Source on cspan, unfiltered, unbiased, word for word. From the Nations Capital to wherever you are. The opinion that matters most is your own. This is what democracy looks like. Cspan, powered by cable. National Economic Council chair Lael Brainard discusses the Biden Administrations economic policies and their impact on growth in the economy. He also touched on workforce participation, supply chain challenges and china. This event was hosted by the peterson interest Peterson Institute for economics. We are due to start in a few seconds. Given the importance of dr. Brainard today we are here for the presentation by dr. Lael brainard director of the Economic Council assessing the recovery. This is a great opportunity for us, not just to welcome lael back but to seriously engage with the Top Biden Administration official on what could only be described as a surprising and superb performance of the u. S. Economy in the last 1. 5 years, two years. As a former central banker and strong economist of note, Lael Brainard has grappled with these issues analytically as well as politically, as a policymaker. We are fortunate that she has agreed or offered to have an on the discussion following remarks. My admiration for Lael Brainard is sincere. She is now the fourth member of counsel serving as President Bidens top Economic Council. She previously served as vice chair of the federal reserve. Working on international, domestic, operational issues. In between all that, she was Vice President at the brookings institute. This all came after she received her phd from harvard and was on track to a stellar academic career including teaching at the sloan school of management before deciding to throw herself to public service. We are genuinely honored and looking forward to the remarks of dr. Lael brainard. Thank you. [applause] dr. Brainard i think, probably i should just leave now. That was so nice. Thank you. It is always wonderful to be here. That was extremely kind. I am delighted to join you. After this institution has made so many contributions to thinking about the nature of the pandemic shocks and assessing the recovery. I know you will continue to make really important contributions that will inform our thinking. After the pandemic years brought an unprecedented amount of shock, it is disheartening it is incredibly heartening that the every process is so strong. It is a testament to the resilience of American Workers, consumers and businesses. It is also an indication that smart policy can make a positive difference. Every week that goes fight, we learn more about the recovery. Yesterdays return to grew by 4. 9 in the Third Quarter and today we learned that core pce inflation came down in september on and analyzed basis. That is the lowest level since day of. 21. Core pce inflation is running about 2. 5 percent at an annualized rate. There are of course risks associated with elevated Geopolitical Uncertainty and Financial Market volatility but it does appear inflation is going down while inflation remains robust. It was not too long ago that the economy experienced dramatic supply shocks in labor inputs and commodities. That and the elasticity was a sharp and shift was a sharp and sudden shift. Following that massive shock to supply, americas recovery under the president s economic plan stacks up well in comparison to previous forecasts, recoveries and other advanced economies and even to the last u. S. Covering. If we start by comparing u. S. Recovery with forecasts, we will back a year and we looked at the consensus forecast. It was that unemployment would need to go up in the economy would need to flatline to get inflation down to where it is today. In actuality, the u. S. Economy has grown over the last year. Unemployment has remained below 4 while inflation has physically fallen to the level in that forecast. Similarly, if we look across advanced economies, it tells a similar story. While many experts believe that the president s economic plan would lead to worst worse tradeoffs, we have seen the u. S. Bring inflation down faster than other advanced economies while growing more robustly. U. S. Gdp growth has been cumulatively 7. 4 since a quarter before the pandemic and that is the strongest among the g7. At the same time, the u. S. Currently has the lowest inflation both at a headline and core level of any g7 economy. Second, we have also seen faster postpandemic growth is estimated by output per worker. We have seen highgrowth physically in areas at the heart of the president s resting in america agenda. For example, real spending on manufacturing is actually up about 60 since the president signed the chip science inflation reduction act. The agenda and clean energy portions are catalyzing private sector investments. Hundred 14 million at last count. In infrastructure, clean energy and Semi Conductor manufacturing. We are also seeing some reallocation in the market that may be indicative of similar sets of markets. We have seen large employment gains during the sectors, manufacturing and construction, sectors that are at the heart of investing in america agenda. Do not see this we do not see these patterns in data of other economies suggesting that the president s plan may be contributing although it is too early to tell. Third, it was not so long ago that some experts claimed that economic policies would keep americans on the sidelines instead of the great resignation, we have seen the great rebound. Labor force participation has rebounded by comparison and prior recoveries, despite long expected them with credit demographic headwinds. Despite long expected demographic headwinds. In the u. S. Recovery, the prime age Participation Rate was 1. 7 Percentage Points below its precrisis level. Today, it is. 5 percentage point above the level. We saw a decline in prime age participation that stretched until 2015. Now, we are seen increase in labor force is at its highest level in over 20 years. The surge among prime page women and mothers with Young Children in particular to its highest level suggests that improved childcare availability and trauma or clicks abilities may, in combination, become to beating to the gains of labor supply. Unemployment officially fell below 4 years before protected. About eight faster and have remained there consistently. That faster labor Market Recovery potentially avoided much of the scarring we have seen in previous downturns. If you look at groups that traditionally recovery more slowly, they have record low unemployment rates. That is true for black americans, hispanic americans, workers with disabilities and workers without a high slit diploma. In short, we might conclude that sharp downturns need not lead to scarring and declined in participation if theyre met with targeted policies. Strong labor demand real demands and selfsatisfaction are drawing more americans to the labor force. American households emerge from this pandemic downturn with much Better Financial Health as compared with the gfd. Again, i think you can see the connection to certain policies. The latest survey of Consumer Finances recorded that real median Household Net Worth is 37 higher than before the pandemic. We have not seen that before. If you look at the distribution of households in the lower saw the largest gain. Flakka in Household Net Worth sought even larger gain compared with the plot compared with declines. That is true for hispanic heating household. The american households paying down debt and lower debt burdens. Especially for credit card and student loan debt. Median fell the lowest level in the history of the survey last year. An increase in Health Insurance rates to an alltime high may have also made a contribution. Business ownership increased by 9 with particularly large growth in black and hispanic households. We are seeing record high business formation applications and some academics have suggested after carefully studying the data that the increase may be curable and may make a contribution to the dynamics him to the dynamics. Verdure further investigation suggests caution. Light was highly elastic and they were only replying to demand shocks. The episode accompanied by a dramatic supply shock and significant distortions in demand. It is interesting to know that if you look at a picture of the new york feds Global Supply and index and you map it against any number of inflation, you will see the two moving closer together. Nominal wage Growth Continues to moderate despite what can be against strong payroll growth, at odds with earlier predictions that low unemployment would lead to steeper nominal wage increases. Overall, a quick look at comparison just as the president policies appear to help relative prior situations. We will continue learning more as experts in here as experts adhere closely. There is more work to do. There are risks we need to navigate utter. Progress is encouraging. Thank you. [applause] adam thank you very much dr. Brainard it is your concision to something we do not usually get to enjoy on this stage. That must make 4 myself included very efficient meetings. Let me, if i could, before we open to the audience, pose a few questions starting from where your speech was. You talked about scarring and the historic lows or highs in participation and lows in unemployment for various groups. As well as the high Household Net Worth. When you are at the fed and in the early years of the biting initiation, there was a lot of discussion on whether we should run the economy hot. Do you think there is a message here is that is because general likability for you think there should be caution is not everything could work every time . Dr. Brainard i do think every set of socks needs to be carefully studied and understood. Before being too confident. The set of policies that worked last time for this time, certainly that is not what happened. We saw a lot of policy innovation and i think tentatively we can conclude that the president policies, the policy innovation led to an earlier, stronger recovery and that recovery intern has brought people back into the labor market and led to selfsustaining and positive growth. In terms of what that set of policies led to, it really was to bring the recovery on track faster with broader participation by a broader set of households. We have seen that in the Labor Force Participation data that not only the labor market in terms of demand bring that about more rapidly but we also saw that what is normally a lag response actually moved relatively quickly this time. It was quite broadbased. That was underwritten by a set of policies that were designed specifically to enable parents to come back into the workforce. Especially in the wake of a childcare system that had been devastated. There were deliberate policies recognizing how important it is to get parents childcare so that they can participate. I think the prescription is that like taking a strong policy response can get a Higher Quality recovery that comes into play more rapidly and lets the private sector take it from there. Adam i think it is really interesting that you are emphasizing the structural aspects such as flexibility and Parental Caregivers rather than just the cyclical move of keeping a hot. This is the first time in some time that the u. S. Has undertaken such a strong labor market policies after lecturing people for years. What is on your agenda im going to ask you at times what you would do if you had a functional congress spent the majority, both of which could tear us apart but you have to assume. What do you think should be next for the u. S. Labor market . What would be your structural agenda from here . Dr. Brainard the administration has a set of policies that are designed to make sure that families with children have the resources that will enable them to make those key investments that we know have longterm benefits, allowing them to participate in daily reports. We just set up a request for emergency funding, for stabilization funds to continue. The president s budget continues to emphasize the tax credit which brought million out of poverty and appears to have led to investment in precisely those Early Childhood areas that experts have suggested our unofficial. There is some additional funding. The flipside is that we need to fund those commitments in the president has a robust set of revenue raisers, the biggest factor in the most recent numbers that we have seen on the u. S. Fiscal side are really a big reduction in revenues, tax cuts, under the previous president , those projections are now coming in. They are well and lined with projections we have seen before that text and we need to be able to find those important investments. Adam just to follow up on that one bit of lets call it bad news was how low tax revenues came in year after year given the state of the labor market and income. Is your point that we want the bundle of tax cuts to expire and that will fix it or is there some thing else that needs to be done . Dr. Brainard if you look at the deficit, sequeira sent of that is associated with decline in revenues and revenues has a share of gdp are below the historic average and in line with what critics were concerned about before this set of tax cuts was passed. The president has put on the table for host of revenue breakers, including boosting the Corporate Tax rate back halfway from 21 to 20 , which is in of itself and in numerous revenue raisers. Another set of policies that would bring the u. S. And raise important revenues. Those are revenue raisers that we would love to be able to talk about and get past today. There is no need to wake. There will be another opportunity when some of those business and tax cuts for wealthy individuals are slated to expire in 2025. Adam take us back a step into the macro picture. As you are aware, the question of less jargon, what would be the trend of the Interest Rate of the economy that we usually prophecy to some great . Abundantly think youve been on low turn market but the question is, how much of this you expect to persist and are the drivers of the longterm rate changing because of primary deficits or should we expect them to go back down . Dr. Brainard this is a very important debate. There are a number of factors and researchers and participants have discussed. I think it is early to tell exactly what the country are. Of course, we have full fundamental factors as well as technical. There are thing changes in demand that were on the technical side that Market Participants are pointing to is part of the story. In terms of some of the more researchbased explanation, there is an effort to distinguish between a potential rise and that librium rate and this term. I think a lot are pointing to the term premium although it is reasonable to expect there is a bit of there. For full played a part of that. A different rate of interest over a longer period of time. We are certainly studying that carefully. It does have nations that we want to hear we are taking on board. Is this something that you think is a good idea, worth considering . Dr. Brainard we just had a bipartisan decision for don in june. The majority of House Republicans voted for the right agreement. It was signed into law. This was after a very damaging threat from mostly republicans to default on the full faith government. We are barely four months later and, the House Republicans, out stood there speaker because he forward about to keep funding the government. I think we have some really serious challenges to address. Clearly, we are in a period where honoring the agreement is the first and most important thing. Until we see the will to do that , it is unfortunate that the American People have to continue to see this kind of drama really for no reason when we had an agreement that was just put into law with strong bipartisan majorities. Adam thank you. Going back to something you mentioned a couple times, if we take those first numbers on gdp, it looks like productivity surged again. As you mentioned in your opening remarks, some other things that the Biden Administration and congress have passed seem to be a good investment but you fairly and rightly have said that is too soon to say that that is what is causing. You have to be thinking about this, what do you think is going on with productivity and why it has been so strong relative to the recovery . Markets people and myself im not a margus morrison, are worried about the labor market and that productivity is not going up. Any comments on productivity . Dr. Brainard i am cautious on productivity. Data isnt torry sling volatile. We do need to see some increases and that kind of is i think, well grounded in some data areas. We have seen exceptionally strong Business Investment, certainly in the Second Quarter search in areas that you would contribute to productivity over time. We have seen interesting patterns and turns of allocation and that is consistent with some of those Business Investment areas that have been really important. The business, Small Business applications data and formation data has surprisingly doubled and stayed at that level for two years. Serious researchers are looking at that and saying, that is it going. There may be something going on. We do have a