Ezra Klein interview with Jason Furman on inflation and the US economy

February 8, 2022 3:03 PM

What the Heck is Going On with the U.S. Economy? What matters more, a booming economy or spiking inflation? Ezra Klein interviews Jason Furman, former chair of the Council of Economic Advisers in the Obama administration.

Short version:

• The US is seeing inflation because demand for goods is way up. For example, for the category of "sporting goods, hobbies, musical instruments and books," spending is up by 40%.
• As spending shifts back towards labor-intensive services, it also seems likely that there'll be inflation in service prices.
• For 2022, the Federal Reserve is likely to "ease up on the accelerator," gradually raising interest rates but keeping them below the "neutral" rate of about 2.5%.
• Expanding supply is important.

On that last point:

Ezra Klein: When you look at what we’ve learned since then, do you think we are persistently supply-constrained? And if we are, what can we do about it?

Jason Furman: I love what you’ve been writing about the supply side of the economy. There needs to be more of almost an explicit — people saying they're supply side and being proud of it. That’s so important to what we do. Now, supply side doesn’t mean you cut taxes and deregulate. But reclaim the word.

My ideas tend to be less creative than yours and more conventional — so more investment in research, in education, in infrastructure. I’m more of a fan of when you need something, the government will offer to overpay for it. Tell people we’ll pay $30 a test. Tell people will pay $50 a shot. And Pfizer will figure out how to improve its advertising campaign, because it’s going to make that much more profit from all of it.

So I don’t know exactly what the right supply side policies are. But having the debate and discussion about those is really important and it’s been probably underdone on the progressive side.

posted by russilwvong (13 comments total)

I don't know a ton about some of the more advanced topics at hand, but I am reticent to take what Furman says at face value. To me the brilliant son of a real estate developer who rode the Harvard-Brookings-Obama admin pipeline isn't exactly who I would trust on the economic advice that will benefit the maximum amount of Americans. This is the guy who once wrote a paper called "Wal-Mart: A Progressive Success Story"

Instead I would expect this person to consider only turning the narrow amount of economic knobs deemed politically expedient, which has the effect of enriching an already enriched class of people by shoveling money at private companies to deliver what the government should be already providing. This above quoted line here seems to indicate as much: "I’m more of a fan of when you need something, the government will offer to overpay for it. Tell people we’ll pay $30 a test. Tell people we'll pay $50 a shot". Why does the government need to overpay for something that is (I would assume) already profitable?

It's essentially the ACA/Obamacare problem (yes, a Furman project too) where we are providing more insurance to more people, but at a significant tax cost, most of which is pocketed by large healthcare corps. I'm glad that most of these additional taxes were progressive, but it also resulted in larger out-of-pocket payments on Medicare Advantage.

This stuff should be considered the bare minimum right-wing policy and instead we've ceded so much ground this guy can hawk supply-side economics and work in Dem admins.
posted by JauntyFedora at 3:54 PM on February 8, 2022 [19 favorites]

I used to really like Ezra Klein but I'm finding his weird brand of technocratic progressive cosplay harder to forgive from back when I could rely on him having good interviews and guests where he could pantomime objections to be addressed and countered by the better qualified.

Now his whining comes across as insular and enabling.

However, Robert Reich is still dead on the money.
posted by abulafa at 4:33 PM on February 8, 2022 [17 favorites]

I'm going to gently push back on the criticism of EK - he may be very vocal about his political views but while I don't always agree, he absolutely will show his work behind why he believes what he believes. For every softball interview, there are 10 wonky, nerdy, delightfully weedy dives into political insiders and authors brains.
posted by rebent at 7:31 PM on February 8, 2022 [8 favorites]

Thank you for the short version!
posted by panhopticon at 7:50 PM on February 8, 2022

this american economy--where consumers are surly about long lines and short supply and higher prices--is what you get when you give workers even a tiny, tiny fraction of a better wage and more confidence that they can quit and get a better gig. especially after the worker misery of the past 30 years.

just imagine the disruption if workers had 1950s level bargaining power. it would totally upend prices and availability of pretty much everything people buy.

that would be great for workers! ... except workers are consumers too. and consumers in the working class are especially vulnerable to price shocks. and that's what fucks the policymakers, and why there is no easy answer, and why bland vanillas like furman should be taken seriously when they say to take. it. slow.
posted by wibari at 10:17 PM on February 8, 2022 [5 favorites]

1) inflation helps debtors, as do low interest rates. The federal government, the states and counties and cities are all in a large amount of dollar denominated debt, as are nearly all americans. Not 100% of that debt is owed to americans below the 1%; hence inflation is a net win for americans except those who are rich and will be fine but have their insatiable feelings hurt and will finance the coup.

2) inflation "taxes" at a flat % and is the only real tax we manage to leavy on companies and wealthy people.

3) The proper response to inflation is not to raise rates and try to raise the number of unemployed and slow the economy; the proper response to inflation is a COL UBI indexed to inflation. This quarantines the decay of material standard of living to those who are already not broke, instead of slowing the economy and starving out the poor (for the numpteenth time).

4) The worker shortage, the supplychain bottlenecks, the demand shift from services to goods; these did not come from low interest rates or price signals or fed balance sheets and printing money. we live in a global economy and THERES A FUCKING PANDEMIC THAT IS KILLING MILLIONS AND DISABLING MILLIONS MORE and we tried with mixed success to slow the pandemic by distancing, masking, closing businesses to the public etc.

No interest rate change is going to bring back the dead or unfuck the disabled. I dont know whats more terrifying, that we believe economists and bankers are experts when they try to use economics to respond to health or climatic crises or that they believe their own bullshit.

Thank you for the interestinf interview.
posted by anecdotal_grand_theory at 12:47 AM on February 9, 2022 [9 favorites]

...note, not Ezra Furman in conversation with Jason Klein...
posted by From Bklyn at 2:02 AM on February 9, 2022 [1 favorite]

he absolutely will show his work behind why he believes what he believes.

That work often boils down to "I'm basically unconvinced device A will have effect B, therefore we shouldn't rely on it."

Effect B is often "[reducing] someone else's misery" which Klein seems to take as a truism with no more urgency than "slightly higher steel tariffs". He had internalized the perfect as the enemy of the good so completely it has quietly made him a technocratic conservative.

So - I'm glad he shows his work. His work often disregards misery and humanity as a casual afterthought.

[Edited to clarify first premise.]
posted by abulafa at 5:29 AM on February 9, 2022 [5 favorites]

Klein has reached the same level of galaxy-brain takes as Yglesias, e.g., this podcast about meritocracy from last year. Neither can be trusted as an honest dealer anymore.

As for the economy "booming," to quote National Treasure Charlie Pierce, “People got no jobs, people got no money,” and they can't afford a place to live or health care, so who cares if the Dow is at record highs?
posted by ob1quixote at 9:09 AM on February 9, 2022 [7 favorites]

'Interesting' take on the economy (thanks for the links above on how great Walmart is) but I agree with the comments about Ezra Klein. He's so busy trying to be a public intellectual he's totally lost touch with progressive politics.
posted by bluesky43 at 4:02 PM on February 9, 2022 [1 favorite]

My ideas tend to be less creative than yours and more conventional — so more investment in research, in education, in infrastructure. I’m more of a fan of when you need something, the government will offer to overpay for it. Tell people we’ll pay $30 a test. Tell people will pay $50 a shot. And Pfizer will figure out how to improve its advertising campaign, because it’s going to make that much more profit from all of it.

This paragraph just so perfectly captures the moral and intellectual bankruptcy of the neoliberal policy elite that has turned the USA into a failed state.
posted by moorooka at 4:48 PM on February 9, 2022 [4 favorites]

I heard somewhere last week that overall inflation is being driven largely by the sharp increase in the costs of housing and cars.
posted by neuron at 9:51 PM on February 9, 2022

There are some other major contributors. In today’s CPI report, fuel prices are up 46% from one year ago; overall energy prices are up 27%. Food prices are up 7%.
posted by mbrubeck at 12:23 PM on February 10, 2022