Does he have the ability to do this, do you agree with the decision . Sen. Schumer i agree with the decision and i know that he will check things out legally. Thank you, everybody. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] a we take you live to discussion on fiscal policy in the Incoming Biden Administration and congress, hosted by the brookings institution. Size i think is ambiguous and policy occur through a political process. I would rather see something that is a little bit smaller but that could pass this week or next week, rather than wait for something that is a little bit until, but will not pass february. If you look at the output gap, i think a trillion dollars is a reasonable figure for the next round of stimulus. I think democrats should be willing to take a couple hundred billion dollars less than that. Republicans should be willing to take a couple hundred billion dollars more than that. That is a lot of money, particularly on top of cares act , which was around 1. 8 trillion that passed in march. So we are talking about a sizable amount. I dont think 200 billion in december is better than one point 5 trillion in february, but in the range of consensus estimates, i think anything in tot range of 700 billion 1. 5 trillion, i think we should just take what we can get out of the political system as soon as possible, for the reasons that doug said. Now,u do not do this businesses and households that really need support in december, january, are not going to get it. That is a pretty long time. To take a quick step back, i think this is an unusual recession and that the needs of fiscal policy are unusual. A primary objective of fiscal policy in this situation in my view should be to preserve the productive capacity of the economy. That is not a typical objective in a typical recession. In a typical recession, there is a Macro Economic imbalance, policy error, something wrong in the economic system. It is in the economys interest that unproductive enterprises go out of business and that capital and labor resources can be allocated to better use. You really dont want the mucking up that process. In this case, the threat to the economy has happened outside of the system, the virus. Businesses that would otherwise be viable, that are healthy, are havective, that relationships and networks, all sorts of capital that can be easily replaced, they could go under because households dont have enough income to spend. Becauseld go under social distancing restrictions limit the ability for people to frequent them. You want to support Household Income, you want to support those businesses. Part of supporting Household Income in my view is supporting state and local governments, so they dont lay off a bunch of workers. You really want to keep everything that is good about the prepandemic economy in place. As much of it as possible, until we are on the other side of it, and people can take a vaccine. Then we can let businesses sink or swim once the pandemic is behind us. I think that really speaks to doing something that is in the ballpark of the optimal size, as quickly as possible. , and weeks is a long time a lot of damage can be done in that time. Thank you, michael. Wendy, maybe you have a different angle on this timing issue. I know you have written about issues of sustained fiscal policy, both in the context of this crisis, but in general. Maybe you can give a different perspective. Think thated, i do the support we need for the economy right now needs to be sustained. I do not want that to take the place, though, of doing something urgent. Let me start there and say we i dontent need see myself but im trusting the system is working. On screen and heard. Excellent. Wendy we have an urgent need for congress to act. I am in a near panic about the lasting unappointed benefits, that according to the department of labor numbers could mean that for upwards of 9 Million People on december 26, they abruptly lose all of their Unemployment Insurance benefits. That is just a crisis proportion. I do not want anything that im saying about a size of a package or how sustained the package should be, or my concerns about the long run economy, to crowd that point out. That is just an urgent issue that Congress Needs to take up immediately. That said, i want to make three broad points. One, i want to talk about where we think the economy is today. Where i think the economy would go if we did not see any additional stimulus. And then what i think additional stimulus could do. Re the economy is today both doug and michael have talked about what is happening in the labor market. We had many statistics that one could point to. Almost 4 Million People who now say their previous jobs are permanently gone. Those people are sometimes referred to as the permanently unemployed. They are not permanently unemployed. Hopefully someday they will find employment, but they will be in different jobs than they had previously. People who say that their previous jobs are permanently gone unlike those on temporary layoff are in much worse circumstances. They leave the market in higher rates and are slower to be employed. Numbers like that, we are on track to have the same number of people say that their previous jobs are permanently gone as we did post rate recession. Numbers like that are alarming. , thist fiscal support recovery, particularly in the labor market, is going to be painful and protracted, much like the recovery was post great wish and. Laborot a great Market Recovery we want to emulate. There is of course widespread pain in wide Small Businesses. Rate of closures for Small Businesses is running about three times its normal pace. Worrying. Course as michael stressed, will leave our economy with less productive capacity, once we are post pandemic, than we had prepandemic. That is an even greater problem given how many millions of people are going to be looking for employment post pandemic. We will have reduced labor demands that will take a long time to recover. Aboutnow, if you think what we have seen in terms of job openings, the number of Unemployed People per job opening right now is roughly double that it was prepandemic. We see a lot of pain in the labor market, a lot of pain in Small Businesses. We know there is a huge amount of heterogeneity, dispersion and who is feeling the pain. Some are basically back to financially speaking, back to their lives that they had prepandemic, in terms of labor income, wealth. Some businesses are doing well. We know of course, for millions of people, hundreds of thousands of businesses, the pain is quite acute. Lets talk about what the economy may look like without any additional stimulus. Even the more optimistic gaparios suggest the between where gdp might go in lets say 2021 relative to where we thought it would go, relative to what our projections look like prepandemic, that gap looks to be about a trillion dollars in 2021 in nominal dollars without any fiscal support. Size, inut half that 2022. Those are very large numbers. So here is the issue with what that means for how much fiscal support is necessary right now. A welldesigned package should be able to have a bang for the buck, which is to say, how much it will boost gdp per dollar of federal cost. A welldesigned package should have a bang for the buck of about one. We are lucky if we can get something bigger than that, also be2, but we could unlucky and get something smaller. Lets say for arguments sake, its an easy number and we have a bang for the buck of about one. Adam we are going to have to move to the next question in a moment. Wendy let me go quickly. The problem with a bang for the buck of about one, it doesnt happen right away. It takes at least a year and a half for us to get that effect on gdp. Of ader to fill a hole trillion dollars next year, we righteed a package passed of considerably larger than a trillion dollars. Aven what i just described, trillion dollar hole in 2021, half a trillion in 2022, that leads us to needing a package of about 2 trillion to fill the whole hole. Adam thank you, wendy. I just want to make sure we get multiple topics covered. Picking up on something wendy was saying, starting with aboutl, if we are worried speed and overdoing it, what kinds of design aspects would you want in this package . Some people talk about triggers. My colleague has written about this in the european context. Ont the stimulus should go until a certain benchmark in unemployment is hit. How realistic and useful do you think those proposals are . Do you have something else, should it be done on an ad hoc basis based on the conditions . I appreciate in theory the role that those triggers could play. I think it is difficult because every recession is unique in some important ways. This recession, for example, the Unemployment Rate has fallen significantly faster than professional forecasters and other economists thought it would. Even after the cares act past. If you look at forecasts of the Unemployment Rate that were may, even inil, august, months and months after the cares act past, they expected the Unemployment Rate to be higher for longer. There was a lot of talk over the summer about triggers that would keep on benefits extended until the Unemployment Rate had dropped low 7 below 7 . I dont think that is a trigger that a lot of people would want. I think the Unemployment Rate is in that vicinity but there is still a need for extending unappointed benefits. Triggers make some theoretical sense, but if you try to design that theych a way apply to recessions more broadly , for any individual recession, you will not get to the need. Theave a program in Unemployment Insurance system that has triggers. We have extended benefits that automatically kick in based on the unappointed rate in the Unemployment Rate in the state. There is wide agreement that that program has not worked well, and that is why congress in the Great Recession and in the pandemic recession passed a special ad hoc benefit program. I dont see why an Additional Program with different triggers would lead to a better result. So, i think what we need is just up thegress to size situation and pass something reasonable. To its credit, congress did a great job in march. What Congress Passed in march was a welldesigned, really appropriatelysized package. The compromise being discussed right now on capitol hill, the outlines of which have been clear for months, would also be a welldesigned package. Remove think we need to the legislative function of and put it on autopilot. In this particular case briefly i think the right trigger is for a lot of these programs is, after a vaccine is in wide distribution, and we want to return the economy to a situation where businesses sink , and wheretheir own households have to rely on earned income as they would in a normal situation. We are not going to meet that switch immediately once the vaccine is out, but shortly thereafter. That is not that far away in the future. I think there is even less of an argument for triggers, now that we are already so close to the vaccine. Adam i know that doug wants to come in, but let me go back to wendy. Based on your writing, you may have a different view on this trigger situation. Can you give us a different take . Wendy absolutely. I agree with michael that the triggers incorporated into the Unemployment Insurance system, at least the fallback ones that states have to use, are horrendously designed. The reasons states cannot adopt a more reasonable ones which they could adopt is because they cost the state money. What we see right now just to pause on this what we see is while the federal government is doing 100 funding of extended benefits, the states have actually adopted the better triggers. A number of states have adopted the better triggers to leave extended benefits in place. On december 30 one, once that federal financing goes away, drops back to 50 , four states are giving up on the more reasonable trigger and going back to the unreasonable trigger so that extended benefits immediately lapse. Triggers can work, they just have to be welldesigned. The financingove onto the Balance Sheets of states that are in dire straits right now. Doug talked about some of the terrible fiscal strings of 2008, and a lot of that was because of completely insufficient support for state and local governments. All of those issues are tied together. I strongly think that triggers make more sense than arbitrary calendar cutoffs. Adam thank you for that. Doug, you wanted to come in. Michael and wendy have seen this, but you in your term had to put up with a lot of proposals for fiscal rules, things like that. If you could give a mention to what you are experiencing with those types of proposals. You are muted. Doug thank you. Respectfully disagree with my friend michael about triggers. Michael has noted the forecast of what would happen over the course of this year has not been accurate. That is true for Macro Economic forecasts every year. I have spent about a dozen years of my life deeply engaged in or casting, first with the Federal Reserve board, later with the Congressional Budget Office. Time,endy for part of the but we seem to have trouble getting the forecast accurate. A lot of smart people are trying really hard to do a better job. It is just really difficult. At the same time, fiscal policy is just not nimble. We are having a discussion in december about a bill that might be passed. All of us and most economists and others studying this have said that four months ago, this should have been passed. Maybe the congress will now act with support from the administration, and that would be good. The cares act is a positive sign of fiscal policy reacting. Maybe we will get a second one, but maybe not. That is why we are having this discussion. I think the fact that recessions are all different is actually an argument for triggers. It emphasizes why it is so difficult for economists to predict how long recessions, how deep recessions will be. Even in other recessions, you mentioned, some have structural imbalances that need to be fixed. If you look back a dozen years, we were building too many houses in this country for the demand. There had to be some reallocation of workers. Even then, many people who lost their jobs lost them because they were not in one of the sectors that needed to change, but because the people within the sector could not pay any more for the appliances or whatever it was. There is always a spillover effect. Triggers are a great way of responding early, and also sticking with it until the problem is gone. I think this can be designed. Jason furman dowrote a paper about how set of triggers for medicaid. I think the ideas are out there. What congress doesnt want is they do not want to be taken out of the picture. Want to respond. They want to respond. Congress should still respond with policies that are specific to the given downturn. That could be housing finance, the paycheck protection program. But thetill there, question is can you complement that with a more regular response. I think you can do both. Congress is going to want to act. Congress wants to take credit for acting. So they will need things to do, but theres plenty they can do even if you had triggers in the system, now or in general and the system. Mr. Posen thank you, doug. We have come from talking about the immediate present situation and the risks, not just risks, the harm that you all agree on, to talking about some Design Principles and what each of you would want. In ongoing ways are very aware of the realities in congress. And the fact is that the Republican Senate majority in divided government seems at least likely to be objecting to or blocking a number of potential initiatives. Im not talking necessarily about the deal that may come this week or this month. I understand that deal might be done along the lines. But in terms of any large budget initiatives or simply the next budget that would be normally coming in just the next month or two. So, maybe we can talk a little bit about how you see that playing out, but also more what do youichael, think is possible to get, maybe not bipartisan, but at least an agreedupon and passed bill other than a continuation agreement . Wendy, do you see from a democratic or hamilton project kind of side, what pelosi or others should be advancing in the situation . And finally, doug, not that our colleagues are partisan, but you with your nonpartisan cpo, doesnt really matter that we have divided government in this sense . Im trying to keep the timing straight, so i will shut up now. Michael, over to you. There ain i expect that will be difficulty in passing another economic stimulus measure in february. I think that the odds of something passing in december are significantly higher than the odds of something passing in february. And i think that democrats in congress who are hoping that they can get Something Better with President Biden then they will be able to get with President Trump, and therefore are willing to wait, i think they are making a significant mistake. Republicans are going to be much less eager to give President Biden a win in his first few weeks in office than they will be eager to give President Trump a win in his last few weeks. By the time we get to late january, early february, we will already have 20 one million, 30 Million People vaccinated, at least according to what Public Officials are saying right now. And a vaccine and why distribution will be just a couple months away, a few months away. That is really going to make