The Indicator from Planet Money - A Conversation With Janet Yellen

Former Fed Chair Janet Yellen talks about her New York Times op-ed with Jared Bernstein, proposing a two-punch solution for boosting the economy.

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1 Cardiff and Stacy here. This is the indicator from planet money today on the show. We are speaking with Janet Yellen, who was the chair of the Federal Reserve aka the fed from 2014 to 2018. She was the first woman to ever hold the job and feel both Republicans and Democrats have said in many forms at the thought. She was great at it in a gallon is you know about as big as it gets she's a really kind of a big deal, but she's kind of day and today along with Economist Jared Bernstein another old friend of the show. She has an op-ed in the New York Times arguing that with the economy really needs now is a boost from fiscal policy. This is money that goes directly to people and businesses from the US government like back in March when the government passed a bill that among other things expanded unemployment benefits by $600 a week, but those benefits and other provisions of that bill have now expired and after the break Janet Yellen explains why?

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If the government does not pass another bill to keep supporting US economy. She thinks economic growth might soon come to a stop this message comes from NPR sponsor Microsoft. The world has changed and Microsoft teams is there to help us stay connected teams is the safe and secure way to chat meet call and collaborate to learn more visit microsoft.com teams Support also comes from fundrise fundrise makes it easy for anyone to invest in high-quality real estate by building you a portfolio with there more than 1 billion dollars in assets get started at fundrise.com indicator to have your first 90 days of advisory fees waived Jenny own former chair of the Fed Up. Thanks so much for joining us. My pleasure. Thanks for inviting me. So in this new iPad you write that if there is no new fiscal Aid or stimulus Bill than the US economy will and I'm quoting here likely downshift from its current slow rebound.

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Growth to know growth at all unquote. That's a frightening Prospect. Why is that? Well, what I'm very concerned about now is that unemployment insurance payments the extra $600 that have been going out that came to an end at the end of July and that was supporting a great deal spending that was creating jobs in the economy whose extra $600 a week payments. We're supporting something like 15 or 16 billion dollars a week to unemployed workers and they have ended now and they're spending with supporting jobs throughout the economy to this loss and physical support is what I'm tremendously afraid is going to lead to retrenchments in the economy or

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Complete petering out of growth and do you think that any new bill should effectively Echo that earlier bill from the end of March that included those expanded unemployment benefits included checks to number of individuals or do you think that there should be some new Provisions in any new bill additional unemployment insurance benefits are tremendously important on top of that food assistance through the snap program food stamps is extremely important as well. So I'm very focused on trying to get more money into the pockets of the people who need it the most and we'll spend the most creating jobs in the economy also mention federal aid to State and local governments state and local governments face tremendous budget.

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Opposites going forward because their tax revenues have been decimated by the pandemic and these are entities that have to balance their budget and when they face that kind of short falling revenues what they're doing and planning more of is spending cuts and layoffs and that's going to add to the economy's woes and create more unemployment throughout the economy. So I would very much like to see Aid to State and local governments part of a new bill that Congress agrees to you know, when the when the cares Act was passed back in late March by historical standards, it was quite a large bill in the trillions of dollars and yet here we are at the end of the summer with the potential of the recovery slowing down already. So what's a good way to think about how much is the right amount of new fiscal stimulus in?

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Made for the economy so that we can judge whether it's too little just the right amount or or even too much we need enough spending in the economy to support jobs so that there's enough demand for the goods and services that the economy is capable of producing. I don't have a number to give you but estimates that I've seen suggests that something on the order of a trillion dollars would be too little to keep the economy just going where it is. We're growing and recovering slowly emergency landing facilities at two in particular one is the facility that cement to get more lending too small and midsize businesses and the other facility you mentioned it a second ago state and local governments was another emergency.

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Facility, that's also meant to get more funding for state and local governments. Those facilities haven't been used a lot and it seems to be because the logistics of setting them up or tricky that's done in collaboration between the fed and the treasury and because the terms might be two owners to stringent how big of a problem do you think that is in and how could it be fixed? So it is absolutely true that this requires agreement between the fed and the treasury, these are joint programs. You should not assume that the program isn't working because it's not paying out a lot of money or being used heavily. A lot of the programs the feds set up art essentially backstops. That issuer private lenders that markets won't be subject to dysfunction and they still continue to work.

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And that's provided them the assurance that they need to lend and so we've seen for example that many borrowing rates in mid-march began to spike. The credit was drying up from the private sector to borrowers, but when the fed put these programs into place also, they weren't much use that generally been true for most of the programs private borrowing began to pick up. So the CID programs will working even though they didn't do a lot of business, you know, one thing that you're Powell often says that we have to keep in mind is the Fed can lend but not spend and some some identities. This is true of some state and local governments and also some businesses. This pandemic is causing such water.

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To them that they really need subsidies to survive and it's important to have loans available but loans have to be repaid in the future and in some cases what we need or grants. I hope that the bill that's eventually passed by Congress will also have more support for small businesses that are in a position of yes, they need access to loans, but they very much need subsidies also in order to in order to be able to survive this.

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Yeah, and then finally how have you and your family been riding out the time of the pandemic is everybody? Okay, zor be safe. Thanks for asking. We are both extremely careful when we're at home, and I consider us among the lucky people who were able to do our jobs from our homes. We're all working very hard, but staying safe and being very careful not to expose ourselves and have you found ways to have fun or or is it an economic analysis is so much fun that that's another's company and, you know kissing the we're eating at home. All the time cooking is a nice and relaxing Hobby and we're trying to treat ourselves to some good things to eat. That's great Danielle, and thank you so much for joining us today. Thank you for having me.

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Editor is Patty Hearst and the indicator is a production of NPR with civil unrest the pandemic and the economic crisis. You want to know what's happening right when you wake up and that's why there is up first the news you need in about 10 minutes from NPR news with an everyday.
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