A Conversation With Janet Yellen
N.. P. R.. Everyone Cardiff and Stacey here this is the indicator from planet money to the on the show we are speaking with Janet, Yellen who was the chair of the Federal Reserve Kfi the Fed from two thousand, fourteen to two, thousand, eighteen she was the first woman to ever hold the job and you know both Republicans and Democrats have said in many forum that they thought she was great at it in the Economics World Janet Yellen is you know about as big as it gets she's kind of a big deal she's kind of been. and today along with economist Jared Bernstein another old friend of the show. She has an op-ed in the New York Times arguing that with the economy really needs now is a boost from fiscal policy. This is money that goes directly to people and businesses from the US government like back in March when the government passed a bill that among other things expanded unemployment benefits by six hundred dollars a week but those benefits and other provisions of that bill have now expired and after the break Janet Yellen explains why if the government does not pass another bill to keep supporting the US economy, she thinks economic growth might soon come to a stop. This message comes from. NPR sponsor Microsoft. The world has changed and Microsoft teams is there to help us stay connected teams is the safe and secure way to chat meet call and collaborate to learn more visit Microsoft Dot com slash teams support also comes from fundraisers. Fund rise makes it easy for anyone to invest in high quality real estate by building your portfolio with their more than one billion dollars in assets get started at rise dot com slash indicator to have your first ninety days of advisory fees waived. Janet Yellen former chair of the Fed. Thanks so much for joining US my pleasure. Thanks for inviting me. So in this new op ed you write that if there is no new fiscal aid or stimulus bill than the US economy will and I'm quoting here likely downshift from its current slow rebound in growth to no growth at all unquote. That's a frightening prospect. Why is that? Well, what I'm very concerned about now is that unemployment insurance payments, the extra six hundred dollars that have been going out that came to an end at the end of July, and that was supporting a great deal of spending that was creating jobs in the economy. Those x-cris six, hundred dollars a week payments were supporting something like fifteen or sixteen billion dollars a week to unemployed workers and the ended now, and they're spending with supporting jobs throughout the economy. So this loss fiscal support is what I'm tremendously afraid is going to lead to retrenchment in the economy or a complete petering out of growth. And do you think that any new bill should effectively? That earlier bill from the end of March that included those expanded unemployment benefits included checks to a number of individuals or do you think that there should be some new provisions in any new bill? Well, I definitely think that the additional unemployment insurance benefits are tremendously important on top of that food assistance through the snap program food stamps is extremely important as well. So I'm very focused on trying to get more money into the pockets of the people who need it the most and will spend the most creating jobs in the economy. I'd also mention federal aid to state and local governments State and local governments face tremendous budget deficits going forward because their tax revenues have been decimated by the pandemic and these are entities that have to balance their budgets and when they faced that kind of shortfall in revenues with they're doing and planning more of is spending cuts and layoffs, and that's going to add to the economy's woes and create more employment throughout the economy. So I would very much like to see aid to state and local governments part of a new bill that Congress agrees to. and. You know when when the cares act was passed back in late March by historical standards it was quite a large bill in the trillions of dollars and yet here we are at the end of the summer with the potential of the recovery slowing down already. So what's a good way to think about how much is the right amount of new fiscal stimulus in aid for the economy so that we can judge whether it's too little just the right amount or or even too much. We need enough spending in the economy to support jobs so that there's enough demand for the goods and services that the economy is capable. Of producing I, don't have a number to give you. But estimates that I've seen. Suggest that something on the order of it trillion dollars would be too little to keep the economy just going where it is or growing in recovering slowly. Let me shift gears to ask a question about the Fed now. Yes. Sure. Yeah. There have been some critiques about a couple of the Fed's emergency lending facilities to in particular one is the facility that's meant to get more lending to small and mid sized businesses and the other facility. You mentioned a second ago state and local governments. There's another emergency lending facility that's. Also meant to get more funding for state and local governments, those facilities haven't been used a lot and it seems to be because the logistics of setting them up are tricky. That's done in collaboration between the Fed and treasury, and because the terms might be too owners too stringent. How big of a problem do you think that is and how should it be fixed? So, it is absolutely true that this requires agreement between the Fed and the Treasury these are joint programs You should not assume that AH program isn't working because it's not paying out a lot of money or being used heavily a lot of the programs. The Fed setup are essentially backstops that assure private lenders that markets won't be subject to dysfunction and they'll continue to work and that's provided them the assurance that they need to land in. So we've seen for example that many borrowing rates in mid March began to spike the credit was drying up from the private sector to borrowers. But when the Fed put these programs into place they weren't much. Generally, been true for most of the programs private. Began to pick up so the FID programs will working even though they didn't do a lot of business. You know one thing chair Powell often says that we have to keep in mind is the Fed can lend, but not spend and some some entities. This is true of some state and local governments also some businesses this pandemic is causing such losses to them that they really need subsidies to. Survive and it's important to have loans available but loans have to be repaid in the future, and in some cases what we need or grants I that the bill that's eventually passed by Congress, will also have more support for small businesses that are in a position of, yes. They need access to loans, but they very much need subsidies also in order to in order to be able to survive this. Yeah and then finally. How have you and your family been writing out the time of the pandemic as everybody okays it'd be safe. We'll thanks for asking. We are being extremely careful where it home and I consider US among the lucky people who were able to do our jobs from our homes. We're all working very hard, staying safe and being very careful not to expose ourselves and have you found ways to have fun or is economic analysis is so much fun that that's how you're We enjoy one another's company and You know Kiffin we're eating at home all the time cooking is nice and relaxing hoppy, and we're trying to treat ourselves to some good things to eat. That's great. Jenny. Thank you so much for joining us today been. Thank you for having me. This episode of the indicator was produced by Nick Fountain fact checked by Brittany Cronin. Our editor is Paddy Hirsch and the indicator is a production. 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