem a little less bad, because if it's so
Speaker 1: difficult to detect the recession even when it's actually in action,
Speaker 1: it makes it seem like it will be much more
Speaker 1: difficult to predict it in advance, right, I mean, as
Speaker 1: you say, when it's raining, we know that it's raining, right,
Speaker 1: So that implies that rain is a binary, which maybe
Speaker 1: is not true if you live in England or Scotland.
Speaker 1: Maybe it's always a little bit raining. But I mean,
Speaker 1: imagine that rain is a binary either it's raining or
Speaker 1: it's not raining, and then it makes it easier to detect,
Speaker 1: and that, in turn, you would think would have some
Speaker 1: effect on our capacity to predict it. But if something's
Speaker 1: very hard even to detect, surely it should be even
Speaker 1: more difficult to predict. I mean, maybe only a handful
Speaker 1: out of one hundred and fifty three recessions doesn't seem
Speaker 1: like a very good success rate. Maybe we just have
Speaker 1: the wrong baseline. Maybe it should be hard to predict.
Speaker 1: That's the defense that many of my fellow economists offer.
Speaker 1: I mean I don't I don't fully buy it. I
Speaker 1: think that there is a bit of complacency. I think
Speaker 1: the suffering that in recessions inflicts on people is not
Speaker 1: really felt by my fellow economists and the salary jobs
Speaker 1: that you know, Yeah, I think we have to protected.
Speaker 1: I mean we are an I mean many of us
Speaker 1: are have high levels of education. We kind of managed
Speaker 1: to hold our jobs through recessions. I think if we
Speaker 1: were the common person, we would demand that economists try
Speaker 1: to do a better job. I mean, you know, fifty
Speaker 1: sixty years ago, we would completely bad at predicting hurricanes,
Speaker 1: and you know, hurricanes had used to have major loss
Speaker 1: of life following that, and we didn't. We said this
Speaker 1: is not acceptable because you know, people are dying. And
Speaker 1: I think we just don't see the damage that recessions
Speaker 1: inflict in the same way. And if we did, we
Speaker 1: would demand that economists try to do a better job.
Speaker 1: I mean, you're right that we may not be able
Speaker 1: to do so with complete success. I mean weather forecasters
Speaker 1: who are predicting hurricanes often, as we know, get us
Speaker 1: all worried, and then the hurricane changes course and they
Speaker 1: say sorry, falls along. But we don't blame them, you know,
Speaker 1: we said they're doing their best job. They're trying to
Speaker 1: protect us. I think economic forecasters should be treated the
Speaker 1: same way. I mean, these are people who are trying
Speaker 1: to protect us from job loss, which has you know,
Speaker 1: just as devastating consequences as what hurricanes do. I mean,
Speaker 1: you were asking me what got me motivated? One thing
Speaker 1: that also got me motivated in addition to My own
Speaker 1: poor forecast was that I was unemployed for a year
Speaker 1: and I could see the effects it had on me.
Speaker 1: And I've been studying the effects of what unemployment does
Speaker 1: to people, and so I've become very passionate about saying,
Speaker 1: you know, we should try to forecast recessions, we should
Speaker 1: try to take steps ahead of time so that we
Speaker 1: can prevent job loss during recessions. Well, those are That's
Speaker 1: a very fascinating perspective on it, and I appreciate that
Speaker 1: having had the experience of unemployment must raise your awareness
Speaker 1: and consciousness. And that actually brings me to the question
Speaker 1: that I wanted to follow up on, which is, let's
Speaker 1: think a little bit about the incentives of predictors. So
Speaker 1: you mentioned that when the meteorologists predict a hurricane and
Speaker 1: then the hurricane misses us or doesn't happen, we don't
Speaker 1: get that angry at them, yep. But that goes to
Speaker 1: their incentives, right, I mean, when they predict a hurricane
Speaker 1: and it doesn't come, we just think, instead of directing
Speaker 1: anger towards them or blaming them for the research us
Speaker 1: that we might have spent in preparing for the hurricane, unnecessarily,
Speaker 1: we say, oh, we're so glad, so overwhelmingly please that
Speaker 1: we weren't hit by a hurricane that that outweighs any irritation,
Speaker 1: and we might feel towards the meteorologists. And you know,
Speaker 1: if we expand from hurricanes to let's call them winter storms.
Speaker 1: You know, I'm from Boston and I still live in
Speaker 1: the Boston area, and you know, the prediction of great
Speaker 1: sizeable winter storms is an industry where great profits are
Speaker 1: made by local media, by local radio and television, because
Speaker 1: people will watch them if they predict a storm, and
Speaker 1: so they systematically I mean I've never read a study
Speaker 1: about this, but I would bet almost anything that you
Speaker 1: could show it into study that they systematically over predict
Speaker 1: storms because it's good for ratings, and as you point out,
Speaker 1: there's not that much downside for them if there's there's
Speaker 1: no storm. They don't internalize the full externality of the
Speaker 1: full spillover costs of their having made predictions. What about economists,
Speaker 1: I mean, if they predict recession, do they have something
Speaker 1: to lose? And I'm looking for some motivational account. I'm
Speaker 1: trying to be a good economist or a good you know,
Speaker 1: rational actor economists and see if there's some motivational explanation
Speaker 1: for why economists underpredict recession. Yeah, I've I've been studying
Speaker 1: that a lot too. I mean, I you know, many
Speaker 1: of these forecasters who have been studying are actually you know, friends,
Speaker 1: and I can talk to them, and for them, the
Speaker 1: reputational loss from falsely calling a recession would be huge.
Speaker 1: That's that's how they perceive it. And what they tell
Speaker 1: me is that they will make a forecast that things
Speaker 1: could be kind of bad, but they don't go into
Speaker 1: negative territory. But when they go to meet their clients,
Speaker 1: they may say, well, you know, I didn't want to
Speaker 1: move my forecast down into negative, but privately, I'm telling
Speaker 1: you I'm really worried. So they say they would prefer
Speaker 1: to do that then to go out and make a call.
Speaker 1: And there's a very good example from some years ago.
Speaker 1: There's this really nice place called the Economic Cycle Research Institute,
Speaker 1: which really tries to forecast recessions. And in September twenty eleven,
Speaker 1: their lead guy, Lakshmanachuthan, went on Bloomberg and said, there's
Speaker 1: going to be a recession called. He said, We've been
Speaker 1: telling our clients privately, but I feel I have an
Speaker 1: obligation to tell everyone else the public, that there's going
Speaker 1: to be a recession, and that recession didn't happen. And
Speaker 1: you know, for a year, Bloomberg would keep inviting this
Speaker 1: guy back. He would say, it's going to happen, It's
Speaker 1: going to happen. And then one year later he had
Speaker 1: to say, well, it turned out to be a false alarm.
Speaker 1: And my sense is that that did not do wonders
Speaker 1: for his reputation or the reputation of his company. And
Speaker 1: to me, that's unfortunate because I don't see that he
Speaker 1: was making that call either to become famous or to
Speaker 1: make money. He had already told his clients privately, but
Speaker 1: he just felt, here, we've just gone through the Great Recession.
Speaker 1: He was truly worried his company, based on their indicators,
Speaker 1: that twenty twelve would be a recession, and he thought
Speaker 1: it was a public duty. Just as with hurricanes, we
Speaker 1: think it's a public duty of forecasters to tell us
Speaker 1: if a hurricane is coming. He thought it was his
Speaker 1: public duty to do so. And the experience didn't end
Speaker 1: up well. I can picture two different stories about why
Speaker 1: in this case that you describe, it's so costly for
Speaker 1: an economist to predict a recession and not have it happened.
Speaker 1: So one is a story about safety in numbers. Right
Speaker 1: on this story, it's sort of conventional that most of
Speaker 1: the time there isn't a recession, and so economists defaults
Speaker 1: to predicting that there won't be a recession. And then
Speaker 1: if one person wants to say there will be a reception,
Speaker 1: he or she has got to put himself on the
Speaker 1: wine go out there. And then if he's right, sure,
Speaker 1: people might say he's a genius. But more of the
Speaker 1: time he's going to be wrong than right, and it's
Speaker 1: very costly because he's an outliers. He's stuck his neck
Speaker 1: out and others have not done so. And in that story,
Speaker 1: you might be able to fix this if more economists
Speaker 1: were willing to predict recessions simply by virtue of there
Speaker 1: being more numbers. You know, we're getting a group together,
Speaker 1: you might be able to fight off that that cost.
Speaker 1: The other story, though, is a story about self fulfillment.
Speaker 1: It might be that we sort of imagine that if
Speaker 1: enough economists say there's going to be a recession, that
Speaker 1: that has a recursive effect and helps drive a recession.
Speaker 1: Since there is some element of expectation having an effect
Speaker 1: on real world events, and so on that theory, we
Speaker 1: collectively we really don't want economists to say there's going
Speaker 1: to be a recession. We might know that they are
Speaker 1: under predicting recessions, but we like that because as a
Speaker 1: social matter, we prefer the optimism because we know that
Speaker 1: once in a while, too much pessimism can actually bring
Speaker 1: about a bad result. Do either these stories make any
Speaker 1: sense to either of them? Correspond to how you see
Speaker 1: the world? Yeah? No, I think the second thing that
Speaker 1: you mentioned is the only to me justifiable reason for
Speaker 1: caution in predicting recessions, because of the self fulfilling nature.
Speaker 1: You know. That's that's the difference between economic forecasting and
Speaker 1: weather forecasting. You know, we take preventative actions, but we
Speaker 1: don't influence whether or not there will be a hurricane,
Speaker 1: whereas with recessions there can be the self fulfilling nature.
Speaker 1: But to me, we are so far from having to
Speaker 1: worry about that, because, as I said, we are in
Speaker 1: a corner where we almost never predict a recession, even
Speaker 1: though they happen twelve to fifteen percent of the time.
Speaker 1: So to me, it's worth the risk of saying, let's
Speaker 1: try to move to a sort of world where we
Speaker 1: are always somewhat worried about recession. If a recession has
Speaker 1: just happened, I would say, then don't worry about it,
Speaker 1: because you know, if recovery has taken hold, it tends
Speaker 1: to be self perpetuating for a while, and it's fine.
Speaker 1: But once you get two, three years, four years into
Speaker 1: an expansion, then you start judging and trying to see
Speaker 1: what the odds are. So I think the language and
Speaker 1: the terminology should shift into more about, you know, what
Speaker 1: is the likelihood, and then you know, to be open
Speaker 1: about the fact that at at some times there will
Speaker 1: be a divergence in opinion, and then people can decide
Speaker 1: on that basis whether or not they want to make adjustments.
Speaker 1: So now we're in a moment when some economists really
Speaker 1: are starting to talk about a prediction of recessions. So
Speaker 1: let's talk a little bit about some of the indications.
Speaker 1: One is, you mentioned already that when a recovery has
Speaker 1: lasted for a good long time, it's getting I think
Speaker 1: you said long in the truth. Just statistically it seems
Speaker 1: probable there will there will come to an end at
Speaker 1: some point because you know, if you just look at
Speaker 1: the probability distributions, it's been the X number of years
Speaker 1: and so it's probably going to be over soon. Another
Speaker 1: is the so called inverted yield curve in the bond markets. Yeah,
Speaker 1: maybe let's take them in order. Let's start with the
Speaker 1: just the numbers game. You know, it's been a while,
Speaker 1: and then from there we can you can explain the
Speaker 1: inverted yield curve to us, and we can we can
Speaker 1: try to look at that a little more closely. Yeah. No,
Speaker 1: I think the you know, the duration of expansions has
Speaker 1: some predictive power for whether or not there will be
Speaker 1: a recession. So I think that's certainly one factor. But
Speaker 1: I think, off the other indicators, the yield curve is
Speaker 1: the most promising one, and the fact that it has
Speaker 1: inverted now, and that it had inverted prior to the
Speaker 1: previous five recessions, is something that we should take into account.
Speaker 1: So let me run by what I try to I'll
Speaker 1: give you my attempt to explain to my fourteen year
Speaker 1: old what the inverted yield curve was, and tell me
Speaker 1: where I where I went wrong. What I said to
Speaker 1: him was, look what's going on in an inverted yield
Speaker 1: curve is that people who are setting interest rates believe
Speaker 1: that the economy is likely to be much better over
Speaker 1: a long term than they expect it to be over
Speaker 1: the short term. And that's why it's a higher interest
Speaker 1: rate over the long term than it is over the
Speaker 1: short term. And that reflects I suggested, I think, maybe wrongly,
Speaker 1: a prediction that things are going to get worse before
Speaker 1: they're going to get better, as opposed to the more
Speaker 1: normal set of circumstances, where we think that that something
Speaker 1: out in the future is more uncertain and in the
Speaker 1: nearer future we're able to identify with a greater probability
Speaker 1: that things will go well, and so therefore the usual
Speaker 1: model is for the interest rates to be the other
Speaker 1: way around. Right, So where in that analysis did I
Speaker 1: go wrong? And I think that's that's exactly right. That
Speaker 1: is one of the channels. One channel that we typically
Speaker 1: used to say was that the FED or policymakers had
Speaker 1: somewhat more information about which way the economy was headed,
Speaker 1: and they were worried about the near term, and so
Speaker 1: short term interest rates were being lowered. But the problem
Speaker 1: this time is that the short term interest rates have
Speaker 1: been low for almost a decade now, right, So it
Speaker 1: can't be a good predictor that they think things are
Speaker 1: going to get Yeah, it can't be seems to switch
Speaker 1: to being some other thing. It's like now it's a
Speaker 1: feature of political economy that Yeah. So I think there
Speaker 1: are pressures on the FED, including from the president, but
Speaker 1: even before this president, other people were putting pressure on
Speaker 1: the FED to try to keep the interest rates low
Speaker 1: and to keep the markets happy. Yeah. I mean that's
Speaker 1: a constant of presidential wish list, is you know? Right
Speaker 1: every president, every president would like people to be able
Speaker 1: to borrow for relatively little money, right, Yeah. So going
Speaker 1: back a bit to our discussion on the recession, I
Speaker 1: think at this point, given the imprecision of our forecasts,
Speaker 1: it's ridiculous to be worrying about decimal places on our forecast.
Speaker 1: I mean, you know, changing a forecast from three point
Speaker 1: four to three point two is just meaningless given the
Speaker 1: range of error. So I think if we shift the
Speaker 1: discussion more to likelihoods of bad things happening, like recessions,
Speaker 1: then the discussion will also be more about what policy
Speaker 1: steps can we take now, either to keep the recession
Speaker 1: from happening or if we see a recession happening, what
Speaker 1: steps will we take? And I think fiscal policy is
Speaker 1: going to play a very big role, namely finding ways
Speaker 1: to put money quickly in the pockets of people and companies.
Speaker 1: And I think I see a bit of hope there
Speaker 1: because all this talk about whether or not a recession
Speaker 1: will happen is provoking at least some very sensible people
Speaker 1: to think about, you know, what would we do if
Speaker 1: if he really started to think that a recession was
Speaker 1: on its way, or if we recognized it early enough,
Speaker 1: you know, what would we do? What do you consider
Speaker 1: to be the most the most promising. I think money
Speaker 1: in people's pockets is what you're talking about. Yeah, exactly.
Speaker 1: I think that some of the things that were done
Speaker 1: during the Great Recession kind of you know, either through
Speaker 1: some kind of cash transfer or some other schemes which
Speaker 1: turned out to be pretty promising in countering the depth
Speaker 1: of the Great Recession, are what people are talking about. So,
Speaker 1: you know, Heather Bouchet at the Washington Center for Equitable
Speaker 1: Growth and Jay Shamba of the Hamilton Project at Brookings,
Speaker 1: they have a new book basically on you know, how
Speaker 1: to be recession ready, and to me, Again, this goes
Speaker 1: back to the kind of analogy with hurricanes. I mean,
Speaker 1: we don't know when it's coming or where it will
Speaker 1: hit the most, but we ought to be recession ready
Speaker 1: and think about what schemes we have, And indeed, the
Speaker 1: most promising thing in my view, is to just have
Speaker 1: ways of providing direct stimulus, basically finding ways of giving
Speaker 1: cash to people who will be a acted. So there
Speaker 1: are people, including at the fair, who are thinking about
Speaker 1: some kind of rules that would go into place, which
Speaker 1: says if unemployment in a certain region goes up x percent,
Speaker 1: we would immediately start giving checks to people there and
Speaker 1: so on. And I think that that's exactly the way
Speaker 1: we do with hurricanes. We say who's getting affected? You know,
Speaker 1: where are the floods, what do people need? And we
Speaker 1: provide that help. And I think that's what we should
Speaker 1: be doing with recessions. Well, that's an optimistic way of
Speaker 1: thinking because it offers us some tool to address it,
Speaker 1: and I want to I just want to close by
Speaker 1: asking Percash, how bad do you think this one is
Speaker 1: going to be? I mean, you've been pretty clear that
Speaker 1: you think a recession is is coming. Do you think
Speaker 1: it will be a long one? Do you think that
Speaker 1: it has the capacity to be more than a recession,
Speaker 1: and that obviously will have serious consequences for the policy
Speaker 1: recommendations that you make. Well, first, to be clear, so
Speaker 1: I don't lose my own jobs. Everything I've said is
Speaker 1: my view and not the IMFs. I think the IMA
Speaker 1: is still predicting two percent growth in the United States
Speaker 1: and mostly and elsewhere, and you've told us exactly why
Speaker 1: go on? Yeah, so you know, making clear that these
Speaker 1: are my own views, but my own views that are
Speaker 1: based on the fact that, as I said, expansions that
Speaker 1: get long in the tooth tend to end, and so
Speaker 1: in terms of probabilities, I think we should be prepared
Speaker 1: based on the yield curve, based on a couple of
Speaker 1: other indicators, consumer sentiment, there is the Institute of Supply
Speaker 1: Management's index. I think based on all these there's enough
Speaker 1: reason to be prepared for one. My own personal view
Speaker 1: is that, you know, this doesn't need to be a
Speaker 1: d procession. I think we went through essentially the next
Speaker 1: Great Depression just a decade ago. So I think with
Speaker 1: preparedness and particularly with an attitude that says we have
Speaker 1: to think about what policy responses we can put in place,
Speaker 1: we should be well to write it out. Thank you
Speaker 1: very much, Percussion. Those are very very helpful points, and
Speaker 1: I'm very very grateful to you for your description. Thank you.
Speaker 1: Thanks No, it's a pleasure. Now for our sound of
Speaker 1: the week. That was the sound of victory, specifically victory
Speaker 1: in the National League pennant for the Washington Nationals, sending
Speaker 1: them to the World Series for the first time in
Speaker 1: the recent history of their franchise. The truth is that
Speaker 1: for a Washington DC team to go to the World
Speaker 1: Series is a kind of world historical event. The last time,
Speaker 1: and indeed the only time a baseball franchise in our
Speaker 1: nation's capital one a World Series was in nineteen twenty four.
Speaker 1: That's nearly a century ago, and Walter Johnson, one of
Speaker 1: the greatest pitchers of all time, was still pitching for
Speaker 1: the club. Then. Not only was there a long period
Speaker 1: of mediocrity, but ultimately, between nineteen sixty and two thousand
Speaker 1: and five, there was a forty five year drought of
Speaker 1: any baseball at all in Washington, d C. That's right,
Speaker 1: the national pastime was not played at their professional level
Speaker 1: in the nation's capital. This opportunity for the Nationals then
Speaker 1: isn't just something for DC fans, long suffering though they
Speaker 1: may be. It's actually about something much bigger. It's actually
Speaker 1: about the question of whether baseball truly is and remains
Speaker 1: a national pastime for Americans. The statistics make you think
Speaker 1: that it isn't really the case any longer. There was
Speaker 1: a time when nearly every American child, or at least
Speaker 1: the boys, played baseball in a serious way. There was
Speaker 1: a time where baseball dominated national consciousness. During World War Two.
Speaker 1: If American troops wanted to make sure that their lines
Speaker 1: weren't being infiltrated by clever spies from the other side
Speaker 1: who happened to speak English, they would ask them baseball
Speaker 1: questions on the assumption that every legitimate American would know
Speaker 1: the answers, while a foreigner might not. Today, there's just
Speaker 1: no way that questions like that would work. If we
Speaker 1: have a national sport in statistical terms, it might be
Speaker 1: American football, and if you look at the sport from
Speaker 1: the United States that's garnering the greatest degree of world attention,
Speaker 1: that would be professional basketball. Baseball in some sense, has
Speaker 1: come to be seen then as old fashioned, as too slow,
Speaker 1: as unexciting. In some way, not as up and coming American.
Speaker 1: The fact that the Washington Nationals now have a shot
Speaker 1: at the World Series is not going to save baseball
Speaker 1: from the duldrums to which it has to some degree entered.
Speaker 1: It might, however, remind us that baseball could still have
Speaker 1: a central place in our national consciousness, even without needing
Speaker 1: to dominate all of the other sports. After all, even Washington,
Speaker 1: d c. Doesn't stand in the same kind of civic
Speaker 1: position relative to the United States as it once did. True,
Speaker 1: it's still our nation's capital. Still many tourists come and
Speaker 1: visit it to try to learn about civics, but the
Speaker 1: city itself is royaled in political controversy. An impeachment inquiry
Speaker 1: is going on. No one right now would think that Washington,
Speaker 1: d c. Is a shining ideal of what the capital
Speaker 1: of a great republic should be. Under these conditions, the
Speaker 1: fact that the World Series will come to the capital
Speaker 1: is just a pleasant recognition that our system still has
Speaker 1: some nice parts to it. Lots of countries in the
Speaker 1: world play baseball, some today play it better than the
Speaker 1: United States. The unique association of baseball with the country
Speaker 1: and with the capital is not what it was, and
Speaker 1: that might just be a good thing. Maybe we can
Speaker 1: be a little more realistic about what sport is, a
Speaker 1: little more realistic about what politics is, a little more
Speaker 1: modest about whether the United States of America can ever
Speaker 1: function as a shining light to the rest of the world.
Speaker 1: Deep Background is brought to you by Pushkin Industries. Our
Speaker 1: producer is Lydia Genecott, with engineering by Jason Gambrell and
Speaker 1: Jason Rostkowski. Our showrunner is Sophie mckibbon. Our theme music
Speaker 1: is composed by Luis GERA special thanks to the Pushkin Brass,
Speaker 1: Malcolm Gladwell, Jacob Weisberg, and Mia Lobel. I'm Noah Feldman.
Speaker 1: You can follow me on Twitter at Noah R. Feldman.
Speaker 1: This is Deep Background.