WEBVTT - Alan Krueger: Congress Should Invest In Infrastructure (Audio)

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<v Speaker 1>Stocks higher, SMP five hundred index up seven on this

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<v Speaker 1>Job's Friday to a game there of three tents of

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<v Speaker 1>Stack up fifteen to fifty two forty two. Now Industrial

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<v Speaker 1>is up fifty to eighteen thousand, four hundred sixty nine.

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<v Speaker 1>The ten year down nine thirty seconds, yield one point six.

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<v Speaker 1>of one percent. West Texas Intermediate cruet four barrel right now,

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<v Speaker 1>up two point seven percent. I'm Charlie Pellett and that's

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<v Speaker 1>a Bloomberg Business flash. You're listening to Taking Stock with

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<v Speaker 1>Kathleen Hayes and Pim Fox on Bloomberg Radio. I'm Kathleen Hayes,

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<v Speaker 1>broadcasting live at the US Tennis Open here in Flushing Meadows,

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<v Speaker 1>Corona Park, Queens. My co host Pim Fox is on vacation.

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<v Speaker 1>He'll be back in the office and on the show

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<v Speaker 1>on Tuesday. Phillion for him today. Well, actually, he's a

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<v Speaker 1>very special guest here at the Open every year on

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<v Speaker 1>Bloomberg Radio. Alan Krueger. He's the been and Professor of

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<v Speaker 1>Economics and Public Affairs at Princeton University's former head of

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<v Speaker 1>the Council of Economic Advisers, and he's also an avid

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<v Speaker 1>tennis fan. Alan is always great to have you here.

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<v Speaker 1>You have the will this job? Tell me about it

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<v Speaker 1>every year every year, my friend and watch a ton

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<v Speaker 1>of tennis. You know. There we're gonna talk about jobs

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<v Speaker 1>and there are you know jobs created here at the

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<v Speaker 1>Open for two weeks, right, because they do do a

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<v Speaker 1>lot of hiring and to put on this event that

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<v Speaker 1>is just so complicated has so many moving parts, but

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<v Speaker 1>you know, come in and come out. It's a great

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<v Speaker 1>sports event in some respects. I guess the US economy

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<v Speaker 1>is going in that direction and that we have more

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<v Speaker 1>and more workers who are working as contract workers and

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<v Speaker 1>freelancers doing short term jobs. Now, Ellen, that's a good

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<v Speaker 1>question to look at, because we got the jobs report

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<v Speaker 1>today a hundred fifty one. Um, you know, Lord Amester

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<v Speaker 1>of President Cleveland, Cleveland Fed went out of our way,

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<v Speaker 1>I think to point out, you only need seventy five

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<v Speaker 1>to a hundred fifty jobs to keep the unemployment rate steady,

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<v Speaker 1>if not moving lower. So so we get that. But this,

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<v Speaker 1>this move from part time to uh, full time, is

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<v Speaker 1>what a lot of people still aspire to, don't you think?

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<v Speaker 1>Or or are we really in such a gig economy now? Well,

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<v Speaker 1>over the last decade we've had very fast growth in

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<v Speaker 1>independent contract work, freelancers, workers being contracted out. And for

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<v Speaker 1>some workers that's a better situation they have more control

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<v Speaker 1>over their hours, more flexibility for companies that could be

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<v Speaker 1>more efficient or productive. Uh. Yet for others they prefer

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<v Speaker 1>to have its traditional job. So I think it's a

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<v Speaker 1>very heterogeneous sector. Um. We're also seeing over the last

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<v Speaker 1>few years, very rapid growth in on demand work uber

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<v Speaker 1>type jobs, task grabbit. They still only represent about half

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<v Speaker 1>a percent of the workforce. We don't do a very

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<v Speaker 1>good job capturing them in the statistics that came out

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<v Speaker 1>this morning. Uh. Fortunately they're still small, so it's not

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<v Speaker 1>really distorting our picture of how the economy is doing.

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<v Speaker 1>But over time it's going to be a much bigger concern. Now,

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<v Speaker 1>what about the momentum in the economy. Yesterday we've got

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<v Speaker 1>the Institute a Supply Management Manufacturing reported fell back below fifty. Uh.

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<v Speaker 1>The consumer has been just about the only consistent driver

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<v Speaker 1>of growth this year GDP year over year on a

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<v Speaker 1>are just the last three quarters of something around one percent.

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<v Speaker 1>Maybe it's going to bounce up to three percent when

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<v Speaker 1>you look at the jobs numbers, when you look at

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<v Speaker 1>all these different factoris how does it look to you?

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<v Speaker 1>Do look okay to me? I think we're going to

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<v Speaker 1>grow about two percent this year. Having the consumer power

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<v Speaker 1>of the recovery, I think that's actually very helpful. Consumers

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<v Speaker 1>account for seventy of the US economy, so seeing households

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<v Speaker 1>in a stronger position with higher income with lower gasoline prices,

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<v Speaker 1>I think that should support the economy. I think there's

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<v Speaker 1>still room for housing to expand. So this recovery is

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<v Speaker 1>not going to be the strongest one on record, but

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<v Speaker 1>it could well be the longest. And I think that's

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<v Speaker 1>what we should be rooting for. Okay, and I guess,

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<v Speaker 1>but the question is the longest on record? Do you

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<v Speaker 1>need to start raising interestates? You and I were both

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<v Speaker 1>attendees at the Jackson Hole the Kansas City Fits im

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<v Speaker 1>Poseum in Jackson Hole, Wyoming. In fact, just a week

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<v Speaker 1>ago we were sitting listening to some very very big papers.

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<v Speaker 1>We were listening to Janet Yellen say the case for

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<v Speaker 1>great high has strengthened, which seems very broad. That doesn't

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<v Speaker 1>incline you to any direction. In two separate interviews, now

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<v Speaker 1>what verst in Jackson Hall and then on Bloomberg Television

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<v Speaker 1>this week, stand Fish of the vice chair seems to

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<v Speaker 1>really be trying to push in the direction of hey,

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<v Speaker 1>at least one interest rate increase this year. You get

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<v Speaker 1>a sense that perhaps that the vice chair is trying

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<v Speaker 1>to lead the chair towards the rate hike if he

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<v Speaker 1>thinks it's so necessary. It is a committee, and members

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<v Speaker 1>of the committee can have different views. My own view

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<v Speaker 1>is that the Fed should move slowly to raise rates.

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<v Speaker 1>I think one rate hike later this year would be appropriate. Uh,

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<v Speaker 1>you have to bear mind, even if rates can hop

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<v Speaker 1>another twenty five basis points, we're still going to have

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<v Speaker 1>very accommodative monetary policy. I think what the FED wants

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<v Speaker 1>to do and should do is avoid a situation where

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<v Speaker 1>it has to ratchet up rates very quickly. So if

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<v Speaker 1>they move up one rate hike this year, two next year,

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<v Speaker 1>I think that's moving out a pace set slow enough

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<v Speaker 1>that they're going. Uh. If the recovery continues as I

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<v Speaker 1>as I expect it would, I think there'll be in

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<v Speaker 1>a better position so that they don't have to yank

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<v Speaker 1>up rates very quickly and pull the rug out of

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<v Speaker 1>the recovery. I'm speaking with Alan Krueger, Professor of Economics

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<v Speaker 1>and Public Affairs at Princeton University, former head of the

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<v Speaker 1>Council of Economic Advisors in the Obama administration, and we're

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<v Speaker 1>live at the US Open in Queens and New York.

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<v Speaker 1>Alan productivity. We also got numbers this week which showed

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<v Speaker 1>the productivity is just lagging and sagging every which way

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<v Speaker 1>it can businesses. That's a big question. Why are they

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<v Speaker 1>so uncertain? Why won't they commit to longer term projects.

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<v Speaker 1>Some people blame very low interest rates as as part

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<v Speaker 1>of that borrowing costs are low. Let people look out

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<v Speaker 1>over the horizon and they're uncertain because they figured this

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<v Speaker 1>situation has to change. What's hurting our productivity so much?

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<v Speaker 1>That's an excellent question, and I don't think there's uh

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<v Speaker 1>compelling answer. To be honest, I think there is a

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<v Speaker 1>lot of uncertainty out there. I think some of it's

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<v Speaker 1>coming from the presidential election. I mean, we have a

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<v Speaker 1>candidate who said he'd like to renegotiate the US debt,

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<v Speaker 1>So it's possible Donald Trump wins, we're gonna have quite

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<v Speaker 1>dramatic change in economic policy, in my view, not for

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<v Speaker 1>the better. Also, there's a lot of uncertainty in the

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<v Speaker 1>world economy. I think that's probably more important than Federough

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<v Speaker 1>Reserve policy. And in fact, the low interest rates should

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<v Speaker 1>facilitate investment. So this you just said on one of

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<v Speaker 1>the big themes from everybody who speaks from the Federal

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<v Speaker 1>Reserve lately, and they seems to be people are trying

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<v Speaker 1>to get the message across. If you're a central banker

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<v Speaker 1>in almost any country that monetary policy only has so

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<v Speaker 1>much power at this point when you're when you've been

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<v Speaker 1>at zero rates or lower for so long, and now

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<v Speaker 1>governments have to step up. Legislators have to agree on

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<v Speaker 1>steps because if we're going to move ahead, we need

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<v Speaker 1>we need some sort of fiscal push, some kind of

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<v Speaker 1>government spending. Do you agree with that? I think it's

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<v Speaker 1>been that way for a while. I think the US

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<v Speaker 1>Congress should have done much more a few years ago

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<v Speaker 1>in terms of investing more infrastructure, helping a long term

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<v Speaker 1>unemployee get back on their feet. Uh, there's only so

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<v Speaker 1>much that monetary policy can do. I think making investments

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<v Speaker 1>in recent arch and development and an infrastructure who will

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<v Speaker 1>raise our competitiveness and productivity in the future, especially given

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<v Speaker 1>the low rates today, it makes a lot of sense. Well, Alan,

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<v Speaker 1>you've done so much research in depth, from your your research,

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<v Speaker 1>from all the people you've worked with. When you think

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<v Speaker 1>of the said invest in infrastructure, can you give us

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<v Speaker 1>something specific, an idea maybe people have not looked out closely,

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<v Speaker 1>or something that has been tried that you see as

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<v Speaker 1>an example of something that can be productivity boosting, job boosting, well,

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<v Speaker 1>just maintaining our existing infrastructure. Uh, Repairing our roads and

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<v Speaker 1>bridges and highways has a very high return. UH. So,

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<v Speaker 1>I know people are worried about shovel already and so on,

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<v Speaker 1>but we have all of this infrastructure out there that's

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<v Speaker 1>in disrepair. Think about how many potholes you've run over

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<v Speaker 1>the pothole tax. I know I've paid quite a bit

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<v Speaker 1>this year to to have my car repaired because of

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<v Speaker 1>uh roads that are dysfunctional. Um So that's an easy

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<v Speaker 1>thing to do and also would put a lot of

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<v Speaker 1>construction workers back to work. There's other things which are

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<v Speaker 1>also pretty easy. We had during the Recovery Acts something

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<v Speaker 1>called Build America bonds. Build America bonds were taxable municipal bonds.

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<v Speaker 1>They're much fairer, much more democratic form of investment because

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<v Speaker 1>moderate income people, lower income people benefit from having Build

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<v Speaker 1>America bonds and their portfolios. So we could bring back

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<v Speaker 1>Build America bonds. Okay, So we are at the US

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<v Speaker 1>Open and you come out here every year. So um

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<v Speaker 1>jack sock an American having a pretty good match with

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<v Speaker 1>the Silk today. Who are you rooting for? Who are

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<v Speaker 1>you betting on the on the men's side, Well, it's

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<v Speaker 1>hard not to bet against marian and Djokovic. But it

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<v Speaker 1>is nice to see Americans doing well. I was watching

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<v Speaker 1>Ryan Harrison and I actually left during a tie break

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<v Speaker 1>to come here to join you. So I'm glad you

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<v Speaker 1>got the tennis, um, and it is nice to see

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<v Speaker 1>so many young Americans doing well. How about on the

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<v Speaker 1>women's side. On the women's side, of course, it's hard

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<v Speaker 1>to bet against against Serena UM. I watched matched earlier today,

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<v Speaker 1>So that's Ova who had up at mugu Rosa, and

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<v Speaker 1>it was very exciting. She lost the first three games

0:10:04.720 --> 0:10:07.840
<v Speaker 1>and then came storming back. Uh. So be interesting for

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<v Speaker 1>me to see how far she can go. Uh. In

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<v Speaker 1>terms of tennis broadly, Uh, what could you tell people

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<v Speaker 1>who have never been tennis fans that? What? What draws

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<v Speaker 1>you to it? Why are you so addicted to tennis watching? Well,

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<v Speaker 1>this is a great event. You see the best athletes

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<v Speaker 1>in the world playing tennis. You can watch them up close.

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<v Speaker 1>During the first week in the outer courts, I sat

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<v Speaker 1>right behind Sevetzolva's coach and two friends who went to

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<v Speaker 1>high school with her. So Uh, it's an easy event

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<v Speaker 1>to go to. There are plenty of seats, especially there

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<v Speaker 1>are the early rounds and uh, just a great spirit

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<v Speaker 1>out here. I agree, and it helps that people like

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<v Speaker 1>you join us every year. I'm happy to come back.

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<v Speaker 1>I know Alan Kruger faces and he's not working for

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<v Speaker 1>the U. S Tennis Association. By the way, those are

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<v Speaker 1>sincere comments and I couldn't agree with you more. Alan Krueger,

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<v Speaker 1>then then professor of Economics and Public Affairs at Princeton University,

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<v Speaker 1>is also former head of the Council of Economic Advisors. Again, Alan,

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<v Speaker 1>thanks so much for joining us. Coming up, we're gonna

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<v Speaker 1>be taking a look at Dave Wilson, our stocks editor

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<v Speaker 1>Chart of the day. I'm Kathleen Hayes, and this is

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<v Speaker 1>Bloomberg