LESSON OF 2008 AND ’09 WHEN CONGRESS WAS TOO TIMD AND IT
CONGRESS WAS TOO TIMD AND IT
TOOK YEARS --
>> INSISTING ON A BIG COVID
RELIEF PACKAGE.
IS BECAUSE OF WHAT HAPPENED
DURING THE LAST BIG CRISIS.
RIGHT?
AROUND 12 YEARS AGO.
THAT IS THE LAST CRISIS PRESIP
TATDED BY A REPUBLICAN PRESIDENT
THAT DEMOCRATIC ADMINISTRATION
IMMEDIATELY HAD TO TRY TO GET
OUT OF.
DESPITE HAVING BOTH HOUSES OF
CONGRESS AND THE WHITE HOUSE THE
RES LUE PACKAGE WAS IN RES TO
SUSPECT TOO SMALL TO DO WHAT WAS
NEEDED AND ONE OF THE LOUDEST
VOICES CALLING FOR MORE STIMULUS
BACK THEN WAS NOBEL PRIZE
WINNING ECONOMIST PAUL KRUEGER.
HE HIMSELF JOINS ME NOW.
I HAVE BEEN COVERING THIS SINCE
BACK THEN.
I WAS WRITING ABOUT THE DEBATES
OVER THE RECOVERY ACT BACK THEN
AND THE STIMULUS AND NOW.
WHAT HAS CHANGED?
WHY -- HOW DO YOU ACCOUNT FOR
THE MASSIVE DIFFERENCE BETWEEN
THE APPROACH THIS TIME AROUND
AND LAST TIME?
>> WELL, FIRST OF ALL, I THINK
DEMOCRATS HAVE LEARNED TWO
THINGS.
ONE ECONOMIC AND ONE POLITICAL.
THEY HAVE LEARNED THAT WHEN
YOU’RE KIND OF AT BOTTOM,
PARTICULARLY WHEN INTEREST RATES
ARE ALREADY ZERO, THERE’S A
TREMENDOUS ECONOMIC ASYMMETRY.
IF YOU OVERSHOOT, OKAY, THE
FEDERAL RESERVE CAN RAISE
INTEREST RATES AND INFLATION CAN
BE CONTAINED.
IF YOU UNDERSHOOT THEY CAN’T CUT
BUT THEY HAVE LEARNED THAT
POLITICAL, THAT THEY HAVE
LEARNED ABOUT THE NATURE OF
THEIR OPPOSITION.
APPARENTLY ACCORDING TO ACCOUNTS
THERE WERE PEOPLE IN THE OBAMA
INNER CIRCLE THOUGHT IF THE
FIRST STIMULUS TURNED OUT NOT TO
BE BIG ENOUGH THEY COULD GO BACK
FOR MORE.
THAT MAY HAVE BEEN TRUE WHEN
DIRKSEN WAS THE LEADER BUT NOT
TRUE WHEN MITCH McCONNELL IS THE
LEADER.
IF IT IS NOT BIG ENOUGH THE
OTHER GUYS SAY, A-HA, SEE?
THE ECONOMIC PHILOSOPHY DOESN’T
WORK AND DON’T GET A SECOND
CHANCE AND LEARNED THAT.
SOME OF US DID WARN ABOUT THAT
BACK THEN BUT NOW I THINK
EVERYBODY GETS IT.
>> I THINK THERE’S -- ON THE
POLITICAL LEVEL IT WAS
INTERESTING TO SEE THE
REPUBLICAN GOVERNOR OF WEST
VIRGINIA, AGAIN, THIS IS A STATE
TRUMP CARRIED BY 40 POINTS
SAYING THINGS LIKE THIS.
RIGHT?
SOUNDS LIKE PAUL KRUGMAN CIRCA
2009.
IT IS THIS.
AT THE END OF THE DAY IF WE
OVERDO IT A LITTLE BIT, DOWNSIDE
RISK IS MINIMAL.
IF WE UNDERDO IT, THE DOWNSIDE
RISK IS ENORMOUS.
THAT DID SINK IN BROADLY PAST
JUST LIKE LITTLE -- YOU KNOW,
THE CORP.ER OF ECON TWITTER
WHERE PEOPLE DEBATE THIS.
>> I HAVE TO SAY, I SPENT MOETS
OF MY CAREER AS A PUNDIT, YOU
KNOW, MAKING ARGUMENTS THAT TURN
OUT -- NOT ALWAYS RIGHT BUT
ARGUMENTS THAT TURN OUT TO BE
RIGHT AND VINDICATED IN
PRINCIPAL BUT NEVER HAVE IT
RIGHT IN REALTIME.
THIS TIME THE DEMOCRATS ACTUALLY
ACTED ON IT.
PEOPLE ACTUALLY LEARNED THE
LESSON.
AND DID THE RIGHT THING.
SO I MEAN, IT IS -- I’M PINCHES
MYSELF WONDERING IF THIS IS A
DREAM BECAUSE WE ARE RESPONDING
MORE OR LESS ADEQUATELY TO THE
CRISIS AT HAND.
>> ONE THING I THINK ABOUT NOW
AS WE WATCH THE VACCINATIONS
WHICH ARE RIGHT AROUND 2.2
MILLION A DAY, WE CONCEIVE OF A
HERD IMMUNITY AND THE RESCUE
MONEY, I’M NOT AN ECONOMIC
PROGNOSTICATOR BUT THE SECOND
HALF OF THE YEAR COULD BE REALLY
GOOD.
>> YEAH.
>> THERE’S PENT-UP DEMAND.
IT IS NOT A NATURAL DISASTER
THAT TOOK OUT PHYSICAL CAPITAL.
LIKE THE AIRPLANES ARE ALL THERE
AND THE HOTELS, BROADWAY IS
STILL THERE.
LIKE YOU HAVE TO JUST -- WE
COULD HAVE A PRETTY GOOD SECOND
HALF OF THIS YEAR.
>> THERE ISN’T THE OVERHANG OF
BAD DEBT THAT WE HAVE THIS TIME
AROUND.
>> RIGHT.
>> SO WE REALLY ARE -- I MEAN,
TO COIN A PHRASE, THIS COULD
VERY WELL BE MORNING IN AMERICA.
GOLDMAN SACHS, THEY HAVE A VERY
GOOD TEAM OF ECONOMISTS, THEY’RE
PREDIBLGT
PREDICTS THAT WE WILL HAVE 8% OF
GROWTH THIS YEAR.
ENOUGH TO GET THE ECONOMY BACK
TO FULL EMPLOYMENT BY EARLY NEXT
YEAR.
NOW, THAT’S NOT THE END OF THE
STORY.
THERE’S A TREMENDOUS AMOUNT OF
STUFF TO DO DOWN THE LINE BUT I
AM EXPECTING THAT A YEAR FROM