FOR DINNER.
RIGATONI AND SAUSAGE.
NEIL: OKAY.
I DON’T KNOW IF JASON FURMAN IS
ON CHARLIE’S LIST OF INVITEES,
BUT THAT WOULD BE AN INTERESTING
ROUND TABLE.
THE FORMER BARACK OBAMA ECONOMIC
ADVISER WITH US NOW.
JASON, GOOD TO SEE YOU AGAIN.
THANKS FOR COMING.
>> GOOD TO BE HERE.
NEIL: WE WERE JUST TALK EARLIER
ABOUT THE TROUBLES WITH THIS
POST-PANDEMIC WORLD AND THE
ACCOMPANYING INFLATION, LOOKING
AT HOW THE BIDEN ADMINISTRATION
IS RESPONDING TO THAT.
WHAT DO YOU THINK?
>> YOU KNOW, THERE’S TWO THINGS
THAT ARE HAPPENING
SIMULTANEOUSLY.
LAST WEEK WE GOT NEWS ABOUT THE
UNEMPLOYMENT RATE FALLING
DRAMATICALLY, LABOR FORCE
PARTICIPATION PICKING UP.
THIS WEEK WE LEARNED ABOUT THE
LOWEST UNEMPLOYMENT CLAIMS IN 50
YEARS.
THAT’S ALL REALLY GOOD NEWS.
AND THEN TODAY WE GOT SOME
REALLY BAD NEWS ABOUT THE VERY
HIGH INFLATION RATE AND VERY
BROAD INFLATION RATE THAT IS
HURTING FAMILIES ACROSS THE
BOARD.
NEIL: DO WE NEED THEN -- YOU
HEAR THIS A LOT, PARTICULARLY
FROM REPUBLICANS, YOU KNOW, $2
TRILLION WORTH OF ADDITIONAL
SPENDING THAT COULD WORSEN THAT
INFLATION AGGRAVATION?
>> I LIKE BUILD BACK BETTER
BECAUSE I THINK INVESTMENTS IN
PRESCHOOL, CHILDCARE AND CLEAN
ENERGY ARE IMPORTANT.
I RESPECT THAT A LOT OF
REPUBLICANS HAVE A DIFFERENT
EVALUATION OF THOSE PROGRAMS.
I DON’T THINK ANYONE SHOULD
REALLY BE DEBATING THE
INFLATIONARY IMPACT OF THAT.
IT’S GOING TO BE RELATIVELY
SMALL OVER THE MEDIUM AND LONG
TERM.
THE FED CAN OFFSET IT.
IT’S LARGELY PAID FOR.
SO I THINK THE WHOLE INFLATION
DEBATE IS A RED HERRING THAT’S
BEING USED BECAUSE IT’S THE MOST
CONVENIENT ARGUMENT.
LET’S DEBATE ON THE MERITS, IS A
GOOD OR A BAD WAY TO INVEST IN
CHILDREN, FOR EXAMPLE.
NEIL: YEAH.
PEOPLE LOOK AT OTHER PARTS AND
WHETHER IT REALLY WILL MAKE THAT
MUCH OF A DIFFERENCE, BUT
LEAVING THAT ASIDE, I AM CURIOUS
WHAT YOU MAKE OF HOW THIS HAS
PROGRESSED UNDER THE BIDEN
ADMINISTRATION, FIRST DISMISSING
THE INFLATIONARY PROBLEM OR
SEIZING ON WHAT COULD BE JUST A
TEMPORARY DROP IN ENERGY PRICES
OWING MORE TO DO OF LATE WITH
THE OMICRON VIRUS AND THE
SKITTISHNESS THAT RESULTED FROM
THAT.
AND NOW RECOGNIZING THAT
AMERICANS GOING TO THE GROCERY
STORE AND OTHER STORES ARE
SEEING IT FOR THEMSELVES.
I MEAN, HAVE THEY MISHANDLED
THIS ON AN EQ FRONT?
>> MAYBE ON AN EQ FRONT THEY
HAVE.
YOU KNOW, SIX MONTHS AGO I THINK
THEY COULD HAVE BEEN DOING MORE
TO TALK ABOUT THE PINNING OF
INFLATION AND LESS TO TALK ABOUT
HOW INFLATION WAS TRANSITORY.
IN FAIRNESS, MOST FORECASTERS
DID EXPECT IT TO BE TRANSITORY.
I DIDN’T EXPECT IT TO BE
TRANSSTORY -- TRANSITORY, BUT A
LOT OF PEOPLE GOT IT WRONG THIS
PAST YEAR.
I DON’T SEE WHAT THEY CAN DO
ABOUT IT RIGHT NOW.
IT’S REALLY AT THIS POINT THE
FED’S JOB.
THE FED NEEDS TO PIVOT, THE FED
NEEDS TO STOP LOOSENING AND
START MOVING TOWARDS TIGHTENING
IF WE’RE GOING TO GET INFLATION
UNDER CONTROL.
NEIL: I THINK YOU RIGHT ABOUT
THAT.
GOD KNOWS I HEAR FROM VIEWERS
WHEN I SAY YOU CAN’T BLAME ALL
OF THIS INFLATION ON JOE BIDEN,
AND, OF COURSE, HAVING SAID THAT
AGAIN, I’LL GET STILL MORE.
BUT MY POINT WAS AND IS WHEN YOU
COME OUT OF THE PANDEMIC WHEN
ESSENTIALLY THE WHOLE ECONOMY
WAS IN PARK, ANY PICK-UP IN
ACTIVITY IS GOING TO SEEM
JOLTING AND WITH IT, YOU KNOW,
THE COMMENSURATE PICK-UP IN
DEMAND FOR LIMITED SUPPLY.
SO THAT IS NEITHER THIS
ADMINISTRATION’S FAULT OR THAT
OF THE PRIOR ONE IN THE MIDDLE
OF THE PANDEMIC.
HAVING SAID THAT THOUGH, THE
QUESTION THEN BECOMES WHAT, IF
ANYTHING, CAN BE DONE, YOU KNOW,
WITHIN THE EXECUTIVE BRANCH OR
THE LEGISLATIVE BRANCH, OR IS IT
ALL ON MONETARY POLICY TO
REVERSE THIS?
WHAT DO YOU THINK?
FINISH.
>> I THINK IT’S MOSTLY ON
MONETARY POLICY TO REVERSE THIS,
AND MONETARY POLICY CAN WORK ON
A KALE OF 1-2 YEARS -- SCALE OF
1-2 YEARS, AND PEOPLE ARE
FEELING PAIN ON A SCALE OF 1-2
MONTHS --
NEIL: I’M SORRY, ARE YOU SAYING
THAT THIS INFLATIONARY SITUATION
GOES ON 1-2 YEARS?
>> I’M I SAYING THE FED MAKES
CHANGES NOW, THAT THAT WOULD
AFFECT INFLATION ONE YEAR FROM
NOW --
NEIL: I KEEP JUMPING RUDELY, I
APOLOGIZE, BUT YOU HAVE THE
10-YEAR NOW 1.46%, AND A LITTLE
MORE THAN THREE WEEKS WE WERE
AROUND 1.70%, THE BOND MARKET
SEEMS TO BE SAYING IT’S NOT
INFLATION THAT’S THE PROBLEM,
IT’S THE SLOWDOWN THAT COULD BE.
WHAT DO YOU THINK?
>> YEAH.
I MEAN, THE BOND MARKET IS A
STRANGE CREATURE ALWAYS,
ESPECIALLY TRUE RIGHT NOW WHEN
THE FED IS STILL PLAYING SUCH A
BIG ROLE IN THE BOND MARKET TO
MAKE IT HARDER TO INTERPRET THE
SIGNALS.
BUT DEFINITELY WHEN YOU HAVE THE
SHORT END OF THE CURVE HAS GONE
UP, THE LONG END OF THE CURVE
HAS COME DOWN, THAT’S A REASON
TO BE A LITTLE BIT SCARED --
NEIL: USUALLY PRESAGES A
SHOWDOWN.
USUALLY.
DO YOU THINK WE’RE IN FOR A
SLOWDOWN?
>> I HOPE NOT.
LOOK, WE’RE GOING TO HAVE SOME
SLOWDOWN, RIGHT?
THIS YEAR IS TURBO-FUELED
GROWTH.
WE’RE NOT GOING TO HAVE THIS
LEVEL GOING FORWARD FOR THIS
VERY GOOD REASON.
WE’RE GOING TO BE CLOSER TO
WHERE WE WANT TO BE.
I’M WORRIED ABOUT RISKINGS TO
THE ECONOMY, BUT BROADLY
SPEAKING ON THE REAL ECONOMY I
FEEL GOOD.
IT’S INFLATION WHERE I FEEL BAD.
NEIL: I ALWAYS SAY INFLATION IS
IN THE EYE OF THE BEHOLDER,
JASON.
IF YOU’RE AN OLD FART LIKE ME,
YOU DO REMEMBER THE ’70s, A
21% PLUS PRIME RATE.
BUT FOR A YOUNGER GENERATION,
MUCH YOUNGER, GOING FROM A 3% TO
A 4% MORTGAGE IS CATACLYSMIC.
SO IMPRESSION IS EVERYTHING.
DO YOU THINK AMERICANS ARE
PREPARED FOR THAT?
THE IMPRESSION OF RATES THAT GO
UP NOT TO THE POINT THAT I CAN
REMEMBER, BUT HIGHER THAN WHERE
WE ARE NOW?
>> YEAH, THAT’S A VERY
SELF-SERVING VIEW THAT ANYONE
WHO WAS BORN BEFORE 1970s IS
OVERLY SCARED OF INFLATION.
THEY THINK THE 1970s MIGHT BE
COMING BACK AGAIN.
ANYONE BORN AFTER 1970 JUST
DOESN’T APPRECIATE INFLATION,
DOESN’T WORRY THAT IT COULD BE
REAL.
IT’S REALLY ONLY ME, NEIL, THAT
ACTUALLY UNDERSTANDS IT --
[LAUGHTER]
UNDERSTANDS IT COULD BE A
PROBLEM BUT ISN’T TOO WORRIED
ABOUT IT.
NEIL: WELL, YOU’RE NOT ALONE ON
THAT.
JASON FURMAN, THANK YOU VERY