‘Some Really Disastrous Macroeconomic Policy Advice’



Jobless benefits are extremely fraught. It becomes a morality play very quickly. “The unemployed are lazy. We need to push them to go back to work.” But because so many people lost their job in this recession early on, that had to be why we had an extra $600 a week and the gig [workers] — I mean, the benefits that passed in the CARES Act were off-the-charts generous for anything we’ve done. In the Great Recession, the extra weekly benefits were 25 bucks a week.

But I think that was because at the beginning of the recession, there was no morality play. Almost 20 percent of workers, by some measures, lost their job. But as we go further and further along, this is a smaller and smaller group. And so, you get back into, “The unemployment insurance is causing problems in the economy.”

Bringing it back to the people, the unemployed were the ones that we failed the most in this recession. Because they had to live with a constant, “We’re going to give you money, but it’s going to expire. But we’re going to give you money, and it’ll expire. And oh, you have to fill out another form.” And then the straw that broke the camel’s back: “Oh, you’re gonna have benefits till September? No, we’re gonna cut them off in July.” There’s absolutely zero justification in terms of good economic policy of pulling the rug out from under the people who are suffering the most.

Honestly, the moment when I was the most frustrated with the Biden administration is when they did not fight for those extensions. They didn’t even use the bully pulpit to tell the Republican governors, there is no justification for what you’re doing. States like Texas that joined in had unemployment rates well above the national average. There was no saying, “Oh, well, these states have recovered.” Biden walked away from that. There was basically no push from the White House to extend even the long-term unemployment benefits.

The economy’s in an odd place right now, where we sort of reopened and things aren’t as bad as they were, but we still have the Delta variant. It seems like the Biden administration has shifted its focus to, “Let’s make long-term investments.” Is that the right focus, or should we still be doing relief?

It’s tough. During the campaign, his whole thing to build back better was really about getting to someplace better than February of 2020. The surge last winter really set the Biden administration back in their agenda, because Covid came back with a vengeance. The economy started to stall out. The vaccine wasn’t here yet. It was clear that the relief wasn’t going to be enough to get us through the winter. And so instead of the better part, they had to just do the back, the building back. The Rescue Plan was really big, generous. I firmly agree that that was the right thing to do. I mean, you can argue about the structure and the components and the timing, but that was never what their focus was going to be.

Biden came in and the Democrats came in with a vision of a better country, a better economy. We were in a super deep hole, but the pace of the economic recovery has been really good. And part of that is because Congress spent $5 trillion. That’s a lot of money. You do relief in a recovery — you want to make the recession as least severe as you can. And then you want the recovery to be as fast as you can. You wouldn’t necessarily do relief all the way back to where you started, but you got to get it on a glide path. You’ve got this positive feedback loop. And we have that, and then Covid comes back. So what is interfering with this recovery, and what’s probably making it hard to put the political capital behind more and more economic relief, is the problem is not in the economy. The problem is a public health crisis.

A flaw in every single one of the big relief packages was overestimating how quickly the pandemic would be over. The CARES Act was written for Covid to be under control in the summer of 2020. It wasn’t. And the winter packages, especially the Rescue Plan, was absolutely written for us to be in a good place by September. And frankly, a lot of the opponents to the Rescue Plan felt like Covid was going to be under control even sooner because we have the vaccine, right? So, we have this confounding factor of the vaccine. And while the Biden administration is really trying to get the vaccine out, it’s running into this political mess.

So I understand — the recovery is going, and now it’s time to do long-term investments. I do see where you want to start shifting that balance. But wholesale walking away from those who are still suffering — that’s a pretty abrupt cutoff. As much as I think getting cash to people is great relief, I would not endorse sending another stimulus check. But extending long-term unemployment benefits? That’s the thing we should do.

There’s more momentum at the Fed towards an interest rate increase as early as next year, even though it doesn’t seem like officials are that confident that the unemployment rate is actually going to get back down to where it was before the pandemic. I’m curious if you think that that’s a smart signal to be sending.

We are in a moment of extraordinarily high disagreement among [Fed policymakers]. And there’s disagreement on so many levels, which is what makes it really hard on the outside to piece through what exactly is going on inside their meetings. So, you have the first level of, they have a new framework [targeting an average of 2 percent inflation over time and considering whether the economy is experiencing broad employment]. Those are new to the Fed. It’s not surprising that the different participants of the [Fed’s rate-setting committee] look at the strategy document that they all signed on to and see different things.

Also, it is abundantly clear, and Powell said it: We all got the same data right now, but the officials have different views on what’s happening. And then they have different views on, OK, well, if that’s what’s happening, what should we do in terms of interest rates? So, you have all these levels at which Fed officials can disagree. Oh, and then you throw on top of that we have the highest inflation rates in decades.


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