How White House economists are thinking about COVID-19 relief | FiveThirtyEight

FiveThirtyEight Politics podcast host Galen Druke explores the rationale behind the American Rescue Plan.
32:00 | 02/27/21

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Transcript for How White House economists are thinking about COVID-19 relief | FiveThirtyEight
Hello and welcome to the five but he politics podcast I'm dealings route. As we discussed earlier this house Democrats plan on passing a one point nine trillion dollar American rescue plan. By the end of that week BB they've passed it actually by the time listening to us next the bill will go to the senate. Potentially be amended. Then potentially back to the house but eventually you'll likely be sent to president Biden's task Biden in March. On Monday we talked about some of the political considerations Democrats and Republicans are making with the arts to the plan. And today we want to get into the details of what is in the plan and why. And to do that will go straight to the source the White House. Here with me is how other Boucher member of president Biden's council of economic advisors welcome to deter other. Thank you gallons an entity headed home. And so to explain to listeners exactly what role is according to the White House web site the council of economic advisors was established by congress in 1946. And advises the president on economic policy based on. Those are three things that we also really like you're fired 38 so please feel free today to get walking as UC set. To kick things off what are the biggest challenges facing the economy right now as you see. Well now set up the biggest challenge continues to remain the pandemic. We have to continue to wrap our arms remnants get it under control that means getting those vaccines out. Everyone is fast as possible and it means in the meantime making sure that people have the protective gear that testing. All the things they need to that businesses can open safely schools and opened safely. And not like. So that is the first thing is we have seen over 20/20. If you cannot have that under control in the economy can't function as usual. And so while we are doing that the second most important thing for the economy is to make sure that they. All of the people and businesses in state and local governments and communities. Are kept whole lobby at the pandemic under control settings making sure that you know millions of people who can't be a work because of the pandemic. Happy incomes accord. It means making sure that families have some extra cushion because at this you know enormous tragedy across our society in our economy. We've been speaking should it speaks in local governments have the resources they need to cope with the pandemic can get school so and it. Keep you know Arab nation that they have all the things take have been testing facilities get those acting without an opera like. Making sure businesses how to support they need. So this is about making sure that we are really tending to the theory real crisis continues to be in front of the American people. Over all. Is the goal of this package to restore the economy to where we've worked pre pandemic. War is difficult to push just in a different direction and created different economy from the one that we are before rock. Typically what we need to do is they should get that relief is giving out there. And sit that is the first most important thing now while we're do we back. There's been a lot of attention in this package especially to making sure that we focus on the hardest hit. We think should be addressed economic inequalities. If we do things like count raise the minimum wage. They should it we're intending to differences across different communities. So there's an element here where we're really trying to focus on addressing some of it in equities in the economy they that is insert this and trusting this very real crisis in front of us. I wanna dig into news some of the details in the plan at you know. I am I'll just say up front that as we talked on the podcast earlier this week. This plan is popular with the public however of course economic economists on the laughed on the right the center progressives and so on. All take issue with certain parts of the plan and I want it really two real into you. Some of the questions that they posed and we can get walking along the way an action so. I guess what one of the first question next year is. You know. January's job numbers or repeat and of course I'd administration set that we really need this plan to get the economy back on track because. There are signs of the the economy's turning a corner unemployment claims are falling faster than expected. Retail sales are rising. And then on top of that Americans are sitting on you don't access evenings because of past stimulus not being able to spend during the pandemic. And that essentially. One of the arguments is that really the goal should just be getting the pandemic behind us. Not really putting additional stimulus into the economy. Because we are out a lot of pent up demand and once he just yet the pandemic behind us there's going to be booming economic growth even without a lot of the spending in this. Heidi response. A few things I think that that argument really does ignores some of the reality on the ground so there's about 45 FactSet when he can't you hear Nokia. So first stop even though reported unemployment rate has fallen six point 3% maybe that doesn't mean that's why it's not so I. But here's the reality. Because of the unique nature of this crisis. There is strong reason to believe that outnumbered vastly under counts they treat number of the unemployed. Millions of people have dropped out of the labor force being given up searching because quite frankly their jobs and available for them use you know your professional waiter. Right now are eager media professional actor. You're just isn't it's it's not coming back until we dealt with the pandemic. So those folks may not are not being counted in the unemployment numbers among a few other sort of certainly issues you know bidders the city to the pandemic. So what we think it and council's economic advisors is they the unemployment rate is actually closer to 10% over some Regina and have 10%. Rather then six point 3%. And in fact we actually think that given what we're seeing is those changes in labor force participation in employment rates. That actually backed. Discrepancy is much luncheon for women then Burma. So well that reported unemployment rates but you can prevent damage when you county in bad people but it dropped out of early reports actually are much higher for women and permit and almost a full percentage point higher. And then similarly there extremely high especially for black Americans and Hispanics. So they want it the unemployment rates that we hear on the news are really under reporting the true crisis are there in ways that are unique to the panda. The second when enemy is we didn't get news that the number of people filing for unemployment and it's is down. Let be beaten theory theory clear. This was the 49 week. Record breaking applications. For unemployment benefits. Prior to this crisis we had never had a week with such benefits as we had for 49. Weeks in Oprah. Just sit with our remaining 49 weeks of record high over 700000. People. Applying each week this is incredible. And this cannot interstates and it's great that the never came down it seriously it's still really really bad. Since those are few things into its retail retail sales are coming back and it's great that people have seedings this here's the thing. We know that experience at this endemic is being Geary an equal. That those that there are a lot of folks who lost their jobs they see exceptionally high unemployment rate still over. Sixteen. About 16% in the leisure and hospitality industry where they lost a reported 40% at their jobs over the past year. That is. That it remains a crisis and so a lot of what we're trying to do here is to keep people a plan. The targeted resources are gonna go to business to UV Tunisia that cushion is there because we don't know which camera is specifically. Are the hardest hit by that. You know. That the health effects this pandemic so this is three reasons why this remains an urgent issue. I think there's a little argument from. Do you know many economists that there are urgent needs for people are unemployed. On for people work been hit hard by the pandemic but then there's this question you know if it is all about the urgent requirements of the economy. Why they're so much spending today won't be you kind of drawn out over the coming years you know for example when it comes to you schools. 120 billion dollars is going to UK through twelve schooling. The Congressional Budget Office estimates that six and a half billion will be spent this year 32000000000 and 22. And the remainder about 120 billion would be spent through 20/20. So you know. Is there. I guess the question here is like is this kind of progressive priorities. War is that's about an urgent response to people suffered. Well as well let's let's remember when well backed about the Great Recession rights have. Thinking back to in the financial crisis in 20072008. And the kind of damage last. What we saw was that employment. In local education in state education sews her up higher Ed and school districts. Did not recover to its pre recession peak until 201922. Money. So we took incredible long time because those losses for so char. What we are seeing now is this incredible challenge for school districts all across the country. We had teachers take on whole need to god she's only is it teaching their students. On top male as they try to get back into schools received seventy teachers do you read better in person learning air online learning schools are having to. You know changed their air filtering systems do these these major overhauls since it and you make sure that children can socially distance like. All of that cost money. They waited schools touching. I you know they have had these urge it needs and we need to nation that they had those resources moving forward because at this enormous expense from 20/20 into 20/20 1 in the evening 20/20 you. Depending on what their specific school district needs. So. I don't think we can actually understand the enormous challenge at schools have been under enormous challenge that teachers and Anders and that these resources are going to kill or to help them. You cope with that. And that is spent on it has to help district how they either meaning but this is resource needs are real. And Andy an ongoing for the past year. There's some to be I think amongst. Even economists on the laughed about how much the lessons from the 2008 financial crisis apply. To this six Richard there's a lot of agreement that the Obama administration did not put enough stimulus into the economy. In order to hurt you get us actor pre crisis levels fast enough and that was a long drawn out painful process for Americans as a result. But a lot of people argue that this is a very different races because of the nature of the pandemic and so some economists. To probably don't have to tell you this but most notably Larry Summers of course. Former president Obama's director. Of the National Economic Council has that the key is worried about. Creating inflation by essentially stimulating the economy young it's you know ideal output -- it's ideal level of employment. We have this plan. Does this ultimately drive up costs for consumers. And have a negative impact on you know. Everyday Americans as a result and an alternate on the tail and once we experience that inflation cause a recession. So how do you respond to concerns about inflation and it have been expressed. Let's just it's a really important question to ask. Right and down I've let the pieces that Halard Summers put in that election because of course. And dad you know and he made the case it he was concerned that this would be a little inflationary but he did a second piece originally Claire ideas he's eight he's also wants to make sure that we have resources looked over to meet the long term investments to address the structural challenges in the economy. And so I'd put it into this larger context so here's a thing. Argument is started with dealing bit. OK so we've got this pandemic it is unique in different a 100% this isn't supply side recession right because. But the pandemic meant was that we could not go about business as usual well. And to add a OK so that's a very different. Yell happy and able to contain the pandemic quickly last spring and then get back to normal. Then media small infusion or even a big infusion of cash to keep families and businesses in new holding steady perk you must thinking back to normal. That might have been trio. But here's the thing at this point you've seen celebrities small businesses classes. You had so many families that have been unable to pay their rent or mortgage for months on end of their student debt. Now of course we giving them sounds as some relief and said cookie don't compete for a while there were gonna cover the interest in depending on the different programs. Those pills are gonna come to you. And so we have this overhanging. Date part of what the American rescue plan is designed to deal with this too is to cope with some of those. Challenges have been left in the week the fact that this crisis is gone on for so La. Again you know we're Q 49 weeks of record breaking numbers of people applying for unemployment benefits. That's a lot of economic came out there that's a lot of people that haven't been able to that either bills. There's a lot of pent up. We need. Seven seconds to this issue of inflation so that's inflation right that's being if the economy is at this full capacity and that means they. All the resources all of the factories are running at full speed everybody who bought the job is out there working and even if you double their pay in a year back to pull more people into that it would record if you don't you'd have to W doctor really is an act that's an inflation is. And that's it's can only prices to collapse. I would say a few things. First off. Imply rates did not recover. To bear. You know we have you seen twenty years the nation's employment rates. Sort of counted it up and down but they haven't recovered to their peaks of the late 1980s early viewing 2000 before that it that early 2001 recession. So that to me is a signal that there is more capacity out there. I can I look at the numbers and millions of women who dropped out of the labor force because. I've been the because you know without care without schools they can get to work. Well that's unmet. That that that's a capacity out there that we can draw on in pull into the economy. There is a lot of capacity out there at least on the labor market site. And then let me just point now they know the last time that we side serious inflation in the 1970s. And a very different kind of economy and we had to mail was also you know connected to an oil shock. It was sort of out of control of our our domestic government and it's not really what we're looking at today in fact what we're looking and it's been mean to you trust climate change we can critters on on a more sustainable energy path. Bit we have different risks. And so good riskier. I think is less out of control inflation. In more. It wheeled around a whole generation. To flounder in the week at this national tragedy NG not help them get back on their feet. If we don't help schools that's gonna Bergen is generation schoolchildren if we don't help insure people don't get convicted neo from all this research is that we'll have a Exxon. Families and children and their ability to keep their jobs since the in their communities to think that this is an action. Are enormously high. And yes we need to be concerned about the risk of inflation but we have to balance all of the wrists together and I think that this package can tap balance. Is as good as we could. Do considerations about inflation. Mean that because so much money when it's of this package that there's maybe less money to spent for infrastructure to on the line. I don't think so it's very very different means. Writes that this package is about relief it's about it's about rescuing the economy it's about making sure they. Businesses and families are holes we can get to that other side. An economy or I'll get back out there and engaging people. Get this pandemic under control they did not change the fact. We have these longstanding beets we know that we need to shift the way we produce things away from fossil fuels. And that's gonna require a trip that's a means of transmission our economy's undergoing and we need to be should that that's managed law we need to make sure it works. It Mercer. Shifting resources in a way that is sensible for communities all across the country and require resources but that is community resources well spend. We also know that we have this long term needs to invest in infrastructure. Via you know community that I grew up and it was a bridge that fell down a number of years ago these things are scary. And you're related what of the richest countries the world has ever seen we need to meet those investments. And then I'll never. In 20/20 really showed S must invest in our care economy. In fact it is how exciting this leaked it to hear chairman Jay Powell talk about that and in his remarks for congress this week about how. You know if we need is investments in child care and pre usually -- participation of women better be good for our economy over the market and increase the capacity. To Nancy kind of investments that we're gonna need to make it to be competitive in the 21 century. I want to ask you about. That specifically which is maybe one of the areas where this plan gets a little more criticism from the progressives which is that. You know the American rescue plan to it a 110 billion dollars to a child tax credit that would provide parents with 3000 dollars for each child. Or the age of six and 3600 dollars for each child under Egypt's ex. That would only last. One year. Why not meet this you know if this is something that you feel so strongly about this so important for the economy. By only provide it for one year. Lacking from Arctic air is that this is it has even talked about this a rescue plan so it's an important thing to do now it's probably an important thing to continue to do. But we're gonna leave that decision for another day. Bank and do you want to stress that it is that policy among the whole host of others it is and why this package will cut child poverty in half. In the ink this year. And in that is a remarkable achievement super important but especially in the year of the pandemic than school children -- kids have been so hard hit and especially in communities of color. The cutting child poverty and happy these investments could go a long way towards doing something that the image is 20/20. So soon to be a little pointer this New York Times editorial report wrote a piece about this plan and they called it essentially a political gambit Wright saying that. This plan would provide Americans with a taste. He's as good as Democrats would describe important funds to help encourage child rearing and Europe and that account for child care but that would only last for years and then Democrats basically plan on running on this issue in the mid terms. To say okay Americans if you want to keep this you have to real actor us. As opposed to actually figuring out a way to make this a long term solution. Without criticism fair. What I mean really what is going on here if it isn't such an important issue. Yeah it's a great question so I'm an economist I'm not the political strategist necessarily but here's the thing. We have this moment where we need to get out there and help the American people and we know that families have kids have been especially hard yet so it made sense to give them. Extra benefits that they needed right now. And I take your point is spies something we should be doing over the long term especially if it helps reduce poverty especially at helps working families. That that the decision that we have to leave for another day and you know the American people find it compelling and I'm sure we'll continue to talk about it. So one of the other issues you've mentioned here is that this pandemic has hit particularly hard. Americans color. And we knew before it depend on it. Even started you know data from before the pandemic even started showed. That black Americans. Have two and a half percent of the nation's wealth and make up 13% of the population. They now you know face a steeper unemployment rate then white Americans. Does the Biden White House and the council of economic advisors support economic interventions that would target black Americans in particular and if so what would they be. It's great question and it's so important mean this year is just so. Unmasked the Erie BO racial inequalities and Communists. He. And just a case the union on the L economic aspects the fact that Americans were vote. First in line for those had paternity job losses wants more jobs would be ending in what Americans did and yet. Altitudes were partially in those essential jobs where their restaurant especially in those -- months. Where there was are less attention to the protective gear issues beating yeah shopping right mass double asking. All. So this is being incredibly tough here. That despite this package that this is so much on containing the virus that's gonna help black communities. And there's certainly targeted efforts to make sure that the vaccine gets out there it is or is that their health centers are there every community there art that are helping to contain that iris and in each is asking. All. And then there's other policies blank the minimum wage which disproportionately. And its parent and people didn't get that increase in the minimum wage breezed mart is now at eighteen dollars an hour. Disproportionate as stents that you missed it that it would be workers are Americans. So these policies that are gonna go wrong way to help. How close those gaps I mean there's so many other plants. Let me just add another you know you. We don't businesses date businesses that provide services especially to their communities that we need to partially own child care centers. And in fact it's one of color and just a person is simply hand your body in an air rescue plan that provides support. Child care's owners reopened to do it can't recover them as buyers back to. Is and it disproportionately. Help those black owned businesses that are so important there it's. I guess you know. I hear the you know. What you just that we don't know what the fifteen dollar minimum wage is going to make it in the final package that's in part up to the senate parliamentarian it's in part ought to Joseph mention Chris cinema. Man. But at the same time that's not specifically targeted to black Americans trying to account for. The wealth gap and it you know the increase unemployment rates are there things that divide administration thinks that are appropriate. Two to do that target specifically black Americans. Well certainly there's been and Berger. Executive orders and amber things that the administration is ready about it specifically target these questions around racial justice. And I mean you know we're talking about the rescue neighbors not what's it been and you are all. And I just want to stress that has been built as planned from the ground. Thinking about the racial justice pieces were front and center. Because it's at court challenging for us and all we're gonna. Together as a nation this. Is to make sure that those states that it in the hardest hit which are approaching needs. He needed support and it's being so that that has been front and center at this. One more question here that I think. You know is particularly. Ben on the minds of progressives in assessing it this package. It is you know last fall. Speaker of the house near to close he suggested that. The bill that Democrats would eventually password retro actively you know give people enhanced unemployment benefits. At one point I was at 600 dollars increased its currently 300 dollar increase and in this package it's a 400 dollar increase. It doesn't look like in this package there are going to be retroactive benefits for people who been unemployed this whole time. Why not. It's a great question. At this point as I watched the debates happening and I'm certainly hoping that we get what was in the proposal which is the 400 dollar Bob. Let me actually also stress is so urgent and self important men need additional benefits. That were part of December package they expire in March so this should we're talking about it's actually quite a change. It's almost in the feb there is short and he got a couple more weeks before benefits start expiring this issue here racy people not eating those benefits. Could happen again. We think is moving forward what's really arms and make sure that people get extended weeks. It's now the case it and 40% of the unemployed and out of broken searching for a job for at least six months which makes it a long term unemployed. That's extremely high and it is packaged as a pass me as long term unemployed workers will ease access to benefits. So you know really putting France and it has on the planet packages this is a number one priority. So let's talk about you know painful yes and I know that. You know concerns about the debt and deficits that have always isolated based on who has a power in Washington Republicans under trump dramatically increased deficit spending. So let's kind of media ignore Republican critiques for a moment and talk. You know more from from the Biden administration's perspective forgot the politics for a second is there a point at which the debt has become a problem. And if there is what is now. At this is this is a question that keeps economist yell fully employed. Not so here's that I would say. We have right now an urgent economic issue if we do not deal with it. It will lower productivity grows for decades to count. If we allow schools to suffer and in school children package it for example that's gonna have a long term effect on our economy in the short term act. So you have to weigh. The uses of funds that you're you're trying to do with the long term costs. Now there's a lot of things that we increase the deficit for on the back past like that 2017 tax cuts a jobs act. Bit that we're god uses. Government resources that we're Kinney that her what the inches are increasing our long term productivity growth. To think we need to be very very Smart about that in this crisis in this numbing the cost of inaction is just too high. Your question is what we do we need to Laurie about it I mean we always need to be concerned. How we use taxpayer resources need to be concerned about whether and I. The amount of revenues are bringing in her matching that you took the nation. It has sensible national conversations about that. That we cannot. That handicap us in our hour of me. Into the time to have that conversation is actually get to the pandemic after we address the crisis. We're asserted you know where her were back in a good economy but we were. Pre endemic that is the moment to start. Speaking about how we get on that war that that patent you know for the future but right now that is not the issue. But at the same time raising taxes on the wealthy is its popular and the president Rana. So why not raise taxes to pay for package. Well I think that that is and the president did talk about that he's got a lot of plans that relate actor in the campaign to raise taxes on purpose making more than 400000 dollars a year. And and there's a robust agenda there and it is popular and it is really important. But this package for relief is not the place to focus on he floors so they'll be other other things that we need to spend coming down a pipeline. Dip that we can focus on that eat when you're thinking about this kind of emergency you just need to act. Or so it sounds like we can expect some taxable coming down at some point. You know. I know we have to wrap up here so I just want to pass kind of more broadly. When we evaluate the Biden administration's handling of the economy. It's going to work 124. Because in many ways the Biden administration is making big economic interventions years and so you know. Politically. Biden will now own the economy. What should we be looking at in terms of actual numbers. You know actual lives. Unemployment rates things like that you know how should we judge you in the Biden administration at the end of all of us. Great question. So here's what I'm gonna focus. And what I'm going to be watching as we execute on these plants. Eric for the unemployment rate to come back Dan Miller for the employment rate to go that is the share of people that job. Now look at whether an outraged that a poll those women back into the workforce. Rick and attracting the site you know that indicate teaming to the pandemic and vaccines and all that. Bad you know making sure that we're also tracking that you kitchen then back to school and that that that's in part metric as well. But I think also a really critical piece to watch is what's happening with wages and incomes. Right are to be continued his CE inequality and lighting are to be there to be seen folks at the bottom in the middle. See there in their incomes stabilize kill as we get to this you know I'd get an economy gets back to normal. These are the questions that I think we need to be asking ourselves each and every day and whether or not these economic teams are distributed. Across economy not just in terms of condemning backing bit especially by racial by by race. Looking at across different communities and question for parts of our society equipped geographically. So I think making should it be deep below the aggregate numbers to look at what it looks like across communities is a really important thing that I'll be watching. Art malt let's leave it there thank you father. Think you can. Other Boucher is a member of president Reagan's council of economic advisors my name is do you enter. And a grandchild edited video version of this pod cast. You can get a touch by emailing us at pod cast at 530 dot com you can also courts treated us with any questions or comments. If your fan of the show leave us a reading or refute in the apple podcast or more tell someone about us. Thanks for listening and we'll seems. Yeah. And it's good.

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