With the cares act in march and prevented the covid pandemic from doing even more harm to the economy and welfare of americans than it did. The cares act is essentially been spent, many people are about to lose benefits. Unless Congress Acts. And unless Congress Acts fiscal policy soon will be a drag on growth. They are still more than 11 Million People still unemployed by the official count. Most economists and certainly those gathered here today agree more fiscal support is necessary. Following that discussion, we turn to an issue predating the pandemic him one that persists. How to think about the federal debt and very low Interest Rates. Its growing and unsustainable rate. There is sentiment among comp economists for doing anything about that right now. When is a debate about how and how best to address that Going Forward. Had to balance the risk and cost. And too little Public Investment. We look at that issue with the paper posted on our website. By two veterans of economic policymaking. , theytheir presentation will moderate a discussion with the authors. And now, i will turn the virtual stage over to adam pozen. Only have younot led this to new heights, but theyve spoken widely on it broad array of policy issues. Term costs and opportunities presented by the covert pandemic. Let me think not only all the participants. Thank you very much as we not only think the participants. We arehe first time doing this and hopefully not the last. Including many of the people participating today. We are looking forward to talking about that. Please let me introduce artist English Panel in alphabetical order. Distinguished panel. The director of the hamilton project at the brookings institution. She joined brookings earlier this year after recently being the chief economist. Wendy has a distinguished career in Public Service having also served as the executive director of the financial crisis inquiry commission. Also alphabetical order we go to doug. At theean of the faculty harvard journal school. The director of Congressional Budget Office for six years from january 2009 to 2015 before joining the school in 2016. Including asokings the previous director of the hamilton project. Cbo and a senior economist in the white house economic advisors. For hisecognized nonpartisan leadership of the cbo. Michael, he covers a wide range of topics, overseeing work on economic policy, Financial Markets, health care policy. The American Dream is not dead. Bloomberga column for. He also was previously worked in the u. S. Census bureau and the Federal Reserve bank of new york. So let me start right in on the first topic which is very shortterm looking at the possible bill coming out of congress to extend or replace the cares act. What are your thoughts, doug on terms of timing and size, what are the guidelines for this . Doug thank you very much adam. Thanks all of you for coming. Im delighted to be on this panel. When i look back on the , i see fiscalis policy being stimulative in 2009 in 10, but then retreating 2011 and 12, 13 and 14 to a position of restraint. That premature tightening of fiscal policy was one of the greatest mistakes in macroeconomic policy of the past halfcentury in my view and im afraid we are on the cusp of making a similar mistake again. We should at this point go fast and go big. We should go fast because as david noted, there are millions of americans who are about to lose Unemployment Insurance benefits. There are many businesses that are trying to hang on through a very hard few months. There are families that will lose income on which they are necessitiesth other and we see pressures they are increasing lines at food banks in this country. If we do not respond, we will have committed two inflicted harms. Whois we will make people are hurting hurt more today in the days to come. The second will be undermining the foundation for a strong republic. If we keep Household Income supported antibusiness operations going, not only will people be better off, we will be in a better position for a better recovery. Need seen are calculations ive suggesting 1 trillion fiscal stimulus might be enough. There are other calculations showing 2 trillion would be more an appropriate amount of stimulus. I will let wendy speak to those analyses if she would like. Emphasize is just is exactomic forecast is not exact. There will be a risk. Doing too little is much greater. If we have too much stimulus in a macroeconomic sense. The Federal Reserve can readily respond to that by raising Interest Rates a little bit or withdrawing in some of the other ways. Weak, theand is too Federal Reserve cannot respond readily to that because the fund rate is already down to zero. We would be better off, we would have a more robust less risky, more balanced economy if we could achieve full employment with higher Interest Rates. From a macroeconomic policy perspective, we are much better off aiming higher than we need rather than coming up short. The second way we need to go big is because social and human costs of people being out of work are really high. Yearsome of the last few of expansion is very low employment rates put people to work who couldnt find jobs otherwise and faster wage growth particularly in the bottom half. That is important for those people and for increasing those peoples faith in the Economic System that this country is working for them and these policies are working for them, which they doubt. If i had to choose between Unemployment Rates lower for a smooth economy or too high, we are much better off pushing for some being too low. Doing too much are much smaller than the risk of doing too little. Ill stop there. Thanks very much. Concise and clear. , is aiming big the issue , is the timing the issue or is it Something Else taken into consideration . I think you want Something Big enough, but i think the most important consideration is the speed. Getting this done quickly. The optimal size i think is ambiguous and policy occurs through a political process. I would rather see something thats a little bit smaller but can pass this week or next week rather than wait for something thats a little bit bigger but wont pass until february. If you look at the output gap, i think 1 trillion 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. On top oflot of money the cares act which was around 1. 8 trillion. So we are talking about a sizable amount. Billion innk 200 december is better than 1. 5 trillion in february. But in the range of consensus estimate, i think anything in that range of say 700 billion to 1. 5 trillion or Something Like that, i think we should take what we can get out of the political situation as soon as possible for the reasons that doug said. That if you do not do this now, then businesses and households that need support in december and january arent going to get it. Thats a pretty long time. I take a quick step back, think this is an unusual recession and the fiscal policy is unusual. A primary objective of fiscal policy in this situation should be to preserve the productive capacity of the economy. That is not a typical objective. In a typical recession there is a macroeconomic balance in some sort of policy ever, there is something wrong in the system. And it is in the economys interest that unproductive enterprises go out of business and that capital and resources can be allocated. You really dont want the government mucking up that process. In this case, the threats of the economy occurred from outside. Businesses that would otherwise helpinge and that are and are productive and that have relationships and networks and all sorts of capital that can be easily replaced could go under. Under because households dont have enough income, they could go under because social distancing restrictions limit the ability to frequent them. So you want to support Household Income in those businesses, part of supporting Household Income is a state and local government so they dont lay off a bunch of workers and you really want to keep everything that is good about the pandemic economy and place, or as much as possible so when were on the other side and people can take a vaccine and then we can lead this into a sink or swim once the pandemic is behind them, i think that really speaks to doing something that is in the ballpark of the optimal size as quickly as possible because eight weeks is , andg 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 stat