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continues. host: back with us this morning is neil irwin, the chief economic correspondent with axios to talk about the u.s. economic outlook. let's begin with a major discussion point over the past couple of years which is inflation and are we headed toward another recession? where are we right now? guest: 2023 went into than most people were expecting. a lot of people had high recession odds for 2023 in the federal reserve had raised interest rates in 2022 and the recession didn't happen. we have stronger growth than most forecasters expected.

inflation came down faster than many were expecting. we are in the 4% range. that's not what most people were expecting. we were 9% back in the spring. the question for 24 is can it continue and can we sustain the steady growth and lower employment? host: are there still recession fears and who fears it? guest: there is always the risk that interest rate increases that the fed overdid it and they will not back away quickly enough and there is a real risk now that we have these 5%+ interest rates that that still has effects that will come over the course of 2024 and slow activity because a downturn in hiring and recession later in the year. it's not the consensus forecast but the convinced -- but the consensus view. host: did the federal reserve

land the elusive soft landing? guest: it's not over until it's over. you canada clear victory because you are tempting fate but so far so good. it's fair to say that if you told anybody at the fed or in the biden administration where things would stand at the end of 2023, they would not agree with this forecast. host: what prevented a recession from not occurring? what was the policy or policies? guest: a lot of this inflation we experienced in 21 and 22 was driven by factors that involve the pandemic reopening. supply chain disruptions we heard about from trade networks and all things were real and those things unwound a little last year. it became less severe. christmas of 2021, there were many things missing but

christmas 2023, you can get most everything you wanted. we saw an increase in labor supply over the last year. people who stopped working said they would get back in the job market. the supply side of the economy got more capacity and more demand which was not the case. we have to solve this inflation problem on the demand side by crushing demand and having people laid off and lose their incomes. host: you wrote so far inflation has fallen to near normal levels without any major upsurge in joblessness or other broad damage to the economy. in 2024, the fed's job is to try to stick the soft landing. it could err in either direction. our interest rates the main variable here? guest: in the most advanced countries, we rely on the central banks to being the main -- be the main economic driver. they are trying to achieve that

steady growth with no recession and low inflation. they don't always succeed but that's the goal. that's the main game in town in terms of trying to set policy to achieve that steady growth. they can err in either direction and they might back off too soon and inflation might go up again and that would not be a good situation. we also don't want to see a recession. those are risks that they miss calibrate. host: what has jerome powell said? has he shown his cards? guest: if you can read between the lines, they have a language of their own where you can get a lot of value. they had a meeting in the middle of december and a press conference after that. what was clear is they don't have a plan right now.

they still want to cut interest rates in 2024 but they are not ready to declare victory. at the same time, if you look at the projections of the actual members, they pretty much all expect to see rate cuts in 2024 and expectancy low inflation this year and steady growth. if you look at what they write down their forecast, it's a pretty benign outlook, things look pretty good. that's a projection and projections are not worth the paper they are not printed on. host: we usually cover the conference jay powell holds after he meets with the federal reserve board members. you are listening to him and thinking what? what did he just say? at the next one, what should our viewers be listening for, what are the keywords to help them read between the lines? guest: the next meeting will be

this month and they will likely leave interest rates unchanged. then he comes out and i'm usually in the room at the press conference and we in the media eskimo bunch of questions to try and parse what they are thinking. what we are looking for is does he send signals that rate cuts are on the horizon as soon as march? that looks like a possibility in a way it didn't a couple of months ago. they want to save the options and they might raise interest rates further but it's possible we see the first cut as early as march. we have these 19 officials all over the country like the federal reserve bank of different cities. they come together eight times a year to hammer out how they are thinking about things. we don't know how strong the consensus is for rate cuts. inflation is going away and rates have been too high for too

long and is causing damage to the economy. we will look for indications that sentiment has changed. host: neil when is here with us this morning and can answer your questions and comments and clear up any confusion you have about the economy. start dialing in, republicans (202) 748-8001, democrats (202) 748-8000 an independents (202) 748-8002. you can text us as well include your first name, city and's date, (202) 748-8003. we can take those questions as well. what sectors of the economy are doing well and where are their vulnerabilities? guest: everything consumer-based has held up quite well. leisure and hospitality has bounced back amazingly and restaurants and hotels are full. if you want to go to a vacation destination, you still see high prices for flights and hotel

rooms. where there is softness, the tech sector has taken it on the chin with a lot of layoffs at the big tech companies and some parts of wall street have had to have some layoffs there. you see some pockets so manufacturing over all is still in contraction territory. there is definitely some pockets of weakness in the u.s. economy but if you look at the over arching state of the labor and job market and demand, it's quite strong. host: how would you tuesday just -- how would you describe the stock market right now? guest: rates get up to 8% this year and that's been hard for homebuyers. it creates a lock in effect where would-be sellers don't want to sell. if you had a 3% mortgage back in

2021, maybe you will stay in your house for a long time to keep that low rate rather than upgrading for making a change. the housing market is almost frozen. buyers can't really afford prices and mortgages and sellers don't want to give up their low mortgages of volume is low. anyone who relies on volume like real estate agents, that's not so great. how much will supply solve that problem? they would like to see more building and is rates come down and that backs up this year, maybe we can get some help in the housing market but we are not there now. host: is the supply increasing? guest: rates of construction were not as highs they were in 2022. it would be great for them to catch up. host: ohio, republican, you're a first. caller: yeah, your outlook on

the u.s. economic and you are not affiliated with republicans or democrats. they are all stating how bad the economy is for the last three years. inflation is down from the highs it was. it's still way up and they just talked about it nonstop. we are $37 trillion or more in debt. i just bought a second home but my first home is paid for. my girlfriend bought another one in ohio. she got a 30 year mortgage and we have 20 people trying to buy from us. i have friends who are builders. there is no demand with the interest rates to build. i was in one of my banks

yesterday and the rates are 8.9%. if there -- if this party wins again, the democrats, our energy into everything, electricity, gas bills are up 23%. i don't know how you say it's on the rebound. the four years we had with the republicans, every department and when covid hit it was still high and then trump didn't win and the only thing that came out was the tailwind of what he had going but everything was reversed from day one. this green energy movement, they will crush us again with this energy in the energy alone is crushing this country. host: what do you want neil irwin to respond to because you said a lot? guest: rates are up $20 per hour. they are talking about numbers

on unemployment. they outlawed people who worked in two or three jobs. they can't stay up with inflation. host: ok, we will leave it there. guest: inflation was extremely high and still elevated, is not like prices are going back to 21 levels but inflation is not as high as 2021. something he said i want to point out. he's talking about how terrible the economy is and he just bought a second house. this is the thing you see a lot as you look at the mix of data and opinion and how people think about things. cars are expensive because everybody's buying cars, housing is expensive because everybody's buying houses. everybody is buying stuff and has money in their pockets but the same time, they say the economy is terrible. people say things are terrible

and i have to understand why. i would point out it's an odd situation when all the measures of spending and activity are quite strong. inflation is very high, no doubt about it. it was extremely high in 2022 and its still elevated and that meant things unpleasant for everybody. host: this is from the associated press -- what is the impact of this on the economy? guest: these high debt levels are a factor in pushing longer-term interest rates up. when the government borrows money and selling trillions of dollars worth of bond, that is competition for capital, mortgage borrowers and banks. part of the story of interest rates being up is not just the federal reserve did this or that to try and stop inflation but it's partly the u.s. government borrowing a ton of money.

that is one factor pushing rates up. is there ever an effort to do some kind of bipartisan effort to bring the deficit down? that's not where the political conversation is now. the next juncture comes toward the end of 2025 when a bunch of the trump tax cuts are scheduled to expire. there will be a hard-fought battle over which ones to extend and which ones to and in how the change in tax policy will be. it depends who wins the presidency and that will determine the stakes and power dynamics and structure of those negotiations and where tax policy ends up into 2026 and beyond. host: when will congress and the white house have to deal with the drivers of our nations debt, social security and medicare? guest: the key thing to think about is when this social security trust fund will run

out, 2023. that means if you follow current law, social security will have to cut benefits in order to match the amount of money coming in because the trust fund is depleted. that would be a 25% immediate cuts. congress would move heaven and earth to keep that from happening but to they find a long-term fiscal solution for social security and medicare in those negotiations? it's something that is on the horizon how that dynamic shapes up. it could change depending how the economy does. at some point in the early 20 30's, this moment of reckoning comes where something has to happen with social security or there will be cut that nobody wants to see. host: democratic caller, good morning to you. caller: hasn't the economy been turning around? the republican party couldn't fix it either?

it doesn't make any sense. they can't fix it, maybe they should keep their nose out of it, thank you. host: if he's referencing the end of the trump administration to now, the end of the bidens first term, talk about the role of the pandemic. guest: the pandemic was such an unusual event. it created such distortions all the economic data we pay attention to. some economists cut out that time because it makes the axis of the chart haywire. it was so unusual so i look at a longer time horizon. 2017 when trump was president, those were good years for the economy and inflation was low. there was a lot to like about that period no matter what you think about trump and his policies.

the pandemic was a disruptive event. if you look to your immediate question, over the biden administration since january 21, most of that has been rebuilding from the pandemic trough. industries that were completely ripped apart like travel and tourism being prominent, we've seen massive job growth and job creation. wages have to adjust for inflation. it depends on what time period you use and wages have been right and people are making more money than back in 2021 on average. are they making more in real terms to adjust for inflation? most data points would say in 21-2022, people were falling behind because they saw a raise but not at a rate they could

keep up. now we are seeing more real wage growth. inflation is down to roughly 3% so we are finally seeing progress on real wages for the first time in a few years. host: mike, a republican, hi. caller: thank you for taking my call. i would like to see congress send to the states for adoption a meaningful and enforceable and not easily avoidable balanced budget amendment. last time they tried was about 25 years ago. i think it would force government to become more responsible as far as its economic status and the measures it votes on, thank you. guest: people talk about a balanced budget. you don't necessarily need the budget to be in balance to have

a stable fiscal situation. as long as you borrow less money than the share of economy, you can do that forever. the u.s. has had debt for forever so you don't need an absolute balanced budget. what we have now is deficits about 6% of gdp. that's the outlook for notches this year or the pandemic but a decade from now. that is not sustainable. the economy is only growing 2% or so long-term. if we keep on the current trajectory, we will absolutely have upwardly spiraling debt and a problem at some point. what's the best political mechanism to triton bring that down and narrow that? that will be something we hear about from congress in the coming years. you have to watch the debt service cost. interest rates go higher and we have is outstanding debt like if you have a variable rate loan on

your mortgage and rates go way up and you keep are we more money, you will be in trouble soon. that's where the u.s. government is unless there is an effort to reduce deficits. it doesn't have to get all the way to balance but to bring 6% down to 2% would go toward bringing us to a more sustainable situation. host: we are talking about the outlook of the u.s. economy. he is the chief economic correspondent for axios. roland in glen burnie, maryland, democratic caller. caller: thanks for taking my call and i hope you will give me more time than you gave the other guy. republicans cannot handle this economy. they prayed for a recession and they keep talking about the con me. they are trying to make hunter

biden the topic and i don't believe all those polls. they are talking about a balanced economy. if the minimum wage was $15, everybody would be in good shape. guess what, it's almost $16 and it has not helped. how many jobs have been created during trump? everything was great under trump? he got more legislation on the tax codes. do you know the specific amount of jobs created under trump? guest: 2017 on were strong for job growth. job growth has been exceptional in the last few years. let me key on something which is

labor supply. there was a big discussion in 2021 when employers couldn't hire people. there were labor shortages in a lot of complaints and 21 and 22 that the job market was too hot and it was impossible to find workers. there is still pockets of that. the combination of employers paying higher wages combined with getting through the worst of the pandemic and getting through -- we've seen labor supply increase. instead of a great resignation, we've seen people get back to work in higher numbers and that's part of the reason we's -- we saw strong growth last year was because workers are being productive and that's part of the story. host: washington state, independent. caller: hi, thank you for taking my call. i've got some question and comment for mr. erwin if you care to respond.

seeing her the world has changed rapidly since 2000, economic situations are much more complicated. u.s. dollar doesn't have the same certainty as it did before. i'm wondering if economists including the fed or looking at may a real change in world dynamics and economies when they try to control or work on our economy. specifically, i'm kind of puzzled why the magic 2% inflation rate is such that that's the target. maybe floating up at 3% for right now isn't that bad. where did the 2% come from and what does it really mean? guest: as he says, the fed and all the other major central banks around the world have a 2%

inflation target and they say they want inflation to rise in average about 2% every year and if we reach that, that's stable enough. it's kind of arbitrary as you are suggesting. the first inflation target came from new zealand in 1989. i wrote about it a few years ago and it was pulled out of some of someone's imagination. it was a rigorous thing. all the major countries have moved in that direction. if you try to set inflation at zero, you are at risk of falling into deflation. you have less ability to stimulate the economy during a recession because you cannot rates as far. when inflation is higher, they don't like that either. inflation was 4% per year and it means your money is less valuable. maybe you have to factor inflation in with people you do business with soap 2% is high enough to leave some room to stimulate the economy but not so

high that people notice it. i think alan greenspan argued that inflation should be low enough that you don't think about it that much. people ask whether they should move higher in what they have more ability to meet their goal? when chair powell and others have been asked that, they say no, we have a goal and something we written down have to stick to it. any conversation about any changes that have to happen. if you say your goal is to percent and once you miss it high, you just say never mind, people will think you will do that again and again. the view is that having some credibility at 2% is important. if you are going to change that one day, make it way down the road when you