Transcripts For CSPAN2 Key Capitol Hill Hearings 20150331

The idea in larrys revival of stagnation is that because Going Forward the returns to capital and Consumer Spending are likely to be weaker than theyve been in the past, that the real Interest Rate that is needed to provide full employment could be very, very low. And there are a lot of reasons as we see very low Interest Rates, and he talked about in his remarks to the association of business economics a number of reasons why the demand for capital and the demand for Consumer Spending might be unusually low Going Forward and the same ones that, essentially, you need very low Interest Rates to get the economy up to full employment. Slower growth both from population and and also from possibly slower technical change, also he notes and i think this is an interesting point that if you look at new Industries Like facebook on the one hand versus the industries that were dominant in the 50s and 60s like steel making obviously, facebook and Similar Companies have much smaller needs for capital. They dont need big factories and heavy machinery to produce their output. And so with less demand for physical capital that, again the demand for investment have been smaller and that will, again, keep down Interest Rates in the economy. Related to that is the relative price of capital has been declining over time for both capital goods and for consumer durables. So spending on capital, he argued, would be smaller. So the focus has been on the demand for capital goods, how that affects output, and hes talked about and i wont get much into this but hes talked about increasing inequality which has many implications, of course, and many causes. But he argues, and i think theres an interesting debate about this he argues that increased inequality because it puts more income in the hands of people who tend to save more the rich or the upper income people might push down the demand for consumer goods as well and, therefore, be another source of stagnation. Now, what is the implication of this view that demand for capital goods and some consumer goods may be very weak Going Forward and, therefore Interest Rate needed to restore full employment could be chronically and systematically very low. Well, one of the implications and manager that larrys talked doesnt something that larrys talked about is if the real Interest Rate you immediate to get full employment and in particular if its lower than minus the inflation target of the fed then the fed runs out of room. Because if the fed lowers Interest Rates to zero and if thats not low enough, then obviously, Monetary Policy finds it very difficult to get to full employment. He points out, he he argues that, in fact, in order for Monetary Policy to get to full employment by itself that it has to allow financial bubbles like the housing bubble, and you know, during, of course, the early 2000s he points out that the economy did not overheat even though there was all this demand coming from construction and Consumer Spending out of the housing bubble. And he argues, therefore, that thats evidence that Monetary Policy cannot get us to full employment without bubbles and, of course, we all understand that bubbles are very daylight, and we certainly dont want that very dangerous, and we certainly dont want that to be part of our policy tool kit. So whats the solution . His main solution is fiscal policy, and he argues that by bringing in fiscal policy in particular, for example, fiscal expenditure on new infrastructure that that would help solve the sag nation problem and stagnation problem and address the concern that Monetary Policy by itself is insufficient. So let me just express a couple of points of agreement here. Certainly, a better balance of monetary and fiscal policy is something weve needed for some time, and infrastructure in particular has the advantage that not only is it a source of demand puts people to work as you build bridges and roads and schools, whatever, but, of course, it also provides product ivity gains and other benefits for the economy as well. So i clearly agree you need a better mix, and the heavy reliance not just in the United States, but in other economies on the central bank is not is not desirable. And those who complain that low Interest Rates are bad for various reasons, because they create bubbles and so on, we can debate whether thats true, but the night response is not for the fed to tighten policy, the response is, well, lets have a more balanced policy between monetary and fiscal that would give you the appropriate amount of stimulus at an Interest Rate thats not necessarily is so low. So i agree with that. I also take aboard the point that hes made and that people at the fed have made which is what he calls the inverse of says law, the salacious view that supply creates its own demand and therefore, theres never any problem with having enough demand in the economy. Larry puts it cleverly as the reverse, the lack of demand creates lack of supply that if you have an economy which is persistently below full employment so that people have longterm joblessness, thats going to affect their skills, its going to affect their motivation, their connection to the labor market, its going to affect Capital Investment. So by having a weak, chronically underemployed economy youre also going to get, eventually an economy which is not as productive as otherwise would be. So thats thats roughly the, my overview and, of course larry has no responsibility for my summary of his views, of the secular stagnation hypothesis. Let me now just give a few concerns that i have or a few potential responses, you know and give it an alternative perspective. I would say, first, just a few points. First, i think the notion that the real Interest Rate that you these to get full employment has to be, actually quite negative which is what you need, because the fed can get real Interest Rates down to 2 if they have a 2 inflation target. Thats a little bit strong and most economists would argue negative real Interest Rates theres got to be things that are productive ultimately, at least in the normal growing economy. When i was on panel when larry first introduced this point about secular stagnation, and i reminded him of what his uncle, paul samuelson, taught us in school because in that world it would pay to knock down the Rocky Mountains just to save the gas that you get from driving up the grade, you know . Literally, it would. If Interest Rates were really zero. Of course, theyre not and, of course, were not going to be knocking down the Rocky Mountains, so please dont take that literally. [laughter] Interest Rates that are that negative 2 , its questionable whether thats true. And particularly when you think about the fact that investment is not just facebook, but investment involves housing and Office Buildings and consumer durables and many other types of longlived goods that pay a higher return than 2 its also questionable, i think that you need to have bubbles to get to full employment. Theres a very nice paper by jim hamilton, ethan harris and ken west that was presented recently at the u. S. Monetary policy forum, and they questioned quantitatively whether, in fact, it really was true that the housing bubble of the early 2000s was the only reason that the economy was able to get to full employment. And they point out i think correctly, that there were some offsetting factors including the big trade deficit. We had a trade deficit at that time of 6 of gdp. So that was an awful lot of demand that was going abroad rather than affecting demand in the United States. And on top of that, we had a major increase in oil prices which was also sapping consumer demand. So there were some factors working in the other direction, and they show those two things, along with the housing bubble, were more or less a wash. So that evidence and the recent evidence, of course, that were at least approaching full employment is inconsistent with the view that you need bubbles to get to full employment. Their view which i think needs to be taken seriously, is that the slow recovery that weve seen and the low Interest Rates are at least in part due to headwinds, that is transitory drags on the economy that will ultimately dissipate. And often when i was chairperson, i would talk about the headwinds facing the economy including tight fiscal policy, again, the after effects of the financial crisis which are still with us, i think although obviously dying away and also of course, the fact that the housing sector is still quite below normal in terms of its growth. So theres some objections to the second stagnation hypothesis although again i think theres a lot of merit to it and, again i agree with some of the policy implications. But i think the one concern that i would like to talk about for the rest of my remarks is the fact that secular stagnation, the way its been expressed at least, is about the u. S. Economy in isolation. It doesnt talk about the International Aspects of our economy. But, in fact trade and exports are an important source of demand for our economy. And in a world where not just you know, if the whole world has secular stagnation, thats one thing. But if theres anywhere in the world that doesnt have secular stagnation and has Investment Opportunities and growth opportunities, then the u. S. Can benefit from that by Foreign Investment and by exports to that area of the world. And i wont go into detail in the argument but, basically again i would argue that in a world of reasonably mobile capital and reasonably mobile trade, that its not enough to say that the u. S. Is in secular stagnation. You would have to argue that the whole world is in secular stagnation. I dont find that very plausible, even if the United States has reached the state where all of our new industries are facebooktype industries, i think the rest of the world is not yet in that point. So in order to think about secular stagnation and the opportunities for full employment, i think it is important to bring in at least a little bit the global aspects and ask given that the United States is an open economy, that we do have Foreign Investment, that we do have trade can that help explain give an alternative or at least a complement to sec tar stagnation secular stagnation to the basic facts that growth is less than we would like to see. So about ten years ago i made an argument as jared mentioned, called the global savings glut. And the basic idea there was that for various reasons global savings was exceeding desired global investment. And what are some of the reasons for that . Well first, i pointed out what was happening in asia. You had countries like china which had huge savings and even though they invest a lot as well, a lot of their savings was being shipped abroad in the form of acquiring International Reserves or in ems of supporting their export industry which was the big source of growth for them. And this was a policy decision. This wasnt the fact the that a there were no opportunities for investment in china. Rather, they were suppressing domestic consumption, they were keeping their Exchange Rate undervalued, and these policy discussions led to big current account surpluses and a lot of savings that was blowing into the global flowing into the Global Economy. The rest of asia, similarly following the financial crises of the 90s Capital Investment this those economies went down, but theyre high savers, so that saving went off into the Global Financial markets. Likewise, i pointed out ten years ago the Oil Producers Commodity Prices were very high of course just before and during the crisis. And so you had countries like saudi arabia and others that were earning huge amounts of Foreign Exchange, could not spend all that effectively at home and so, again, that was money being recycled into the Global Financial markets. So you had a high amount of savings in the Global Economy, and that was having two effects basically. The first was that with lots of savings in the economy thats going to drive down Interest Rates because the supply of savings is greater than the demand for investment, thats going to push Interest Rates down. And that helped explain, as i argued at the time, what Alan Greenspan called the conone dumb. Even as the fed was tightening rates between 2004 and 2007, the longterm rates remained quite low contributing to some extent to boom many housing prices. The other effect can be that with Financial Capital flowing into the United States, that strengthened the dollar and contributed to our very large trade deficit t which i mentioned before. So in the middle of the 2000s, we had in 2006 we had a trade deficit that was more than 6 of real gdp which meant that a lot of the napped from domestic demand from domestic consumers and firms was being siphoned off into the Global Economy and this was a problem that was talked about a lot during that time. So so that loss of demand through the trade deficit could contribute to Slower Growth in the United States and to some extempt, as i mentioned before the positive effects on demand from the housing bubble. And all of those things, i think, are tied together. Well, let me just in the blog on wednesday ill provide a lot more data on this, but let me just characterize just very call tate ily how qualitatively how the world has changed in the last ten years and what the global imbalances and the global savings glut looks like today. The basic facts are as follows first, the trade deficit of the United States, as you probably know, is habit halved which is very positive. The biggest reason for that decline in the u. S. Trade deficit, of course is the fact that weve become major Oil Producers as well, so we dont have to import as much oil. Just a note that be you are an exporter but youre not an states thats actually not entirely good news for you because strength of our Oil Production and the reduction of demand for foreign oil means that the dollar is stronger than it otherwise would be, and it actually hurts nonoil exports. But thats a secondary issue. The main point is that the u. S. Has seen improvement in its trade deficit which is, which is a positive thing. The second observation i think worth making is, of course, the emerging market savings glut that i talked about ten years ago looks to be its still very large but it looks to be moderating somewhat. In particular, as you probably know china has been trying to restructure its economy so that its not completely reliant on exports and on Foreign Investment and more reliant on domestic consumption and domestic demand, and their current account surplus has accordingly come down meaningfully, and they continue to work in that direction can. So that is positive. That decline has been offset only partially by increased surpluses among other asian countries, the Southeast Asian countries in particular. And then finally in the emerging market world well two other points in the emerging market world. One is latin america has become much less of a surplus looking at brazil in particular, theres been a major swing towards deficit in latin america. And finally, of course as oil prices go down, then the current accounts of the Oil Producers will go down as well. So the emerging market surplus, global savings glut part looks to be lower and looks to be declining which is a positive thing for the Global Economy. But there is one change which is worth noting which is that ten years ago when i talked about the global savings glut the your p peen savings european savings balance was about zero. That is the net trade balance of europe was essentially, in balance. Today, since 2006 the net trade balance of europe and the eurozone has risen by more than 300 billion. So theres been a big Movement Towards surplus and imbalance in europe. Now, wheres that coming from . Part of it comes from germany which has the largest by far the largest trade balance surplus in the world despite the fact that the countrys about a quarter of the size of the United States. And thats troubling, because that looks to be structural and looks to be even rising and it will probably rise even more as the euro gets weaker. Over time. But a lot of the change more recent change though, has come instead from the fact that the deep recession in the periphery, in greece and ireland and italy and spain and portugal has driven down demand for imports in those countries and has moved the european periphery from being deficit, that is from importing more than theyre exporting, to a major surplus. And that has actually been the biggest source of the swing. So europe has replaced to some extent, the emerging markets, and probably that is one of the reasons why Interest Rates still remain very low in the world and that that is a headwind towards u. S. Growth as well, because it props up the dollar and hurts our exports. Now, the good news there is that that its not really good in that for the reason is the fact that theyre in a depression basically. The economys very, very weak, and theyre not importing much and, therefore theyre exporting their extra savings to the rest of the world. Thats obviously not good news for the periphery of europe, but the good news for the world is that presumably at some point this is not a longterm, structural issue. Presumably at some point europe will recover, and that surplus will given to moderate. And so looking around the world, what we see, i think, is some tendency downward to the amount of, of the savings glut issue. As you see less in the emerging markets and as we expect europe eventually to give back some of the surplus theyve developed. So the implications are, i think, from that perspective that the downward pressure on global Interest Rates will probably moderate somewhat, comet to moderate somewhat over time continue to moderate somewhat over time, and the pressures for the trade deficit of the United States will moderate over time. And i think those are positive factors that need to be taken into account thinking about growth. Well again, i dont think that these are mutually exclusive, secular stagnation and the global savings glut. I think theyre closelyrelated ideas except that the global savings glut is a global perspective, secular stagnation is national. But what are the bottom lines in terms of, in terms of policy . Well again, going back to secular stagnation i think that once again it is important for us to get a better mix of monetary and fiscal policy in supporting return to full employment. Again, relying entirely on the fed, relying entirely on Central Banks makes it much more difficult and keeps Interest Rates very very low whereas a better mix of monitoring fiscal policy would have a better better result. Secondly, if you do believe in secular stagnation and you think the economy is not producing good returns, then obviously, theres a lot we can do to make our economy more productive and make investment more desirable. Supporting technological change more worker skills all those thing that make investment more attractive in our economy. Third, we have to continue to fight the headwinds which i think are part of whats happening. Improving, for example, the Housing Market and overcoming the remaining problems left from the credit crisis. But finally i guess i would say that from the global savings glut perspective that we cant forget the international part. We need to continue to do what weve been doing for the last decade through the imf and other International Bodies and trying to reduce global imbalances and try to reduce in particular structural, longterm imbalances that involve in particular large surpluses which essentially are counterproductive in a world where theres not enough demand to keep economies of full employment. So i think these are are interesting perspectives, and ill stop there jared, and im happy to take a few questions. [applause] okay. Thank you very much. That was exactly what i hoped youd talk about. [laughter] so we have about 15 minutes for questions and answers. I will call on you. Please, make it a question. No he cantures if you please lectures, if you please. The more we can make our questions crisps the more well have time for ben to answer them. Rossizeen berry there. Rossizeen berry there. [inaudible] fiscal policy, what are you what are you thinking of when you talk about a better mix or are you talking about, you know 200 billion more of investment or, you know no, i havent, i didnt go as far this morning as to get a numerical recommendation. But i would point to the last few years, i think 2013 was the worst from the macro perspective when fiscal policy, the sequester, other cuts tax increases, all that together was actually a major drag on growth. Cbo estimated in 2013 that fiscal policy was taking a point and a half off of growth rather than supporting growth. And i argued as chairman during that time that shortterm fiscal policy ought to, you know, ought to be more app tentive to the needs attentive to the needs of the recovery and that those who were concerned about fiscal sustainability which, of course, is a legitimate issue should be thinking more in a longer term framework. But in the near term i think that, you know the fiscal policy was on the whole too restrictive during 2011, 12 13, and it put even more burden again on the fed to keep Interest Rates very hoe in order to maintain some very low in order to main tan some progress. We didnt rehearse this, but i have a slide on that point later. [laughter] youll get your answer then. No no, no, i meant on the 2013 problem. Okay. I could give you a fiscal recommendation. [laughter] im not, it is not beyond my skills. Josh bare row. Thanks so much. Can you talk a little bit more about what exactly to do to try to reduce those global imbalances . If china is backenning or was weakening its currency, what leverage do we have to force them to change . Theres been some talk lately about whether there should be provisions in trade agreements regarding currency and trying to enforce a regime of currency levels across countries. Is that something we should be doing . No, i dont support that for the following reason which is first of all i think that this is no chance that would be accepted, so it would kill the trade deal. But the second thing is that its although an economist can tell the difference between Exchange Rate management and legitimate Monetary Policy, im not sure that a technical legal document could do that in all circumstances. And i dont think that theres anything wrong with Monetary Policy being used to respond to weak conditions in a given economy even if Exchange Rate movements are a side effect of that. Because from the perspective of trade partner the Exchange Rate movement is offset by the stronger domestic economy in terms of not, you know exporting the weakness of the economy. Its good for us if other economies are doing aggressive fiscal and monetary expansion. So i dont, i dont recommend putting that into the trade agreement. I think that, you know we dont really have powerful tools, but there has been i can tell you that as a participant in many many Many International meetings other the last decade that over the last decade that office a constant theme of discussion. The that it was a constant theme of discussion. Obviously, theres not a real legal stick to use, but countries do respond, i think, to diplomatic overtures and to pressure from their trading partners when what theyre doing is perceived as, you know counterproductive to the Global Economy. So i think thats all we need to do, is to highlight those imbalances and continue to in International Meetings and other contexts to try to put the pressure on countries to achieve a better sustainable balance. Lets see, right there. Wait for the microphone, please. Hi, gina [inaudible] with bloomberg. So im curious when youre talking about reaching full employment, how do you feel what do you think the appropriate level is, you know . How do you feel about defense 5. 05. 2 range . Im not hearing you. Yeah, im not east. Im really sorry. When were talking about full employment, what do you think the appropriate level of that is right now . Where is full employment . In terms of the Unemployment Rate, is that what yeah. In terms of the Unemployment Rate. Well, i dont know a number and i think that, you know, the kind of economists who have tried to measure find an awful lot of uncertainty around it. And thats one reason why the fed is in some sense groping and among other things, they are obviously paying attention to things like real wages to see if those are responding and that would be one indicator of approaching full employment. But its even more complicated than it was before. Andy levins paper will show the Unemployment Rate used to be the only number you had to look at, but now, of course, there are many dimensions, and as the labor market has been changing structurally other time, its much harder to make an assessment. As you know the fed has modally lowered recently modestly lowered their estimate of the sustainable rate of unemployment, and i would gather thats mostly in response to the fact that unemployment has fallen quickly, its reached 5. 5 and so far theres not much indication of wage pressures. As i said, nobody really has that number, nobody really knows that number with any precision and the fed will continue to grope to find out what the right number is. And just underscoring a point that ben made, andy levins paper, andys going to be on the next panel, goes into a lot of depth on the points that were just made. Lets see is there anyone way in the back there . Okay, person waving your paper other there. The chinese have made a concerted effort in the last two or three years to establish the u. N. As a more prominent currency. Theyve got the sdr thing going on, theyve got a number of other moves theyre making including the other investment bank. Do you agree that having that currency as an additional reserve currency would be good for the World Economy or do you think that would be bad for the World Economy and how do you think their effort to establish that as a reserve currency will affect the euro . Thank you. Well, i think that in order for this to be a reserve currency theres a lot more work to be done to liberalize the Foreign Exchange regime, to make it a floating Exchange Rate, to make it fully convertible, etc. I think those would all be positive things for the world and for china and i hope theyll continue to undertake those reforms. If they undertake those reforms and you have a flexible Exchange Rate and a liquid market, then countries will begin to use it more extensively as a reserve currency, and i see no problem with that. But i think the more important thing is not that it be a reserve currency, but they take the steps necessary to get to that point;s that is, to reform their Foreign Exchange regime to allow capital flows, etc. Im all in favor of them continuing that reform process and i think one implication of that will be that it begins to play a larger role particularly in regional trade. [inaudible] the pboc has led on the the peoples bank of china has led on financial reform, thats correct. You know i think theyre right. Okay. Lets see, the gentleman right there. I appreciate the questioners being crisp p as i asked. So thank you. My question regards to one of the policy priorities you touched on, Climate Change. What monetary tools do you believe there are to address the Climate Change problem and do you believe that these tools require coordination on the global scale, or are they going to go to the approach of each nation individual plan and we all come together . Well im no expert on Climate Change, on making any specific relations there. But, of course, weve had success in the United States with marketbased, you know effluent charges in cleaning up the air. That has actually worked pretty well. And so theres various marketbased solutions charges on carbon, markets, there is a market in chicago that allows you to swap carbon claims. So if the country decides to go in that direction, there are some good marketbased approaches to that. Obviously, the more global it is, the better. And, you know that if you can develop a Global Market that way, that would, you know, equate the benefits, you know across across different economies. What the prospects are for that i really couldnt say at this point. But just again, thinking about it from the point of view of global savings gluts and the like if countries decide to go in that direction its another opportunity for Capital Investment right . Which is part of the issue. Are there enough Good Investments to be made . Okay. Maybe one or two more. Right there. Rob bug garre. Duggar. Ben, the employment problem has to do something with the Capital Stock, Human Capital stock. And what we know about Human Capital stock in the United States now is that the percentage of young adults 1824yearolds, 50, 60 or more are not really qualified for most jobs. In fact, one of the surprising things is the large number of jobs that cant be filled, three million or more in the United States. In your work on both i suspect the secular stagnation must have also something to do with Capital Stock labor force quality, competitiveness. Can you have you thought about this . How would you suggest thinking about this aspect of full employment challenge . Ive thought about it a lot. I think that Human Capital formation, i mean, this is pretty standard, but i do believe that Human Capital formation, skills acquisition training, all those things are critical for addressing a number of our problems including inequality including the inability of people in the middle to make progress, dealing with globalization etc. I think its very important on a human level. So i strongly support it. I was an educator my wife is an educator. We think this is a critical thing, and it would certainly help on secular stagnation because if you have a Skilled Labor force obviously, youre going to have a lot more attractive Investment Opportunities, and between higher income consumers and more Capital Investment, youre going to get around this problem of insufficient demand that the secular stagnation is concerned. So its a very positive thing. Now, that being said im a bit leery of the argument because we heard it sometimes during, you know, in 20082009 when the Unemployment Rate was 10 , you know, i didnt think that these issues really had much to do with why unemployment had risen from 5 to 10, and there were people saying, well, its all supply side, and i didnt believe that. So my remarks this morning suggest that we have to make sure theres enough demand to put the economy at a full employment position. Now, over the medium term, you know, growth comes not from low Interest Rates or even from fiscal policy as much as it comes from productivity and skills and those things. And so those things are critically important. But its also important to make sure youve got a sufficient amount of demand to maintain full employment. If i might i just want to amplify the last part of bens comments in the following sense. Back in 2000 we had similar Human Capital problems of the population you mention and yet their employment rates were rising quickly their Unemployment Rates were falling quickly. So its hard to really get too far into assessing the role that the very real problem you mentioned plays when demand is persistently weak. I think first you have to get to full employment to really understand the extent about to which people are truly unemployable. One more question . I thought learn a few. Lets see, who um, back there, the young person raising their hand back there, the glasses. I learned not to say the young man or woman. Perfect. Thank you. You mentioned china a little bit in your speech, and some people predict the chinese economy [inaudible] i wonder whats your take on this, and if youre managing the pbrc, what kind of policy would you implement to avoid a hard landing . And would you recommend the u. S. To join other chinaled International Financial institutions . Thank you. Ill tackle im just going to say a word about the first one. So chinas going through some very difficult transitions now. As i said, its very constructively and desirably moving from being exportled to having a greater amount of domestic demand particularly consumption. I mean, its good for the Chinese People that a greater share of their growing gdp be devoted to some Consumer Spending and household welfare. So thats a positive development. But it is tricky. It involves many structural and policy changes that, obviously are going on at the same time, and thats one of the reasons, of course that growth has slowed in china recently. As they go through this difficult transition, there are many other issues. There are issues relating to quality of loans in the Banking Sector the shadow banking system, Property Values not to mention issues like the environment and, you know climate quality. So its a very difficult complex situation but i guess my general sense is that the Chinese Government has a lot of resources. They have a reasonable amount of control over the financial sector. So im not particularly pessimistic, but, of course, obviously theres a lot we dont know about whats happening inside china. Well have to watch that carefully. So let me invite the panel to come up, please. Im going to move over here, what do you think . Stay here . Yeah. All right. While people are coming up, why dont i do the introductions. Im david wessel, directions of theup chins center on fiscal and Monetary Policy at brookings. And we have, the center on budget and policy priorities has come up with a pretty ambitious agenda. So first, we get the lecture on secular stagnation and global savings glut from ben bernanke and if that hasnt filled you up were now going to talk about three other aspects of full employment. Let me introduce the speakers who are going to speak for about five minutes and then theyll join me on panel. The first speaker is Valerie Wilson whos director of the program on race, ethnicity and the economy. Valeries an economist. Im the least educated person on this panel, by far. She got her ph. D. From the university of north carolina. Shell be followed but maurice em sell m who is for percent or worst not an economist. Hes director of the National Employment law projects access and opportunity program. And then well hear from andy levin who is currently an adviser at the Research Department of the imf but does not speak for the imf. He used to work for the fed he does not speak for the fed, and he will soon be a professor at dartmouth college. [laughter] Jared Bernstein is a senior fellow, of course, at the center for budget and policy priorities, youve already met him. Each of the speakers is going to speak for five minutes. My friend, larry has, is going to help us keep to the five minutes, and the reason we have journalists or former journalists moderate is were rude enough to point out to speakers theyve hit their limit. I promise to do that. Valerie. Show us how we do this here. Thank you david. Good morning. Before i get started on my remarks, id like to thank jared for inviting me to contribute to the full employment project and more allowing me to be part of such a distinguished group of speakers this morning. So im looking forward to the conversation myself. Talking about the labor market each month has become a bit like going on a road trip with my two young kids who are 6 and 3. Every couple miles someones asking you, are we there yet . [laughter] now, in the case of the labor market there is usually referring to has the economy fully recovered. And just like i tell my kids every couple of miles, my answer is no, not yet. [laughter] but one of the great things about the panel this morning is that we get to have what i think is a more meaningful discussion of what there should actually be. And so and going back to my analogy of the road trip, colorly taking my kids down to clearly taking my kids down to a Neighborhood Park is a shorter ride its a much cheaper trip than taking them to say bush gardens in williamsburg that they also enjoy. But i think its also quite clear that the payoffen on those two destinations is quite different as well. So similarly, i would like to argue morning that full employment is a Better Destination with a better payoff than full recovery would be, and this is especially true when we look at africanamericans in the labor market. Now, you may be asking well whats the difference . Well, the distinction that i make is this full recovery would simply return us to labor Market Conditions that we were in preGreat Recession. Now, whether or not that does it for you depends on how good you had it in 2007. But full employment, on the other hand raises the bar to the point where everyone who is willing and able to work can get a job. Now, as weve already heard this morning, the question was raised about what is the Unemployment Rate of full employment. We can debate that. But i think we know from past experience that its possible to get that Unemployment Rate down to as low as 4 without setting off a national crisis. So i want to make three points this morning from the report that i wrote about why i think full employment is a better target than full recovery and share a few slides illustrating how this has a disproportionate impact a beneficial impact, in fact, for africanamericans. So the first reason that i would argue that full employment is a better target than full recovery is i think pretty obvious. Lower Unemployment Rate means more people with jobs. The africanamerican Unemployment Rate tends to change two Percentage Points for every one percentage point change in the national Unemployment Rate. So with the labor improvements that we saw over the past year, we saw that africanamericans had the largest increase in the share of employed adults, we saw that africanamericans had the largest increase in Labor Force Participation, and this translated into about 200,000 fewer unemployed africanamericans over the past year as we saw unemployment fall. My second argument and i would draw your attention to the slide thats up now is that full employment creates a tighter labor market that increases the chances that we have stronger and faster wage growth. So again to illustrate that point, the slide thats up now shows the average annual change in median hourly wages during the last four economic recoveries. I think the thing that should immediately jump out to you as you look towards the center of that graph clearly the fastest wage growth during the 1990s, that was also the point where the up employment rate got the lowest Unemployment Rate got the lowest on an annual basis in the year 2000. So i would especially focus on that 19952000 bar and the fact that wage growth for africanamericans actually outpaced that of whites during that period. On either side of the 90s we see relatively stagnant wages, and then the only other point where we see a longer block is during the current Recovery Period in which case the longer bar is not a good thing because its beneath that horizontal line which means wages are declining. Now, the next point that i want to make regarding wages and unemployment is common can straited in this slide demonstrated in this slide. So it just shows you over a few different periods what happened with wage growth. This slide formalizes that relationship between the Unemployment Rate and wages and shows that since is the 79 since 1979 wages of black workers have been more responsive than those of white workers. So, for example when the Unemployment Rate doubles from say, 5 to 10 the median black workers wages decline by 810 . And that 810 depends on whether or not im including the periodover the Great Recession period of of the grease recession and recovery. My final point that i would like to make regarding why i think full employment is a better target is that more jobs mean higher wages, and that translates into improved living standards. Now, in my graph i have in my report i have a graph that looks a lot like the first wage graph that i showed you. In looking over the last four recoveries the exception is for median household income. Now, that relationship is pretty obvious since most people get income through working. But this slide i find particularly compelling because it shows shah shows that middle of the Income Distribution which, you know, you could loosely call the middle classics banded between that period between 1995 and 2000 as unemployment reached exceptionally low levels and black wages grew exceptionally fast. So we saw an expansion of the black middle class that was actually unique to this late 1990s period. Again, if you look at the other Recovery Periods, we see that there was actually a decline in the 80s, decline in the current recovery and really not a lot of change in that 20012007 period. So as i close up my remarks here and go back to my road trip analogy that i started with at the beginning and the question are we there yet. So whether were talking full recovery whether were talking full employment, i think the answer is the same at this point, no, were not there yet. But my hope is that we would endure the longer ride and get to the destination where the payoff is greater. And that payoff is full employment. Thank you very much. [applause] thank you very much. Two things i should have noted which is were asking for really brief summaries of paper which are on the center for budget policy and prioritys web site. And secondly for people who are standing in the back, there are seats up front. You can feel free. Ill vouch for you if they tell you you cant have taken the seat. [laughter] just waiting for the slides to come up. [inaudible] yeah. [inaudible] we have maurices slides . Great, thank you. Thank you. Okay. All right, thank you very much. Yeah i also want to thank jared for inviting us to participate in this forum and more taking into account this kind of extraneous issue for a lot of people which is the impact of the criminal Justice System on full employment. I also want to thank my the coauthor of our paper, jason, whos with the Justice Policy institute. Together we did our best to document the impact of the criminal Justice System on the labor market and to make some concrete recommendations for reform to help clear the path to full employment for people with records. So in the few minutes i have, im just going to flag a few of the key findings from the paper. First, i think most people know its been, you know, widely reported in the press that over the last several decades 3040 years weve seen a huge rise in incarceration rates over 400 over the last 3040 years. We incarcerate about 2. 4 Million People right now either in prison or in jail, another 5 Million People are on supervision, either on parole or probation. So total thats over 7 Million People. And every year the cost to the taxpayer of the criminal Justice System exceeds about 250 billion. Given these massive numbers its not surprising that exceptionally large numbers of people have a criminal record thats going to undermine their job prospects. According to the best information we have, roughly 70 million adults in the United States merely one in three nearly one in three, have a serious demeanor or felony arrest or conviction that can show up on a routine criminal background check for employment. Ill talk a little bit more about this later but the impact on people of color is especially severe. According to aen recent New York Times poll a recent New York Times poll, 34 of workingage men who were not employed either full time or part time report having been convicted of a crime. So if you put that together with the fact that nine in ten major employers in the United States conduct criminal background checks for employment, often taking into account old or misdemeanor records, then you start to get a picture of what workers with a criminal record are up against when they try to break their way into the labor market. We also know from are rigorous are employment testing studies let me get my slide up here so you can see that that about 50 of employers are less likely to interview a candidate with a conviction record compared to someone with otherwise identical credentials who does not have a conviction. So this slide from professor pagers testing study illustrates how these results play out by race. So it shows that africanamericans have a far greater likelihood of being denied a callback compared to whites, but even more striking is the fact that an africanamerican without a criminal record is less likely to be interviewed than a white candidate with a criminal record. Finally, i just want to mention a little bit more on the side of economics. The council of economic advisers recently concluded in a report are focusing on limited Labor Force Participation that Economic Growth is also seriously compromised when large numbers of people with a criminal record cant make their way into the labor market and the center on economic and policy Research Found that the failure to employ large numbers of people with felony records deprived the economy of as much as 65 billion in gdp in one year. So thats kind of the big picture scheme. I wallet to talk just a little i want to talk just a little bit about a recommendation that some of the Promising Solutions and there are a bunch of them profiled in the paper. If you have a chance to read it. But i want to mention that theres just been a ton of momentum bipartisan momentum around what we call smartoncrime criminal justice reforms which is i just attended a big forum last week that was cosponsored by koch industries, the center for more than progress aclu, freedom forum, tea party. You name it, they were all there talking about criminal justice reform. So we had this very special moment really to do something about this issue. So im just going to profile just one particular reform. It gives you, also a picture for how this issue plays out in reality for a lot of workers. So just after the 9 11 attacks Congress Passed the Terrorism Security law requiring that over two million workers employed in the nations bolters had to undergo ports had to undergo an fbi background check for employment. This was a program that was implemented by tsa. If the worker has a felony record going back less than seven years, he or she is disqualified under the law from working in the ports. No matter how long youve been working there, if you have a felony record going back seven years, thats it. You can no longer be employed on one of the nations ports. But in the legislation the unions fought hard to include two significant Worker Protections. One allowed the workers to appeal what are routine inaccuracies in the background check even with the fbi background checks. Thats usually the fact that a rap sheet reports arrests but its not updated to include the disposition like dismissed charges. Very routine. The other position allowed workers to petition tsa for whats called a waiver to demonstrate their rehabilitation basically. Individual information not just your criminal record. And in the end, it turns out that both these Worker Protections were worth their weight in gold especially for workers of color. Tsa granted 87 of the workers almost nine in ten of the workers were allowed to work despite the fact they had a felony record because they were able to produce evidence of rehabilitation. That was almost 15,000 workers whose coveted port worker jobs were saved in the end because of that one procedure. Just about done. And then tsa also granted 95 of the appeals which saved 50 of the jobs also a serious indicator of how routinely inaccurate the records are. So as you can see from next figure, you can see that africanamericans were far more lakely to petitioning for a likely to e petition for a waiver or e ea pile given the disproportionate numbers who have a criminal record. More than 50 of the people who applied for theware were africanamericans. Unfortunately, most occupational licensing laws, most employers dont follow these and other model Worker Protections which is a big reason why so many workers with a criminal record are still unfairly shut out of the labor mark. Thank you. [applause] well, first of all, thank you to jared and to the cbbp. Ive wanted to see more e events like this and more public discussion and debate. Decisions that policymakers are making on fiscal policy and Monetary Policy and all sorts of other regulatory policies are crucial for millions of americans. So is as david said, the red ink at the bottom of the slide if you can read it is to essentially to say these are my own view and my coauthor. So i had the privilege of working for ben bernanke. My instinct is to call him chairman bernanke because and i was an adviser for a couple of years. The major strides that the fed took under chairman bernankes leadership on transparency were really remarkable. Ask on this slide you can and on this slide you can just see one excerpt from a statement that the Monetary Policy committee adopted in 2012, and its reaffirmed each year since then. As chairman bernanke, ben bernanke just said a few minutes ago, you know, this statement and the related policy decisions that the fed made at that time and since then have really underscored the role of the employment part of the Federal Reserves mandate along with its mandate for price stability. Those are both important. And as ben bernanke has emphasized in the past theyre complementary goals. Now, what you see here in the statement is that a promise its a commitment by the fomc to communicate as clearly as possible and it indicates that their decisions must be informed by their assessments of the maximum level of employment. A pretty good indicator of the shortfall of the economy from a balanced growth the full Employment Level the Monetary Policy can achieve in the stable low and inflation rates. What you see is that it went up dramatically from 5 to around 10 when the Great Recession hit. And its come back almost all the way back towards the longer run level. The problem here is are we there yet. And many policymakers and other commentators have suggested yes we are back to normal now and it is time for the Monetary Policy to start normalizing. And i will just say i strongly disagree with that. But me show you why. First of all unemployment is a very narrow concept in a way about the labor market because it only counts people that are completely out of work not working at all and they search for a job in the past month. Okay. If you look at this picture its shoving you people working only parttime and they indicate they want a fulltime job and they are available and they are searching for a fulltime job and they havent been able to find one. It seems obvious to us that we could discuss it in the qanda but that is a part of the labor arc and if you look at the picture that went up a lot in 2008 and 2009 when the recession hit its only about halfway back to its crisis level suggesting as valery said we have made substantial progress measurable import and important progress in the recovery of the labor market, but we are not there yet. Maybe only halfway there. By the way i hope you will read it. Its a really important factor and you can see that its on the right side of the picture that these issues are very important for people of color and we shall hear the same theories specifically for african americans. Okay. They are not currently searching for the job, theyve given up that they are not unemployable. They can come back without the greater details and a picture about him line the bottom line as the policymakers have been watching the data they basically said maybe those people are never coming back. Maybe its demographics. Maybe its structural, maybe these people just become unemployable because they have been out of work for so long. That raise is very unappealing to me. I think that we certainly agree that gap is big and you can see here something valery emphasized on the paper that from what people in their prime working years, 30s and 40s and early 50s, those people are not retired, they are generally not disabled or in school and many of them are not fulltime parenting when you see here that those numbers fell automatically after the recession after the onset of the recession and we havent recovered much theres been good recent news that theyve been rising in some of them have been coming back to the labor market as it has been strengthening. We havent seen any recovery yet. We shouldnt think we are back to normal yet. We are talking three to 6 million americans who have a shortfall in the unemployment jobs its not five and a half it is somewhere between seven and a half in as high as 9 and that also means we should consider ourselves from the time we can start to normalize. I know david wanted to raise this more in the qanda so i will stop you. Explain what you have here. So the first on the left is a 3. 3 . Again there is a paper that goes to the details. The first column is the millions of fulltime jobs in the shortfall how far away from unemployment are we and the benchmark estimate is 3. 3 million fulltime jobs. But under reasonable alternative investment in the Labor Force Participation rate the gap is actually 6 billion fulltime jobs to make the first row includes people working parttime into the second row adds to the people that are out in the labor force is that correct aqwex not quite. They both have the same amount of underemployment. The same amount of unemployment that today gave up on a lot of people said they are never coming back. If you go back to 2013 you get 6 Million People instead of three and again in terms of the Unemployment Rate which is the middle column we should include people who want a fulltime job and people whove dropped out who would be working. The Unemployment Rate is between 7. 4. And then final final call on its way to the rate should be under the policy rule and that suggests that its premature. Thats right. This is one rule so one could debate about this but this is an example according to the benchmark estimate having it close to zero is still appropriate today and if you take the risk that maybe they are not, maybe they will come back and maybe the true rate is 9 than it would be really premature to start tightening the policy. Let me start with you. I forgot. Sorry. [laughter] we used up all your time. It might be better to leave my part output let me give it to you. It has to do with the consumer distinction. I just want to underscore how important the paper is in this regard and theres nothing extraneous at all about the magnitude he is talking about. So i recently finished a book and it was the fundamental problem of the u. S. Economy although this disease has spread elsewhere and that is the Economic Growth cannot longer be counted on to deliver the broadly shared prosperity. I think that is a very much and i did in our economy these days thats been bernanke alluded to when he talked about inequality. The book offers a policy agenda so each chapter in the book goes through a policy intended to reconnect overall growth. Im not going to go through ten chapters. I want to try to go through to delete the second and qanda. The first point is getting the fiscal and monetary balance correct. I would argue that has been missing in our economy and in europe. I have three points to make. Those pulling for unemployment to talk about monetary and fiscal policy is that they are individually important. They are important complements. In fact especially when the Monetary Policy is to some degree and perhaps to a large degree neutralized because the fund rate they control is bound by zero, fiscal policy is even more important. Its quite another and i take you through a long example that supposed to be a restaurant that serves meatless meatballs. We bring bring people into the restaurant and thats my first point. My second point is it may be an increasing problem Going Forward winning if we want to avoid a prolonged weakness in recoveries, fiscal policy will need to step up and at this again goes to some of the points made in the Keynote Presentation regarding how low Interest Rates are and probably will stay for a while that gives the fed less to come down and makes hitting the bound a probability of us raising the importance of getting the mix right. It is a Monetary Policy on the axis and fiscal policy with growth natural and contraction so we have nine different possibilities. In recessions in the week recoveries, we want to be in box one. We are both fiscal and Monetary Policy pushing in this interaction. And i would argue that is where we were in 2009 and a bunch of 2010. In the book i document that these were actually quite effective in the output. They are used all the onetwo punch of monetary and fiscal working together. But fiscal policy quickly moved us into box seven where the fed was in growth mode and the fiscal policy due to austerity was in the contraction mode and this is the point that i said when we were talking about 2013 i have a slide on just how damaging that was. Now we have moved to box number four in the growth mode at the fiscal but fiscal policy is neutral and in fact the move from seven to four has been helpful from the negative impulse its been very positive now that is about as powerful as the fed could move to neutrality any glidepath will be zero and remain but i would like to stick to box number for where they are on the growth and fiscal is on neutral. A bit of austerity even more than we do. We were kind of around box number seven with contraction mode fiscal policy. It was in a neutral mode and this was a problematic. It was being moved to the growth mode and europe remained in the mess that its in. This shows the importance of getting this punch right and iran under him going up to the tenure during this period and are giving very much for the compliment three fiscal policy. I wont go into my next chapter to try to foresee the question i always get when i get this presentation but we have a dysfunctional politics isnt going to do any of the stuff you want it to. What does it take to get us where we need to go. This is a bit of a challenge because they are not quite in the same lane but then i want to change to talk about policy. It comes out of their recession more quickly during the recovery. So two questions why. It has to do with the fact there are disparities in the starts of the africanamerican Unemployment Rate is about double so when we see things getting worse and because it is hire we tend to see more of them increase their. That disparity has to do with how it moves so much. I havent seen it getting greater over time but its been a consistent since 1979 is the day that i was using. It talks about two different sets of policies and the number of people that have records on the forms and the second one is whats lower the barrier. I was startled by the fact in the paper use it for africanamericans working age men assuming that is 2554 who are not in prison. 25 have a felony conviction. So what is one policy that you think has promised it would reduce barriers and the longterm tax that is exactly right we have to do both. There has been a lot of work done in the area today for people in the criminal Justice System theres a ton of bipartisan support to reduce about six felonies mostly drug crimes and various property crimes and that has the effect of reducing the prison population by 200,000 people. Really ambitious and they are reinvesting all that money into Treatment Training and other services. On the side of helping people navigate the background checks the most promising reform is a fair chance creating a fair process in the application the applications did you dont have to report the criminal record anymore but employers can ask about it later in the process and the whole challenge i must say this isnt specific to folks in the record of these days it is specific to a lot of people that are unemployed just getting your foot in the door is a huge problem. The trafficking systems and all the stuff that makes it impossible if you are unemployed or whatever it is and the duty of this in the box thing is you have a chance to demonstrate who you are as an individual so we have 14 states that have enacted these reforms over 100 cities and counties about 60 did so just in the past two years you might not get the job if you have a criminal record or conviction. What we look back on now is the golden era and its interesting to me go back and look at the coverage. People who have a disability are often times treated as though they are unemployable. What happened in the late 90s is that firms were desperate to find people so a friend of a friend says i have someone who got a bad back but could do this job. Lets give them a call and see if they can recruit them as a lot of people that have been disabled and apparently permanently disabled suddenly they were not permanently disabled anymore. They were coming back into the workforce and likewise, people who were coming out of prison and people with felony convictions and just looking in the wall street journal is an article i think in 99 or 2000 employment agencies started going off to the highSecurity Prisons but to the low minimum Security Prisons asking do you have any inmates released in the next couple of months that we could interview now . Im not kidding you interviewing these people for the kind of problems we are seeing today and that we have seen in the last few years of course these others i would agree with you on but i also said there is a demand and supply side and they need to hire more workers because they have more demand for their product than people who used to be considered unemployable become unemployable and that is also part of the problem. There is a potential growth to the economy how fast can we grow thats largely out of control of the Federal Reserve and then theres the question to get us as close to that path as possible. He made the case even more strongly than you did at the Unemployment Rate is misleading and we need to look at a lot more measures of that and you said that that is more true now than it used to be. So why is that and how do you decide how much slack . People are either looking or working for work a lot of it has to do with the trends with work patterns and aging and retirement patterns and peoples schooling choices in a variety of things all of that is due to the recession but on the other hand some of it may be figuring out how much is possible. Theres been a big increase in parttime work and i have no doubt some of that reflects underemployment but there are also changes in the way that firms organize their workforce and the way people interact in the labor market at home production etc. Trade all im saying is theres been a lot of ongoing changes in the workforce etc. That make it harder than usual to figure out how much further before you get to the destination. But as a practical problem for the fed because they do have a dual mandate and they want to figure out, you know how far can they go before they reach the point where the further it easily policy would be. Theyve done the work on a previous papers. How much of this is designed and if you think that it is real slack than a large amount of adult to cost the wages as well. The evidence is that statebystate there does seem to be some relationship between how much of this type of broad measure is there in any given state and others have found different results but thats the kind of analysis you have to do to assess what is going on and thats why all else equal word suggested there is slack in the labor market. I would say again valerie has the same evidence and we were relieved that her findings were very consistent with what we found. Again if you can take a look at both of the papers to compare on this question, i agree with what denver and he said that these are tough. Its not trivial. But when you say for the Labor Force Participation we are taking the current 2015. As of 7. 5 unemployment is using the current. Summarized the statebystate. At the state level evidence is that if unemployment is relatively elevated that dampens the wage. Its also the case that its parttime under employment and in a given state and given year that also is very significant and if you look at the statebystate participation rate. As the Ranking Member said. The people are completely unemployed, completely out of work and its people that are partly employed just 20 hours a week and if and they really want a 40 hour a week job. So, does getting to the definition mean that your white house to get a job . [laughter] that was a joke. So, two points. One is what we were talking about because i took some of the work and i did at waited at the following exercise which i thought was a good way to explain these dynamics that weve been talking about regarding wages which are a critical missing piece of the recovery particularly when you look at the populations that valerie is concerned about. We are all concerned that so if you try to predict on this path that is stuck for five years if you try to predict that using the Unemployment Rate, you will get a prediction to forecast where the wages are going so you run a model and stop at 2007 or 2009 and forecast you will find that it shows wages should be growing a couple percentages faster than they are and you say whats what with my forecast it used to work but it doesnt work anymore. Then you put in the Labor Force Participation rates. And this is just natural stuff you dont even have to get to the sophisticated level. And the forecast tracks the trend really tightly. At the polls you theres something about these folks in the labor force but are constrained on the wage growth and underscores the point about how much is left. Second point related to that very quickly, we are not going to reach the disadvantaged minorities, the longterm Unemployed People with criminal records, simply by getting to the unemployment and then you know, moving off of it. The need to get to unemployment chockfull unemployment and stay there for these effects. You are not getting all of the decline in the labor force dissipation is reversible by running expansionary monetary fiscal policy. There was an aging of the baby boomers also some some persistent demographics are recoverable if we get stronger and the argument is about how much none of us are making the assumption that it is the gap. We are all arguing about these points. I would say the following. Ive looked at all of the decompositions and i think that right now they be the point to have is recoverable. Let me ask about the remarks that ben bernanke made earlier. I am oversimplifying but part of what he was saying is that there is a limit to what the fed can do because it only controls the Monetary Policy in the United States and to the extent to which the chinese choose to run the current account surplus or these days the germans choose to run a surplus other than pounding the table at the g. 20 meetings the fed cannot do much. Do you agree on that . This is obviously a complex discussion. But i would say that ben bernanke himself was adamant. There are situations in which the Monetary Policy is doing everything it can and that still may not be enough to get back to the full employment but i think that i would say first of all i will stand behind it and im the first person to say we are not quite sure how to read this i would stand behind it to say there are a lot of labor markets left and its been flat at 2 so we think it would be premature to start normalizing the policy were tightening the policy right now. We also see very significant Downside Risks to the u. S. Economy. Some of them are from abroad. But this morning the personal consumption data payout and people are starting to talk now. Of course we have heard that story before and i would like to see an economy that is resilient enough to have a few winter storms the one area that i disagree with gets to the question that you were asking is about what we could and should do. Right now one of the things that is a drag on our economy is the strong dollar and if they have a point off of the gdp growth and its also not a result of the currency manipulation that has to do with a bunch of other fundamentals relative growth rates. It could undermine the deal although i still advocate for trying hard. Perhaps we need to do something more outside of it than the quiet diplomacy. But one thing that i disagree with is that its hard to distinguish between the policy that has currency management or manipulation. I think the extent to which we have a large surplus with large amounts of reserve currency is very much an indicator. They do not have the key to enforce the action against it. Most economists can make that distinction. Are you going to say they are not allowed to accumulate reserves . It is the amount that you accumulate. If it is just cover your debt you want to be able to accumulate a multiple of your debt. If you get to you are probably outside of the range. You may be right but there are not a judgment that can distinguish the different motivations for the reserve attenuation for example. It is a good deal i just worry that it will pill the deal. Its harder than you might think to make that distinction. I dont think that currency is misaligned right now. Do either of you want to add anything . Lets turn to the audience. Why dont you start there and then moved in. Tell us who you are. In the comments she said she expects the market to push up and accordingly that is going to be appropriate to start later this year. I was particularly. Its what you think explains that decision and i would love i dont speak for the the Federal Reserve. Im sorry. I agree with what you said earlier that things are complex looking at a lot of different data and different models and different analytical tools. I dont want to make this sound trivial. What she explained in her speech friday is that there have been very significant changes in the productivity growth for the reasons in the first session this morning. That means we dont know for sure is this balanced growth path or what the nominal wage growth will be along that path. And so that means there could be circumstances in which the core inflation period comes back up to the target of 2 and the Wage Inflation still is where it is and that began to point to the federal, structural, regulatory and other kind of policies that would need to improve the characteristics of the growth itself thats not a Monetary Policy at a point. There still is a lot of labor market today. Its been running around 1. 5 for several years now they have been falling short of the goal. As i said earlier they emphasized this for many years the price stability are complementary to be are missing the inflationary goal on the downside. It may be the sign that in fact there is still a lot of labor market slack and the only way to get up to 2 is to have a pickup and the only way we are going to get that is to maintain the accommodative policy longer than we might have thought. Im at the center for the popular democracy. I just want to follow up on alexanders point. At of the 2 inflation is the appropriate goal it seems to me if you are trying to get 2 then you get left off much sooner if you are willing to tolerate given that weve been under inflation for the last seven years or Something Like that. So i wonder is anyone familiar with any research that suggests that the 3 or 4 inflation has the human caused that it would be negative for the economy is doing a reason to think we could not be angered at 4 and a stable growing and robust economy because otherwise the tradeoffs are not clear to me. We have millions. Without speaking of it when you were there there waited you go for 2 is it symmetrical and if you had it to do again would you pick a higher target . There is research and most of it gained 2 which is the international standard. It is symmetrical. Its a symmetrical target and so therefore under shooting, overshooting should be more or less in balance. I think this is a complicated question, not only the question of the cost to the inflation but the benefit if it is a held view and these are issues economists need to do more work on because there isnt serious work on this question. I would say the following which is when i was there we talked about alternatives and there are two questions. What would you choose if he you were starting from scratch and the other is worth the cost complexities of switching the regimes in the middle of the deep recession or the financial crisis and i would say that deciding not to switch isnt the same thing as making a final judgment of what would be the best framework. We established a framework and was based on the history which is that inflation has been around 2 and they are extremely anchored around 2 for changing it is a very complex process. So given all that we decided not to make changes. I think a lot more work needs to be done. I am thinking about the high year targets of the benefit to that. But thats again you have to take into account not just the go vote but what is the cost of making a change. There is a paper in your packet that has written some pieces of the project. He explicitly argues that it would be useful to go about the 2 inflation specifically for the kind of intuitions that i think you were getting at but the the fed should allow not just the symmetry that the persistent period above 2 in order to get the Unemployment Rate down but it was also recommend you you either did this in your question and i think it is complicated and i would agree with a lot of what was just said that if you could anchor to were three or four but that doesnt say much about the cost and i think the point was we dont know much about that. Pam harris Education Board member. As a Housing Provider more and more of our workers are hispanic workers and some of them are undocumented and its greatly impacted this city in washington and the into the Restaurant Business and construction business. How was that factored does that factor into your report and how will it impact the overall unemployment of africanamericans once america embraces taking these workers citizens . There is a lot of directions i could go on. First i would say thats an issue that has been raised for some time. Whether or not increased immigration has resulted in the displacement of africanamerican workers. I think the point that you make is salient as you were talking about your community and your city. Nationally we do not tend to see that as much but in certain communities and in certain areas where there is a labor market i know that there are those tensions and challenges. On the other side of that, however the existence of a large number of undocumented workers serve to suppress the wages of raw. People can be hired because theres the fact that they could support them. There are two sides to the issue but when we get to the level of unemployment that is closer, he gave the example of looking for the workers. There is still a lot of slack that they would raise wages for everyone that longer in the workforce out there and at the same time we need full employment so we are able to bring the unemployment down overall. Tenuate can you wait for the microphone and tell us who you are . Can you tell us who you are who are you going to have us your name. In your comment you said it would work better if we had more Fiscal Health and its also tax policy and in the last 85 years we have had three major disruptions in the economy. The second Great Recession in 2008 there is a similarity between all three of those and that is we have the reductions in Capital Gains and the highest went down also. What im trying to say is it starts out good we have a good response to it but then we leave those in that it would be better for you and your job if we reduced stimuli before you have to raise Interest Rates. It is a complicated thing. But the fiscal policy including the spending side and i want to say an addition that it needs to be symmetrical when the economy is booming and we need full debate couple pullback fiscal. Its more flexible politically and perhaps more effective but i would agree that fiscal policy needs to have many objectives and goals. But many of them should be to try to mitigate those recessions and overshooting. Can i give you the last word because you were so disciplined in your presentation. Tell us how you see the politics of the fiscal policies of that we have done. My book is called the reconnection agenda, and i devote the did go to the last chapter thinking about how will you ever get to the politics to do what i just read about the 150 pages. Which seems like a worthy thing to undertake and i take solace and encouragement from the fact that these issues around the fundamental disconnect between overall growth and broad shared prosperity is a very much bipartisan concern right now. Theres actually an article i just read today or yesterday in the times documenting how of course it was mitt romney a few weeks ago, concerns about the income inequality and sticking to poverty rates in the middle class, jeb bush, Marco Rubio Paul ryan. You can go to recycle place to be for cynical place but i think there is a demand for the reconnection agenda and our job which i know we try to do at the center day in and day out. What is one that is an ineffective agenda but at the end takes on the words income inequality so i think Going Forward especially in the general elections coming there will be argumentation about this what will work and what wont . Please join me for welcoming the panelists. [applause] [inaudible conversations] what do you think is the most famous for the writing and hes very much more than that in oklahoma and we are very proud to have the work back in oklahoma where we think it belongs. He was an advocate for people who were disenfranchised for those people who were. They found themselves in california literally starving and there is a difference between those who were the haves and havenots and became the spokesman. In his own voice thats what makes the recordings that he did make some significant. The deadline for Nuclear Talks has been extended past two nights made night deadline. Methodist University Held a talk about the 18 months of negotiations. We will hear from a former commander of the Strategic Command and the author of a book on the nuclear statecraft. The discussion is about one hour and 40 minutes. Good evening and welcome to the center for tonight special for him on the Nuclear Weapons. It combines the study of the National Security with the study of the grand strategy in the wartime. The Program Features events like this that has leading scholars and practitioners in the same room at the same time. Thanks to that Board Members for being with us tonight. Nuclear weapons are in the news. You cant avoid them if you turn on the tv and read the newspaper any given day you will see stories, hominis stories. I found an oped titled north Korea Nuclear expansion. It quoted an Administration Official warning about north korea a close person would buy the larger program. They are doing too little to stop it. The ongoing debate on the Nuclear Ambition is tied to a broad fear of proliferation in the middle east. The nuclear race is already underway. They are not just about nuclear proliferations. They are also about strategy. How might the countries use Nuclear Weapons to achieve their political objectives. At denmark if it joins russia demands the removal of the nuclear missiles. Some analysts are calling for the returning war tactical Nuclear Weapons to europe. Its a little bit chillier and this might seem strange. The wall street journal oped by George Schultz and sandman come none of them starry eyed pacifists called openly for the global disarmament. They gave a spree to be two speech and thought americas commitment to seek the peace and security of the Nuclear Weapons. There are stories of the new Nuclear Power and the potential also about the traditional powers from modernizing the arsenals china, russia, the United States. The United States Modernization Program is particularly interesting the the purposes tonight. Its not going to be cheap. The Budget Office recently estimated that it is going to be on the order of 350 billion over the next decade alone. The economist magazine also had a big story, special issue on the Nuclear Weapons just a couple weeks ago and they summed it all up. 25 years after the soviet collapse world is entering a new nuclear age. The strategy has become the cockpit of the regimes and the mutual jopling with the five original Nuclear Weapon powers his own dealings are inspected by suspicion and rivalry. Thats scary stuff. Why are the Nuclear Powers acquiring Nuclear Weapons and why are the traditional powers modernizing the forces despite all of the calls for disarmament what is the value of the Nuclear Weapons, what is the Strategic Logic acquired on the forces blacks have the leaders but about the relationship between Nuclear Weapons and National Security . Hell does does it fit in today with our broad foreignpolicy program . I cant think of many better people to answer these questions then the two gentlemen seated with us today. Professor francis the share of the Nuclear Policy at mit. He was the a professor of International Affairs and director of the center for interNational Security at the university of texas. He was on the diplomatic history, foreignpolicy, Nuclear Weapons and the atomic age. To his right is the air force who until recently was the commander of the United States Strategic Command. And i thought he was directly responsible for the defense and the plans and operations in the u. S. Forces conducting global Strategic Nuclear alert and global strikes based on the cyberspace associated operations. As you all know with the security and Strategy Program here at smu and, i think, has really turned smu into a power center and go to place. We we should thank josh for his amazing job. [applause] the history of the nuclear age is marked by a puddle. A puddle. German Nuclear Weapons are monstrous, potentially civilization ending weapons whose use would not only be in moral but increasingly unthinkable. Yet