[000:00:00;00] ah ah ah ah, ah, safe been home and then international anti corruption excellence award, bought now for your hero,

for ah, hello, i'm am language n aldo. hi headquarters is the top stories on al jazeera. we begin with sher lanka, where protest is in the capital. colombo have stormed. the official residents of president got by raja puck, such demanding his resignation. they protesting against the month long economic crisis and widespread shortages. the prime minister's office says political party ladies are set to meet for an emergency session to address the situation. some of the protesters who occupied the home have been taking advantage of its facilities, including taking a dip in the swimming pool of the historic building. the president was tank into safety earlier, but his whereabouts are currently unknown. the protest is have also made their way into what appears to be the president bedroom. they found themselves rummaging through the contents of his drawers and even take himself. he's on his beds out,

his ear is michelle fernandez. is at the protest in columbia present goat albert roger pox and his government had been put on notice that if he didn't go that the hall of sri lanka would take to the streets that would come and basically sit in until they saw his exit. as you can see behind me the crowd, i mean essentially in the far this sense the presidential secretariat, but tens of thousands of people are still streaming in to colombo in any way they can. on our drive. here we saw dozens of people on foot with backpacks living around colombo. even people who had been walking from out of colombo were also hearing that trains which had been part of halted our people, storm rear stations, and literally forestry of a employees to put trains on the tracks and bring them into colombo. and the one thing they see that they are taking that country back to days,

the independence day for me been born in this nation. not mine in 48. because to day, we have thought far freedom from the tyranny from the scoundrels, from the black gods, from the rascal, the robes, and the li, the politicians who have run our nation below ground 0. and this is exactly what the government tried so hard to prevent. the thousands of people converging on the capital to urge the president and his government to go. they brought in a curfew, they had to remove it the next day. they essentially wanted the distribution of fuel. what have a little stocks were available were frozen. i essentially transport public's transport was stopped, but people were not giving up. and if you look at the far background, the sherlock and flag flying high, the raj, a boxer regime, the government of got our b, roger box and his browser brother, president my and the roger proctor were so sort of keen and strong to talk about

nationalism. but the people here see, this is the true spirit of sri lankan and they want their country back. hello, mosque has confirmed, he's terminating his 44000000000 dollar tank over of twitter. the test to see the legal team says the company breached the deal, but twitter says he will soon to enforce the agreement. the police change in the japanese city of nora, where the former prime minister issue was assassinated on friday, says he can't deny. there were problems with the security of a was shot and killed was giving a campaigns page. it has been taken back to tokyo, un secretary of state and to be blank and says he's laid out america's concerns. i've afraid him can tie 12 chinese foreign minister, one e. the 2 met on the sidelines of the g 20 meeting in bali. canada's largest mobile and internet provider has suffered a major outage affecting bake ac ems and emergency service. hotlines. people in

toronto swarmed places that still had functioning. why fi? raj is telling me. communication says it's working to resolve the nation wide problem. and muslim pilgrim's mocking the 1st day of age in america is expanded. hodge is now coming to an end. after 2 years of severe restrictions. because of the pandemic, 900000 people were able to attend. the most of them came from outside saudi arabia . that is still less than half the number that took part in 2019. okay. those are the headlines. i'm emily anglin. thank you. now for the bottom line. ah, i am steve clemens and i have a question. if somebody economists and politicians from both political party saw it coming, why didn't joe biden see inflation coming?

let's get to the bottom line. ah, just one year ago, optimism floated through the air. the economy was booming after a gigantic pandemic relief package of $1.00 trillion dollars. people were buying new cars and old cars and stuff. lots of stuff on amazon. some even decided that they didn't want to work for a while. cash was flowing and extended unemployment benefits and rent relief paid many folks more than they made before the pandemic. well, guess what economists call that kind of situation. a classic overstimulated economy . overnight, there was much more demand and supply then boom, the supply crisis hits. there wasn't enough to buy prices surged, and that's all before russia even invaded ukraine to shoot up the price of gas and all forms of energy, the debbie downers were out there shouting, inflation is coming, inflation is coming. but who wants to hear that, jeff? i didn't want his folks out there saying the i word now the white house maybe

finally admitting that it got this all wrong. but what can you do now? to day we're talking to doug holtz iq and former director of the congressional budget office and current president of the american action forum a domestic policy think take here in washington, dc. does it's really great to be with you and see if her, where i'm going with this. i'm sort of interested in how, in economics. so many people can look at the same ecosystem and see it so differently. but from a policy perspective, if you get inflation wrong, you're getting a lot wrong. i am i right. you are, once you let inflation getting grained, as we have, you actually have no good choices at choice number one is live with the inflation. that's clearly not gonna fly. people are very unhappy or do the things necessary to take that overstimulated economy and slow it down. raise interest rate. it's in the extreme raise taxes, cut spending, all of that produces weaker housing markets,

weaker labor markets, weaker retail sales. that's bad news for american people, so you're looking at a situation where there is no good news. all the choices are hard ones. so this is june of 2022, going into july. an election is coming up in november. it's hard to imagine things getting worse where they were given the toxic political situation we've had in this country. we saw what happened unfolded in january 6. now we're seeing the price of you know, of gas of, of basic supplies baby formula of a peanut butter. i mean years, you just name it out there and prices are surging. i'm just interested as someone who has been in the halls of power, who have advised presidential candidates, you know, what would you do in the situation? what would you advise president biden to do in the situation? he has the following very simple problem. ah, if you look at the monthly reports on personal income and outlays in the behavior

of american households, they are spending money. you're continuing to spend money, they have a lot in the bank from the big stimulus, jackson and the, and the spending fine and the, that sorta part of the economy is fine. if you look at the consumer sentiment surveys, we have consumer confidence at the lowest point since the depths of the 1980 recession. so people are behaving as if they've got the money, but they don't feel good about it and they're really unhappy and they're blaming the president and leadership. if you're in that situation, you have essentially 2 choices. choice number one has changed the subject. i don't think that will work. they've tried that on a number of occasions. choice number 2 is acknowledge some responsibility and, and take action. and so in similar situations, we have seen presidents let some people go say, look, my economic advisors have failed. the american people, i'm going to get an achievement and i wouldn't be shot to see that. you know, one of the things i'm always intrigued with and yet are you and i have talked about economic issues for a long time. and it's always fair. you know,

to have contending perspectives into debate, which is what happens even among the federal reserve board governors. but i want to go back to a tweet that heather bourget tweeted out in june of 2021. let's show this week reads as the viruses contain, the economy is improving step by step. today's data on inflation is the latest indicator that things are both moving in the right direction, and that we have supply chain hiccups. now in part this, this tweet was in response to folks like senator joe mansion at the time. and you began hearing a chorus, folks included some leading democratic commas, like lawrence summers, a former secretary of the treasury, jason firm and a former chairman of the council economic advisors under president obama saying we've got a problem folks. i'm just interested. you are a practitioner in this field, you know, been in c, b o you advised senator mccain. how could this tweet be one? ah, you know, it's some level, how does this tweet get the,

the reward or the condemnation it deserves? and how do you go back and say, wow, you know, mansion was basically calling something early on that he was worried about. so early on, many people were worried about this. so, so this, dial the clock back to the key moment, which is march of 2021. the american rescue plane is being debated. cons, congress, $1.00 trillion dollars in spending and tax cuts, a big stimulus. and at that moment, the posture of the white house and the democrats in congress is this economy needs a lot of help. and we need to give it something very big. and, and the motto you heard was better air on size of being too big than too small. and, and they pushed hard. i testified about the american rescue plan at the time. and all of the data indicators economy is growing. it's 6.5 percent as, as indeed it turned out did. in the 1st quarter of 2021. there was no need for stimulus. so this was a political call that they were going to get try to take credit for the recovery by

having this big stimulus. and they made a big policy here. larry summers to his credit senate at the times of this gonna cause a lot of inflation. other people were worried about it. i didn't think because what inflation, full disclosure, i thought it was a big boom and asset prices because people wouldn't be able to spend the money and they go buy criptos and houses. and we'd seen some of that already. but either way, we were going to force the feds hand to do something and i thought it was a mistake. that white house tweet was trying to say, look, it's not our fault. the inflation is from the supply side. we didn't do it. and we got this growth and we want to take credit for it. i don't think they get credit for the growth. it was there anyway, they inherited it and you only measure supply relative the demand. they hadn't done the rescue plan. the supply problems wouldn't have been so prevalent, so i think they really missed the boat analytically on this and, and they tried to cover it politically and they've been in trouble ever since. you know, one of the other dimensions out there in terms of big spending in the economy didn't,

didn't happen was the build back better package, the early versions of the build better a back better plan folks were about 6 trillion dollars. that's what bernie sanders wanted at the, you know, the and then getting it to 3 and a half was, was a huge controversy. and then the even bigger controversy was getting that down to 1750000. you know, senator mansion was looked at a sort of the devil incarnate for kenner, suggesting roadways and now that didn't happen either. and maybe when the climate energy bill or something comes along, it will be 900000000000 or trillion with the point as you saw this, i guess my question to you, we don't even have to play with the 6 trillion. what if the 3 trillion 3 and after the $1.00 trillion dollar package had come on when it did? would things would it have impacted these numbers would apply, you know, impacted inflation. the supply chain crisis, you know that the, the supply crisis in general, how would that have played out if it had come to be? so the supply crisis is not complicated. it's the fact that we have, okay. demick and globally,

workers have been unable to go to regular shifts at their factories, regular shifts of transportation. and as a result, things are all messed up in and with logic that that's, that's the pandemic that gets solved only by the public health response around the globe. so you have to live with that, that's there. given that it's there, you can't have too much demand. and i think senator mansion has a really a saved on the cumbersome the administration by stopping this. the political dynamic was we want to do all this stuff. streamline, broad scope to the bill, back. better plan and as the numbers had to get smaller the. ready way they did it was let's front load these programs, have them only just for a year, 2 years, 3 years. let's back load the taxes and make it all at up till better a degree. well, if you think about that front loaded spending back go to pay force, that's a stimulus bill. and that would have been the mechanistic went all over again,

bigger internet economy that was clearly already having a big inflation problem. and it would have been a, in worse policy era than the mac rescue climate. so they really are benefited from mansions, insistence that they not go full. well listen, let's listen to president biden for a moment. you know, state the reality of how he see things right now. the idea we're going to be able looks and our quick switch bring down the cost of gasoline is not likely in the near term, nor is it with regard to food. so he's basically saying, we're stuck in this situation for a while, if i sure would i be able to, you know, flip a switch, i'm just interested in what policy levers are out there. and i understand that the federal reserve is independent allegedly, from the white house. but when you kind of look at the question of the big role, the government plays out there, you know, in terms of talk about what sorts of you know, we use talk about soft landings. ah, you know,

to try to bring an economy down to sort of manage the cycles and economy. i'm just interested in knowing from you. what are the levers that can be moved, that the president is saying he doesn't have to deal with gas to deal with food to deal with inflation? so 1st let me say that the inflation problem is the fact that shelter as inflation of 5 and a half percent. so that was essentially a one percent at the beginning of the president's term. ah, that's not something that moves quickly. that's not like food or see a bounce up a down. certainly not like energy we're global markets can move overnighting and raise and lower the price will dramatically shelter is rents and it's owning homes, and the inflation started slowly. and it's never yet pete. it's gone up month after month after month. and if you've got 5 and a half percent shelter inflation, you can hit the feds to percent target unless everything else is 0 or negative. and that's not going to happen. so if you think about the problem,

the problem is how do we slow down the housing market? stop becoming so red hot that year over year housing prices going a 20 percent your over your rent is going up 20 percent and get the overall economy back to a original place. you have 2 choices. you can do it with taxes and spending, or you can do it with the fed. the feds got a plan and if the plan is simple, we're going to raise interest rates and in particular, make mortgages to rates higher. unlike mortgage is less attractive, which makes my house less attractive, which makes building houses less attractive, which means that you don't put up refrigerators in those houses. you don't. what furnace is in this house? you don't paid the driveways. you don't do the electrical work. you have an impact on the broad swath of the economy by cooling down the housing market. and so that's, that's what the feds up to. it's largely the housing market and also shopping autos . another consumer doorbells will make those things more expensive, slow down a con. unfortunately, if you're in a white house, you don't want to be seen as just sitting by and letting someone else solve the

problem. you want to do something. the things they would have to do would be the reverse of the this to us race axis. cat spending, that's not going to happen. this is an election year. there's very little substantively they can do. the one thing that stands out to me is they could roll back some of the trump era tariffs, particularly on china, and have a a discernible one time impact on the, the level of price as an economy. and i have been surprised if they're reluctant to pull that level, that's something i at least would advise them to do. so you mentioned trade. i mean, and i'd love to just go and not further in that because you know, when the, when the president laid out his indo pacific in economic framework recently, there wasn't a returned to the trans pacific partnership. there wasn't a widget region wide trade deal put on the table. and if you look on the, the gas and fuel side of it, you know, the president is going to be meeting up with the saudi crown prince allegedly, a ma had been so mon and others are there things that can be done in terms of whether domestic in the united states,

or because we're the biggest oil and energy producer in the world, but with the saudis, or the other players, to basically help you know, create a lot more. so a demand than we're doing on, on oil, gas and other forms of energy. certainly both france, you could in principle on get additional production, it takes some time and they would have to acknowledge the need as specially delay you turn on their climate strategy, which has been to really call out fuel sources as the strategy. we're not gonna use coal, we're not gonna use oil, we're not gonna use natural gas. i don't agree with this strategy, but that has been their strategy. it has to do a u. turn on that and they're reluctant politically to do that. and they don't have to, to kind of deal with the saudis, where, you know, let's, let's just be delicate. i mean, relations are not at their all time best of in and there's a lot of concern about the saudis. and so i think they've been hesitant to get into that game and, and they're, they're trying to set expectations that gasoline in oil prices remain. ah, ah, i think they also have

a general trade problem. if you look at the framework that just announcing the pacific time framework, that's not a traditional trade agreement that lowers tariffs, increases market access, reduces costs of production and consumption. that they, they don't seem to want to do that. we don't see any market access moves at all. instead, these are agreements that sort of saying, well, we have a bunch of domestic problems in common corruption, tax collections. let's work on those. now we're gonna do a real 1st on this show cuz i've never had cardi be on this show. and i wonder, but let's bring a carty be tweet on carty, be rights when you all think they going to announce that we going into a recession. so let me ask you that, ah, when are we? when do you think mr. economic advisor, we're going into a recession. i think the recession talk is, is way overblown. um that thought the reality is that the inflation and the hot labor market or the flip side of the same problem, you don't get the inflation without a labor market that hot and you don't get away market that hot with

a generator inflation. none of that sounds like a recession to me. so ah, yes, the federal reserve is going to raise rates and slowed down the economy. it is val, it's goal is as you mentioned earlier, have a soft landing slow growth enough that inflation pressures come down, but remain on making forward progress. i'm very have a heart problem that's, that's a hard thing to do. they're doing it in the face of a lot of things that are tough. the tail end of a panoramic, we hope it's, it's, it's path is uncertain. ukraine invasions and the impact on global energy and food markets. a china economy that's really hard to gauge right now, given their public health crisis. that, that all makes the fence all like much, much harder. and historically, it's been a difficult task when inflations then above 4 percent of what has been below 5 percent. the fed has never engineered us off winning. so we're asking them to do something that they haven't historically done without a having the benefit of, of kong conditions. i still think that this year there's not a chance. we have

a recession. 2023, maybe through the 2nd half, there are heightened recession probability. but the premature chad run recession, i think is well on let me ask you a question about the hot labor market you just referred to. and i don't, i think that i don't know the aggregate numbers. i don't know what is real in this area, but i do know that there was a period of time as we were stimulating the economy as we had extended unemployment benefits, where the incentive structure for workers changed. and we had the so called great resignation, a lot of people leaving. and so as we look at these historically low unemployment figures, i'm just wondering if they're real. where are all these workers that used to be in the system? that if somewhat disappeared, do they, do they exist in this country and what are the implications of that? and is it a function of, you know, basically a hostile immigration policy essentially out there? what are the dimensions of the hot labor market that we ought to be focusing on?

where did all those workers go? the puzzle of the missing workers is the great can under of this moment. ah, you know, lots of people are looking at this and we go, it's kind of like cost of like a year round up, the usual explanations we were paying people to not work well that, that went away last labor day. so if that was the problem, it's gone. we haven't seen the workers return. ah, we had people had the care of school. kids and schools were closed or the worried the might be close. he didn't take a job. you look in the data peep with school age kids stayed at work more and went back faster than other people did. so that doesn't seem like the answer we had to retirement can under might. it turns out that a fairly common thing in the united states, as people retire, they think about it for about 6 months. i think now i'm going back to work. i think of this is the wal mart greeter brought me to stay home for a while. your board is out, the school were to wal mart, be greeter. and so you move back into the labor force. no one becomes a greeter and a pandemic. right? so that, that's stopped. but now we're seeing that restart. people are now coming back in.

so that's not the answer. um we have some other things out there that i think are real and we don't know how big the are. the opiate crisis has really hit prime age workers in united states and the numbers are substantial and, and frightening. and we have this phenomenon known as long coven, for which there is no definition, but out 30000000 americans report that they have some symptoms that persisted for a long time. and 10 percent of them say they can't work because that's 3000000 people. so maybe there's something there, but they honest truth, steve is, i can't tell you where those workers are. no one can. and, ah, it's a, it's a part of the supply problems because we just don't have the workers out there to produce goods and serves. you know, you know, both sides of the political equation when you were head of sepia which was non partisan. you were an advisor, a senator john mccain. and now the american action for him, you're out there trying to help you know, all, all parties are there. but i'm just cedars in how you would, you know, judge and grade. i'm republican suggestions right now that are out there. and i often think to myself, what if donald trump for president right now,

would the go go economy that we have the cheap money? you know, what would these issues be any different under donald trump? and i have to say, honestly, i'm not sure they would. so do you see how do you critique the republican response to the president right now? do they need to up their game? i think they have no real answer the question, what would you do about inflation? and the reason is, the things that a congress can do to slow this economy are things that they're not interested in doing that they've vanishing raising taxes, which will be one way to slow this down. that they really don't have a lot of recent track record of budgetary integrity, but they're, they're all, you know, newly i converted to the idea which i have to control government spending. so they, they wouldn't. so sir, be doing the stimulus. so that wouldn't create the problem, but the darn, any real good solutions. in the end, the, this is the federal reserves problem, the fetch to be allowed to deal it to the best of its ability and hands off of that

is a good thing for all parties at this point. but as i said before, once you're in a situation like this, there are no good choices. and so there are no obvious politically easy policies. no one part of the discussion today was really focused on what are the blind spots that our policy world has and, and if, and if this was one, i'm just interested in terms of the many areas of economic performance we've had in the united states. what are other like, and we have the real estate bubble. we have the subprime crisis we've, you mentioned a couple of worries about of their bubbles here. we have a growing national government debt problem. we also had a bubble in private debt on that that caused some issues, but i'm just interested without nicea scribing and saying that these things are out there. what are the other kinds of potential blind spots that are diminished in an administration might have that you think we should be discussing? so, so this is the analytic error,

the by demonstration made on this for session was not. and the 20th century recession, which are usually income events and where we developed our tools, unemployment insurance, discretion tax cuts, sending checks to replace income that was lost in recession. it's also not a 21st century recession, which is larger than financial mark events, dot com bubble bursts, and we have a us, a small recession, you get a huge subprime, a mortgage problem and financial crisis. we got a big recession. this was the virus and people on able to go spend their money. they couldn't get on a plane, stay in a hotel, go to will show all that disappeared overnight in 2020, at the peak of this income rose in the aggregate well, throws in the aggregate, all of the capacity the spend was there and people just couldn't go do it, and indeed if you look in the data, the piece that was missing in the u. s. economy was spending by african americans. they were the ones who typically will take a fancy vacation or on the shows on broadway and traveled a lot. and they were doing it, they weren't going out to dinner,

they weren't doing any of those things. there was nothing about that problem. they could be fixed by the things that the ministration did. you send checks to for people that doesn't like rich people's then he explained the unemployment. sure system. they're not employed. the problem they had was one that could only be fixed by a strong public health response that allowed people to go out and spend. that was it, but they ran a playbook that was inappropriate for the probably had and now we had the inflation . and that's it in a nutshell. well, we'll have to leave it there. economist douglas holds eakin, former director of the congressional budget office in current president, the american action form. i always benefit in my discussions with you, and i'm sure my viewers did as well. thank you so much. thanks. have. so what's the bottom line? americans were already stressing about their toxic political environment, and now inflation makes things so much worse by shaking folks confidence in their economy as well. many blame rising costs on the war in europe or tack it onto the corona virus. but we can't ignore that. america's leaders, we're happy to have

a go go economy with cheap money and super low interest rates from the federal reserve. america has had cheap, easy to get money for a long time, long before ukraine and long before wu on. as long as americans keep consuming, prices are going to keep going up because the supply is limited out there right now . it will be that way for a while, policy makers are going to have to gut punch that consumption, usually by pushing interest rates up. but if that doesn't work, what happens is a big recession may come and solve the problem. and that's going to be painful with huge job losses and tougher times. the question then will be how joe biden's white house leads. so far we've seen a lot more blame game than leadership and a lot more blind spots than vision. and that's the bottom line. ah,

a ah. safe going home and then international anti corruption excellence award boat. now for your hero