program called the emergency fund that was enacted during the last recession and it worked pretty well. the other aspect that we proposed is something that the commission proposed and so even though the emergency fund was affected during the last recession we think they would've been more effective if it had an infrastructure to build on already and gotten off the ground soon. our belief is a special if we have this ongoing structure in place during normal economic times when the next recession

roles rather congress can do much more efficient stimulus through some subsidized job creation and some director job creation. to bring it full circle again, i think we are all tied up in this plays right now what if we were asked are ready for the next recession right now the answer would be no. but the long answer we do think is really possible. if we do strengthen our automatic stabilizers and build some architecture and other programs like we recommend in the paper we think we will be ready for it when it gets here. so thank you very much. [applause] >> thanks everyone. thanks very much. i'll talk about policies for the

next recession, will do my focus. want to start by uploading ben. i've taken a quick glance at the paper so at first glance some things i disagree but it seems important and i'm glad they're doing it. the hard work, what's right thing to do and how to prepare, and the point that ben made at the end about this a good program have the infrastructure set up to wrap up. it seems to be really important. i'm also going to focus a bit on important each of which is triggers. i can't have the sense that sometimes the trigger on it is easier. we will spend money and to trigger off is not as easy and a look at some of the programs that are temporary that don't end up being temporary. so the next recession obviously some of the focus on policies of the next recession is driven by unhappiness over the current recovery. there's an obligatory joke about recovery summer, but we all know the repeated false dawns, the

current recovery is not super satisfactory i think that's implicit in the discussion in the current presidential campaign i gather going on. so implicit in some of the responses, maybe we need more, maybe we need different. it seems like the way to start that is by saying why was the recovery week? what is the difficult things this recession is that there many factors behind. there wasn't just one thing to fix. i've listed some of them, the financial sector was impaired and policy, so that i was involved in and out of the treasury. help stable the sector but they were others that kept it impaired in some ways. doesn't partial address but not entirely a debt overhang on businesses which a lease in euros which about has improved.

but not entirely if you look at the survey of consumer finances and other data sources where it is linked to any quality that could relatively high income or households company balance sheets are looking for good and the other 80% of households are not looking as good and maybe they still feel the overhang. of course implicit in many of these discussions is the fiscal stimulus was not big enough. i'm going to talk about maybe it was big enough not good enough or sort of the quality was low. i'll talk about fiscal quality. i think it is impossible to avoid instances of the rahm emanuel point about the left a good crisis go to waste. that went counter to would've been best for our economy. obviously understand from a political point if you wanted to jam to things when you are 60 votes that able to jam it through. but i suspect it went in the

wrong direction. i mean the recovery console backed by policy choices. we are laboring on disruptive change in the middle of recession, and so without going into it was a pac a good thing or a bad thing, going to all the arguments their, dodd-frank the regulatory surge, uncertainty of the rule of law and fairest situations. it's a lot of stress on the economy. a lot of disruptive change. so it seems like laboring that on to a recovery is inevitably going to bear the recovery. skipping back to my fourth bullet, at the same time many people would say that the political system was disrupted to the recovery. of course, we know today financial markets and maybe tv audiences noted kind of tune out the political show. were not going to default on the debt and things like that. back and 2011 maybe people

didn't quite get that. so do understand the idea that there's been political disruptions and that interrupted the recovery. it's content to say it's just the political fixed -- on the other dark times when things worked and to me i look at things that work, on student loans, for example. the president obama and congress work very well together, medicare doc fix, what i call the obama bush tax cuts were extended in full and then mostly made permanent. so that our times when the political system has not held back growth. and then lastly i think there's still a question about is the recovery weak what we just have a diminished growth trajectory i will return to that at the very end when i talk about my conclusions. let me talk briefly about the fiscal response, if this is all

a bit of a catalog of what we've done in addressing the last recession and then i'll use that to think about the next one. i start from the premise that it's helpful but not sort of conduct into the discussion to address department causes other session. it's always possible to do that. i think my first bulletin is exactly that. the housing sector in 2008 was an important source of the financial crisis and the great recession. when i was at the treasury the administration sort of made the choice to do someone housing. but really to focus on the broad economy, to set housing market have to just and will adjust and the policy will address the broad economy. there's a fiscal stimulus in early 2008, only 150 billion which seems like a lot at the time. there's a lot of evidence i would say suggesting that was pretty effective. but we didn't wash away the

problem of housing and it continues to weigh on the economy. there's the banks and the broader financial sector response in 2008-2009. my point here, the response was very politically difficult but very effective, very cost-effective. of course, the t.a.r.p. was a large amount of money but in terms of the net cost turned out to be relatively small, depending on your counted, whether it's plus or minus. and in the stress tests that were put in by treasury secretary geithner and the fed were incredibly effective. and incredibly cost-effective. and they continue to be cost-effective. so those two things together went directly to the part of the source of the problem driving the economy down. and then there were other things come the targeted fiscal support, infrastructure and other spending that i will talk about next and the automatic staplers were hurt and automatic policy was a bit on the next

panel. i think there's broad agreement on america's infrastructure spending should be part of the next fiscal response, and americans want that to be in the form of a wall. i'm not sure that is the highest quality infrastructure spending but i think there is that agreement. president obama can take credit for that consensus in our society. i think it is important actually in a discussion of infrastructure which should be part of the response to the next recession to think about the quality of fiscal stimulus, and here my joke if you talk to administer staffers about my three bullets, they turn into teenagers and their eyes start rolling. teenagers know there's a phenomena and to understand the administration's position on high-speed rail and sort of the greenport and keystone is just preposterous, can't have a conversation. to me that's a problem that is hard to the discussion about infrastructure until we agree

not to burn taxpayer resources. just a few weeks ago the administration had a proposal to have the gas tax. just burn it. i know that because the first words i saw were high-speed rail. that's a synonym for burning tax resources. as far as i can tell. and northeast corridor is probably not burning taxpayer resources but it also does not have high-speed rail. to me that's the real key, is having high quality fiscal stimulus. rohmer and roemer get a paper analyzing the standard plan and they downplayed the impact of infrastructure spending the long term growth but they still see some benefit for into medium term. so something to think about policies, i'll skip ahead a little bit in the interest of time to my answer is yes, i think there is a fiscal room to

do a new stamos bended picks up to this recession soon i think we could do it. before then i coul think would e useful to prepare for the next downturn. the things i have in mind are exactly the kind of work that jared and ben are doing come is to say what works and did more of the good and less of the bad. especially focuse focus of lesse bad. think about would be work and let's do less of it. just say there things we can do to improve our growth trajectory and i think that's really the agenda for the next president, whoever that should be. [applause] >> thanks. thank you all for trying so hard to stick to the time, even

though philip make you skip over two-thirds of your slides. i want to pick up though on one thing you said at the end, and that's when the and ben about, so there is a get out the that we don't have the physical space. that is, that debt is so high that if we had a recession soon, that we wouldn't be able to raise to borrow money to fund whether they were automatic stabilizers or discretionary fiscal policies. wendy, how do even think about that? do we know? what are the arguments on one side or the other speak with i think this gets back a little bit to our interpretation of literature which is there is no particular trigger. so we know that lower debt is better than higher debt, and we know that a flatter trajectory of debt is better than a steeper trajectory debt. we can make those statements but it's hard to know when investors

might lose confidence. one thing i will say is that it should be true that investors should cannot just but levels but about trajectory. of fiscal response to economic weakness that credibly only temporarily raises deficits and debt, and comes coupled with some sort of long-term responds or maybe even actually gets layered on top of a longer-term fiscal agenda that stabilizes debt to gdp. should have very different imitations than implementing policies that make debt to gdp steeper than it is under current law. >> i think there are many economists would say the idea for short-term stimulus the long-term deficit reduction, and so far none of them have been elected to congress. >> and we can continue to say it. >> ben, how do you think about, do you worry at all about having too much debt?

>> i think our perspective is would like to think of ourselves as cyclical, structural hawks so definitely agree that all else equal we want declining chip to deep -- gdp ratio but our view is that everything is being equal and specially the case during recession, so we think that when you think about the automatic stabilizers and the types of recommendations, we really need to weigh what are the benefits of doing these things against the potential drawbacks. we really think that the benefits far outweigh the potential drawbacks. a paper recently examined the long-term fiscal outlook for fiscal space, and i think agreed that automatic stabilizers are a place where we should definitely be bolstering what we currently do. >> phil come is that your point you are called with stabilizers but not so much with fiscal policy?

a general discretion of fiscal policy hasn't been very well-designed? >> it's a mix. i'm cool i guess is the word you used with -- >> be sure you tell your teenagers your cool. >> exactly. you know, i look at the discretion fiscal policy of the last two recessions inaction worked reasonably well. i look at the 2008 fiscal stimulus your i accidentally almost upon something good about -- >> i was noticing that. i was a little worried. >> there is literature suggesting arra was effective in some ways but not as much as it could've been. the 2008 was a somewhat remarkable about how quickly it was agreed upon and to quickly i got out into the economy. presents the contrast with the 2009 stimulus. i'm not against discretion fiscal policy. i think there is a portal for

congress. we want congress to own that. we want congress to be responsive. at the same time i do a great with them, the authors of the paper, better -- >> your point about 2008, that george bush did was a barack obama stamos it's okay if it's tax cuts but not okay if it's spending? >> arra was a mix. there were some tax cuts that went in wage packets, and the bush one was more heavily on the tax side. that's been a part, i think there is a role for spending your when i think about what you said about the long-term, to me that's exactly it, that spending on preschool, for example, a lots of evidence that would be an important thing. you want to get right. we'rresting on increasing social security benefits for high earners which is part of senator sanders plan to me that's hard to buy what to do that. >> one thing i don't understand issues it seems like a nice

thing to say but it's a should to trigger it on then trigger it all. i thought there was a critique of a fiscal policy at the last five years have been osha's the opposite. the obama stimulus passed pretty quickly. it triggered off too soon. >> a little bit in the paper and on my points of disagreement with the paper is unemployment insurance. there's a debate about ending and extending ui. there's some evidence the nukes and other places where people call in the north go unquestioned to set that aside was ending her extending ui was the right thing or not come the decision said the world will end if we don't extend ui. we didn't extend ui and the world didn't end. the recovery procedure. i think there's a lot of questions about some of these automatic stabilizers. >> but wait. isn't the evidence of the last couple of years that we turn them off and do some people think that was a mistake?

>> while -- >> we had the support you, the arra ran down, things expired. i thought this was a case study in, you can't have temporary fiscal stimulus. may be contemporary. >> no. i would say come what is the automatic part? to me that's a question, why ui is example, white with something that is preprogrammed automatic. how do we have it and? sequester, there's lots of discussion about the political dynamics relating to the pattern of spending. we clearly didn't have the optimal pattern but i don't think that says ever wished more spending or less spending. if you could take out the political drama and say what's been should we have had? to me that's an important discussion but i don't know, it doesn't seem indicative. >> ben, when you think about the

automatic stabilizer part how do you think about the trigger off part? why is that important and what confidence do you have the politicians will let it triggered a? >> well so, we try to be clear in the paper that our conversation about the triggers on and off are abstracted away from a discussion of what's been adequacy during normal times. i think that's a whole separate conversation but we do think that if you're talking about abt programs that are supposed to be countercyclical stimulus they should have it on and off the trigger. i tend to agree much more with you that during these past recession we saw things trigger off too soon. i think if you want to talk about, for example, on a plan insurance compensation which was discretion of stimulus that congress passed, did end at the end of 2013 and we would contend they're still remaining slack in the labor market and could've gone on longer. the proposal we have been the paper actually for enhancing the automatic stabilization

capability of the unemployment insurance system is to incorporate new tiers where additional an appointment benefits would trigger on which would obviate some the need for congress to do the discretion stamoofstamos on an ad hoc basi. to some extent i think that our proposal would solve some of the concerns that phil is worried about because it would happen automatically triggering on and off. >> you want to respond? >> again i have had a chance to read the paper carefully but to me it will be interesting to see, do you treat this literature seriously? what's optimal duration? there's this argument by respectable researchers back and forth. the other thing i was thinking of them remember during the gigantic snowstorm the d.c. school system open some of the schools and had school meal. to me it seems like that is really high quality spending. another word on price on the

against all spending. >> try to come go ahead and respond. >> so i showed this graph of what deficit and automatic stabilizer and deficits without automatic stampers looked like between 2008-2015 and you can see the deficits without automatic stabilizers sure that more quickly than deficits with automatic staplers, which is to say the automatic stabilizer portion of the fiscal policy was continuing to do more to cement the economy. >> okay. >> i don't mean those in rank order but it was just -- >> even when they cut back on discretionary fiscal policy. >> automatic stabilizer were continuing on. >> how much do want to ask congress, how much to trust you to do the right thing. at the moment not very much but that might not be a permanent condition. one final question. a lot of the discussion we have

had here could've been said when interest rates were at 4% or 7%. now interest rates are bumping along at zero and as recently they will be close to zero for some time. how does that change our thinking about the role that fiscal stimulus place in the recession from both automatic and discretion? >> to the extent monetary policymakerpolicymakers are cond episode the same implication we talked about in terms of fiscal room with whether or not we think fiscal policymakers are constrained to extend policymakers are constrained individually to respond to economic challenges that's going to make the cost of those economic challenges deeper both for the con and for welding. sod buster on the monetary policy site. it's true on fiscal policy side. so yes, the fact that interest rates, even in our projections, even though we project that interest rates will come up notably from the current low levels we still project interest rates even in the long-term will be lower than they have been low

and the projections that have been in recent decades. so to the degree that represen represents, that suggests monetary policy might be more constrained in the future, yeah, now give not just one problem but to. >> we will come back, why don't you step down and we are starting with rich or john? rich, okay. never going to turn to monitor policy and the two figures are richard clarida is also a veteran of the bush treasury and to be followed by jon faust who is a recent veteran of the bernanke yellin said and does to a johns hopkins. i'm a comeback after the finish, have a low conversation event always look him up there and have a conversation with anybody all at once. >> thank you very much and it's a real treat to be a. it's my first visit to the center come awfully of a great web presence and i followed what you do actively get the

assignment is to talk about are we ready for the next recession from the point of view of monetary policy to let me begin by sync i/o think the next recession is imminent but it is certainly worth thinking through the options. i think in particular the discussion regarding monetary policies especially interesting these days. 's what i'm going to is on go to talk about where we are now, vis-à-vis monetary policy, and then talk about how that impacts the constraints to provide insight into what we might see in the next downturn. so traditional before the crisis, monetary policy was about raising or lowering interest rates. we all got very comfortable with that model and, of course, since the crisis when we hit the zero lower bound in december 2008 in the u.s., the fed had to pursue out of necessity different measures. and the primary unconventional

or new measures the fed pursued were various forms of quantitative easing, and more and more sophisticated and precise forms of forward guidance. so to start off with some historical data, quantitative easing we are all familiar is purchasing large quantities of government bonds. but, unfortunately, i think the term quantitative easing has been a bit misleading because what's been important about qe is not the size of much of what the fed is behind it has been buying a lot of mortgage-backed security and a lot of long duration or lung maturity treasuries. i'm sorely in the camp that believes that although there some academic dates perhaps, it's, it is worth because it take an interest rate risk out of the market have taken the risrisk and better in mortgage secured in the market. i think the perspective is important because if you look at quantitative easing 30 traditional vehicle lens, it's

very infusing because the balance sheet has expanded. the growth isn't always but they're been more or less offsetting reductions in the money multiplier. we know their excess reserves and the banking system. so the impact of qe has up into generating inflation directly but by changing asset prices in a way to be supportive of the economy. i'll come back in a moment as to the attractiveness and the feasibility of doing more qe in the next downturn. here's a snapshot of a hat and a system put together. this is essentially the maturity profile of the fed's balance sheet under a scenario where at some point they left the portfolio ru but i'll pick you n pick your favorite date. the fed is committed to reinvesting those proceeds as those securities mature. mortgages are tricky because mortgages now but on last for 30 years but most people pay off

the mortgage on average mortgage asked him for about seven years but you have to make assumptions about the maturity of the payoff on mortgages are but the impact here, the message of this fight is over that because of the size and scope of the qe program, it's going to take some time even in the absence of the next recession for the fed's balance sheet to normalize. and important as i'm sure jon will remind us, the normal size for the fed balance sheet is a lot larger than it was in 2007 because of the growth in the demand for currency which if anything is being growing rapidly. even if the fed gets back to enormous -- norwell cheap it would be bigger that was in 2007 or eight. now another key fact of life at the yellin said has been reminding us on of is this notion that the lift off for fed rates, and again david's chart showed you with a microscope you can see that 25 basis point

increase in december but there is a lift off path a lift off that kind a lift off that kind of comeback to that in a moment. and one reason why we have a very gradual lift off path is communicate by chair yellen and others is this notion that the equilibrium or as i've called it the neutral real interest rate in the economy is lower than before the crisis. the neutral interest rate is an important input to monetary policy. it's also unobserved and also time varying which has jon faust is the expert content it's a hard thing to nail down. but the best gas we have is that neutral policy rates in the u.s. and around the world are a lot lower than they used to be, which means the ultimate destination in this cycle is lower. the corollary is able to get to that destination, rates are going to be a lot lower than they were before the crisis which means any adverse shock is more likely to put you into a situation with the central bank will have to use unconventional tools. the rule of thumb in the famous jon taylor rule was to aim for a

policy rate of 2% inflation plus john's assumption of a 2% neutral right. of rates of around 4%. indeed, on average from 1994 until 2007 that was the average funds rate in that period. in a new neutral world because the destination is lower you are more likely to use unconventional policies. another striking thing that's worth following is the evolution anin the way financial markets think about the destination for fed policy. .. you a first cut at evolving market views of where the ultimate destination is for fed

policy and what's striking is if you go back into the days in '08 and '09, folks, thought the feds were going to get rates up more or less before crisis, roughly 2% inflation and 2% real. you see the expectations have been trailing down pretty substantially to the point that there's a pretty big gulf between the fed's blue dot exercise which we can discus in q&a if you wish. market factor in, slightly different fri the -- from the dots. the reality is that markets are in view of liftoff. you probably remember from a macro course that you took in college that there's a rule of thumb that relates real interest rates to growth rates.

there's a lot of slippage there. but the key point is that even if you're in a world where the only thing that drives a real growth, model macro models say it's really the global growth rate and not any one's country growth rate. the global growth slowly expects that to have an impact on rate and that needs to be regarded as well. another reason why we are more likely to see the fed using unconventional tools in the downturn, i typed in too google chart illustrate the geopolitics. i had a conversation and i showed him this chart, what do you make of this, it looks about right. [laughter]

>> he knows a lot more than i do. the key point is not to get into views of alliances and conflicts in the middle east but merely to say that even though so far we haven't seen any huge repercussions, there's a lot more risk geopolitically in the world. and keith, which you know white well, had a nice piece recently making a very basic but fundamentally important point, that even a small increase in investor's sentiments about extreme outcomes can lead to very big reprice of safe sovereign bonds in a world where there's a desire to hold assets in terms of outcomes. to give you an example, the total realize return to june in january 2008 had bought a 30-year treasury bond. don't do anything fancy. you just buy the bond and go to sleep. even though they're boring,

returns would have been up 40%. and so the -- so sovereign bonds in a handful of country, in addition to other factors, slower growth, given that many have gone to negative rates, this gets to the fiscal discussion about the profile for u.s. rates. i have given various examples here. there has been a recent conference in new york. it's important to remember that a lot of our textbook models, forward guidance shouldn't have any impact n. the real world it tends to for a couple of reasons. one, it gives us insights to reaction function and number 2, depending upon how you formulate the guidance in particular the calendar-date guidance which

began and extended can have a powerful effect on market expectations, so it's one of those things that in theory shouldn't work but in practice if it's appropriately communicated, i think, can work. so just a couple more slides to finish up. obviously we know that we've gone through a big severe crisis and a sluggish recovery but it's also true, and these are estimates of potential outcomes. another makes interested or complicated, depending on your choice of adjectives. we are getting to the point where the traditional output gap measures are closing. and then finally, a little bit on options for the fed. i put a question mark here at the time for price level target

and just a quick distinction for central bank with price-level strategy as oppose to inflation targeting, they actually seek to overshoot in order to average inflation at 2%. chair yellen has indicated that she's not embracing a former price-level tarlgt, but she's also indicated that she would like the 2% to be metric. luckily it's a lot easier to do in conference because chair yellen was asked by a bloomberg reporter and if we would see negative rates by the fed in the next downturn and as i read her answer, the fed options would

include various forms of forward guidance, maturity expansion, a version of quantitative easing but without blowning the sheet and certainly indicated that negative rates perhaps of experience of other countries are not at the top of their list. i would also point out another factor that central banks have at their disposal which the fed did not use in the last downturn but certainly in principle could be deployed is an explicit program that would cap the yields on negative bonds with substantial intervention. you might think that the fed did everything in the kitchen sink, it -- i think i will stop there and look forward to comments. [applause]

>> it's a pleasure to be here to talk about this somewhat ominous question. rick is more prepared than i am so i actually had an opportunity to make my talk duck-tail with his a little bit. i think there's a few ways to think about the question. is the fed ready for a session. now we directed to the fed and not we. there's a lot of ways to think about that. is the fed prepared to do what it can, would the fed's response would be powerful and effective? so we have, yes, yes and at best modestly so is the answers and i think that's kind of what the answer was as well. i want to embelish that, i spent

a few years special adviser to the federal reserve board and was there when the cliff event happened. there's a lot of discussion about whether a recession might come and the chair, that was bernanke at the time. the tools in place at the time didn't, probably weren't enough to complete offset such an event. so the question is why -- what do we think, things could be better now or worse now a few years have gone past, and i think the answer is probably the economy is healthier so it would be less scary, but as far as the tools are concerned, it's about the same or perhaps event --

even weaker. we can go through different kinds of tools, the ones that chair yellen was asked in the conference. things the fed tried and the things folks talked about but probably aren't legal. [laughter] >> and the last gets talked to about a lot. let me talk about things that we have tried. forward guidance, now forward guidance, you tell folks what's going to happen. there's a misconception, often times the distinction isn't drawn. the idea here is somehow it dictates policy and would follow a policy that they are not going to want to follow. this goes in the not-tried discussion. no central bank in the world has tried this. so when we get to not try i will

discuss it but not now. things they did try, they did four guidance, one of them called information-only forward guidance. the example would be the famous thresholds that the feds announced. we are going to keep interest rates at zero at least as long as unemployment is 6.5% and inflation below 8%. and there's underappreciated factor here that information only-forward guidance is going to add accommodation only when the public misunderstands what the fed's intentions are. when the public understands how accommodated how the fed intends to be, it doesn't do anything. as we saw in picture, interest rates declined and still remain high relative to the day even in 2012 and 2013, there was still room for the fed to say, no, no,

you don't get it yet, we intend to be really accommodating. it's not clear that that -- that that room is still there, in fact, anybody who has checked recently will realize that market measures of expected policy suggest that the market or the markets derived expectations are actually the fed will be more accommodating than it claims it's going to be. so if you did forward guidance right now, it would actually represent a tightening, so forward guidance still works. forward guidance is just clarity about what you're going to do with the information-only forward guidance. clarity is a good thing. the feds should do that. it's not only going to umpth and folks didn't really get it and the feds would announce something and people would go, oh, i see, they're really serious about this. next time around there wouldn't

be as much as that unless the market has changed its opinion. so next there's large-scale asset purchases, what people call qe. the fed calls qe. you buy long-term bonds and increase the demand that pushes up price which is the same thing as driving down the yield. you drive yield on long-term securities and hopefully then that stimulates the economy. so you can ask if there's still capacity to do that and there's various ways you could look at the capacity question. you could say if there's still a quantity stock to buy and there's only so many securities out there, there's only so many security governments out there and so there are limits there but there's still plenty capacity in that sense. in another sense, it's not clear that the capacity is quite as

large and it's the same point of interest rates that we have been talking about. qe, so qe2, the famous qe2 program was adopted at the end of 2010, rates were around 3 and a half. then a sequence of programs including the maturity extension program and qe3 and some people called it qe infinity, those were adopted in rapid succession and pushed rates down to one and a half where they stayed until the fed said it was time to start normalizing things. so there was about -- there was nearly 200 basis points. 2.4 points in rates, but we are starting out now. i will. i'm going back. [laughter] >> we are starting a different point. there's not so much room to lower long-term rates as there was back in 2012 or 2010 when q

qe2 was adopted. most folks think from going two and a half to 3 and a half is a good thing and going from 15 basis points to minus 50, that gets a little bit more ambiguous, not as much room. arguably a bitless potential -- bit less potential than before. that's where you promise to deliver an inflationary boom in the future when interest rates are no longer zero. so a few years down the road you say, once i get the power to do so, i'm going to produce an inflationary boom. the households and businesses anticipating future good times spend more today because that's what economist say you do. if there's going to be good times in the future you start doing more today.

so why didn't anybody use it? no -- every academic paper says it's the right thing. no central bank tried it anywhere in the world. well, it require it is private sector to overextend itself today having faced that that party is going to happen in the future and central banks announced that in their explanation for why they didn't do that, the ucb, the fed and the bank of england have said there's lots of reasons about this. for the fed one key reason is that the current fmc can't future dictate future policy. we are going -- we are could have a chair turn over soon and we could have a share with administration turn over and we can think about -- promising deliver a party two years from now but rand paul was chair at that moment. [laughter] >> the point is that there's no legal way and perhaps no credible way to promise that several years in the future that

this boom will happen. still worth a try if things get bad enough, sure, maybe. so close cousins to this are price-level targeting raising the inflation target. the immediate effect of all those is to cause inflationary boom at the current moment, if it's not credible, it's not credible. these might be fine on average in the long-term, maybe it'll be the right thing but would it have the immediate benefit today that we are looking for? perhaps. but it's no more likely than -- than the prescriptive forward guidance to do so. negative rates on the table but not favored. i don't want to say more about that. it's a long discussion. finally there's health -- helicopter drops.

the question is, you know, when it's oportune to do that. most couldn't legally give away cash so it has to go some other way. maybe there's stealth helicopter drops. there's various ways that could happen, i suppose. my main point about helicopter drops is that for the fed, the fed's mandate is narrow and much more precise than many central banks. so you're going to have to check with the lawyers first before you think some kind of helicopter drop is going to work. lots of fed legislation both about fees, about interest rates and other legislation have the clear intent of having the fed operate at market prices and avoid implicit or explicit to the banking systems, so all of the ways that start to look like helicopter drops are dubious

under the fed's mandate. bottom line, can still provide meaningful support, but that's modest support. you might try some of the stuff that's not been tried yet but there's a reason it hasn't been tried yet because folks didn't think it was going to be as good as they were doing. [applause] >> so, i think we should go right to the panel because we are a little behind. you could sit here. i just want to mention while people are coming up, that chair bernstein, you get the benefit of two, tall people. i want to mention also that on june 6th here at the center we are going to have negative interest from the european experience.

we have a number of people from european central banks that have been doing this and now it's no longer theoretical. i also want to call your attention to ben beranke. negative interest rates might be worth trying before the fed tries another round of qe and he has at length and he wrote with research assistant peter olson explain that. here is the deal, louis, when we get to the q&ai will ask it. >> great. thanks. so we have both fiscal people and monetary people here, let me ask the question, before the great recession the conventional wisdom was that we shouldn't use fiscal policy to help problem, we should use monetary policy,

now it seems like the conventional wisdom has moved around and we should use the combination and fiscal policy is more important. is that because we learned something about how effective fiscal policy is or is that because we are at the zero-lower bound and anybody answer. [laughter] >> okay, let me see if my voice still works. thank you, everybody, it's great to have such a great crowd and everybody has hung around. it's a compelling topic. i think it's because of the zero lower bound. i don't think it's that complicated. when the federal reserve has more ammunition certainly a combination is relevant. i always thought ben bern anke made a lot of sense when he went to congress regularly the quite weak recovery, jobless back in 2010, 2011, he was constantly saying, we are doing all we can, we need a fiscal help from

congress and, in fact, fiscal multiplier is more potent. i think that makes us what we are in the world we are. >> ben reiterated that in the blog that was advertised. >> go ahead. >> i agree. i think we also learned it can be effective, right. so the 2008 and david calls the busch-pelosi stimulus. so lots of people made it effective. >> so we think it's not -- doesn't have such a lag as we use today think and also that we might need it more. if we think that interest rates are going to be low and more likely to be hit by the lower bound, it didn't make sense to increase target. right now what if we are in an

era where it's a lot higher than thought before. what kind of argument to it's time to push inflation target or something on the table looking forward? >> yes, i think it definitely should be. the 2% was chosen to balance the risk of high inflation as costly but low inflation as you hit zero bound too often. we learned more that we were more likely to hit it than we thought and we learned that it's trickier to get out than we thought. both of those say you should redo computation the same one you did, update it and see if still says 2%. i think that's undeniable. >> just what i thought was a great presentation, suppose they said 3. i thought the implied in your presentation was no one would really take them that seriously. >> whether you could hit that on average over time if that's going to be our policy, could

you achieve it, yes. right now with that help -- would people immediately expect 3 and provide the stimulus to get us out of where we are, that's where we are dubious about. >> i think it's a practical matter. i think it's unlikely that you see formal elevation of inflation targets at 3, but i do think over the next three to five years, central banks being more receptive to some version of averaging inflation, probably not go all the way to price-level target, but could i see a central banker saying, for the last five years, we are not unhappy for the next five years is 2.3, i think we could see that. >> the argument that inflation is getting out of control is just -- you know, we are on the verge of out- of-control

inflation. >> are politics ready for the next recession and what do you think that the political lessons that were -- that have been learned at the state level by people or by congress and how likely -- how does that impair ability by the next recession? [laughter] >> exactly. >> i have to go back to my time at the treasury. in 2008, at the beginning of 2008 seemed like a time to rapidly do fiscal policy, the iraq debate, it wasn't like the administration and congress that democratic can tell congress and got along super well. you know, the congress said, look, we are not -- we are not insisting in our kind of stimulus and president bush said i'm not insisting on permanent tax cuts, let's just get it done

. >> one definition is republican in a recession. >> we actually had that discussion in 2002 and 2003, absolutely right. >> that said, i think it would be one of the motivations that ben jowrnd scored -- underscored that to the extent we can do on the automatic side the concern on jet lag. >> there was money left on the table by the state that is maybe going through the states -- is it going to become less effective because of what happened to the politics at the state levels. there's money, federal money on the table that was just not taken up. >> yeah, i think there was some of that. state fiscal relief scores were

very high. this isn't just -- this comes from the modeling work but also some pretty careful work about how state fiscal relief played and i would suggest that it was, you know, very effective in large part of because of the balance-budget requirement that ben noted to the extent money left on the table. that doesn't persuade me from our recommendation. >> there's some -- there's some argument that states used the money to boost the funds but the hard thing to know what the counterfactual is. if states were looking to boost funds because they were worried about fiscal outlook, it's quite possible they would have done it anyway. >> there's some people that argue since we are worried about the next recession, we don't have fiscal space, we don't have monetary space, that we should take the opportunity to create some by being more aggressive on lowering the debt and raising

interest rates faster than might otherwise might so we have space of something that happened. >> i never understood the argument. [laughter] >> in order to give myself more room to cut i want to increase the odds of the next recession. [laughter] >> now, but in fairness to those who are making that case, if you are in a world where you think you want to end up at 4-5% on rate, the point that the yellen has conveyed through communication, they are saying not we want to be behind the cufer, that's what the economy can take. that reinforce it is view that raising rates rapidly to a high level to cut them is not a winning -- >> i couldn't agree more. if i could make a quick comment on fiscal space. i think there's three opinions about physical call space.

those folks, i think, are very out of tune with the kinds of evidence that we've talked today. i think there's a lot of bipartisan sentiments that you heard today to no small extent that fits in the other two camps. the next camp says, we don't -- yes, 75% of gdp ratio but we should have a plan to bring down that debt to gdp ratio as we do stimulus, so that's the second, and then the third is more like we are not going to get that plan, you know n given today's politics, we should just do it and not worry so much about fiscal safe. most politicians who are not a tea-party variety probably fit into the second ben. >> go ahead. >> i'm sorry. i had one more thought on the interest rate part.

>> i'm hoping mike during q&a will speak on this also from the audience. you know -- we pushed forward all the activity and raised rates, 1% is not -- it's not like there's not projects to be done and if the argument there, the market is going to be -- do we want to rely on rich people. i'm not sure it's a powerful one. am i mischaracterizing what one might say? >> that's exactly what mike would say. [laughter] >> yeah. that argument -- that argument is made. it's still not clear under that argument that there are some future stabilization benefit out of being at one so that you -- i

would like to be at 1 so that i can go back to zero. it's hard to make that work. >> i think it's important to make the point folks from my generation came up at a time where we talked about the fed is setting the interest rate and the entire yield curve of interest rates, you know, those days are long, long gone. .. the less relevant the fed is. ironically affected more control over interest rates in the '70s because there was a huge inflation premium. you brought down rates.

now that the second of the banks are good with it and inflation print is small there's much less leeway to move around rates than perhaps a lot of people believe. so for those of you think rates are low, if it is a global default but that will persist for 10 years, they give you a different view on fiscal sustainability and if you think reverting back to 2006. >> let me ask more on the physical space question. you make your point is clear we don't think there's a trigger. we know higher is less than lower. have learned anything backs about the relationship between interest rates and debt about how much physical space there might be? application of mind what those parameters are -- have we changed our mind? >> epigraph to have learned there was more fiscal space than we thought, that markets are less worried about not just the high level of debt but also,

well, with the trajectory of it is under current law it's impossible to know what markets expect of themselves. it's hard to think of a plausible scenarios that markets have in mind that lead to decline injected -- debt to gdp over the next 25 years. i think we learned markets are less sensitive than we would've thought. but we still think that those relationships are going to normalize over the next five, 10 years. which is to say that we think that as aggregate demand continues to grow over the next several years we will see increases in interest rates that are consistent with the levels of deficit and debt that we project. >> i don't think the relationship is broken. >> i'd like to project a note of how much uncertainty i think there is in this relationship and i completely agree with everything that's been said, but

over the period since 1990, japan's debt to gdp ratio has risen at a stuff three times the level of ours. at the same time their borrowing costs have fallen and they are now borrowing not at 150 basis points but 10 basis point. so for thought that my grief we don't know where the trigger is but sometimes when you say that, you might be leaving the application but surely we are in the neighborhood. we are not even sure we're in the neighborhood. >> just to clarify i'm not sure we know there is a trigger. >> or a neighborhood. >> back to the point where it's not just important i said this before but if such is important because the level of debt to gdp, think about what extract reduced. if investors credibly thought that debt to gdp is going to rise off into infinity over some finite time period, then all

bets are off. so clearly what investors the people running to the federal government clearly that expectations for what's happening to the debt to gdp over someone great of time has to matter really importantly. >> they think we're going to adjust, they don't know how. we will not cut this tax, not cut spending, not raise taxes. that should make investors more nervous. >> before turned to the audience i want to ask a couple questions on automatic stabilizers. one question is, it is the sort of related to stabilizers which is have also learned from the recession of them have much deeper, longer lasting impacts and without? that wante i wanted to ask abour work assuring ideas and how did those relate to each other, how important could it be as a response? >> well, i mean, i can speak so much that we've learnt that automatic stabilizers have made

some kind of a long-term difference with the following very significant exception. there's been a growing and really i think rich and important literature on the benefits of the safety net to long-term outcomes in the lives of kids in the family. so if you look at the family, go back to the beginning of food stamps what was unfolding throughout the country, if you look at families come to the families that got come and kids didn't contract with a lifetime, do the same thing with medicaid, eitc, even some called head start programs you can finally long-term differences and positive outcomes earnings come health care, employment that suggests these programs are much more than just consumption. they are a form of investment. you couple that with some of the work i associate with the economist showing the damage of,

particularlparticularly long-tem particularly long-term unemployment adjectiv educate te how important that kinds of ui interventions. third, this one is huge in my view, and i think i would be interested in wendy's view of the this idea that wendy alluded to, the idea that when the economy is depressed for long periods of time, so long-term unemployment stays highly only for a long time. it's not just a problem in the present. it diminishes the supply-side growth factors and economy both in terms of late -- labor force participation and capital deepening. you can see if you look closely that, in fact, cdos potential came down significantly and some economist and i'm one of them believes this is a very serious consequence of inadequate response to the downturn. it is long-term macroeconomic negative results.

>> the question of how history matters and whether or not history is a thing where short-term downturn always affects long-term potential at that always affects a psychological cycle and they're doing it in the current cycle just in the way they always have. it's just the current cycle is bigger whether or not that's the right story, we don't typically see this history but we see it in its current downturn because it's special to the third possibility is that there isn't history. and i think typical macroeconomics would have normally but history aside and we would've sent in fact the whole point that we are cyclically adjusting things like gdp disregarded take out the cycle, which is to say we are actually trying to look at the structural factors that drive the economy because we don't think the cycle is affecting the structural factors. so it's really complicated to a

chief all of those things apart. what we have seen in the last cycle is that capital, investment was hit hard enough that their long life the facts -- effects, capital deepening, long live effects the kinds of investment we saw. another front, i think cbo has been surprise recently that history has been less of a factor than we would have expected. one place to look is the unemployment rate. so we had previously estimated what was happening in the labor market and with long-term employment and other factors would have longer-term story effect on the unemployment rate. and with long-term unemployment coming down. so history is complicated.

but just because jared mentioned the revisions suggest major projections to potential said before the recession since 2007, and i think you have shown on your site, richard. one thing i will say is that we actually don't attribute most of the revisions to i don't know if you can summon up the picture that richard showed a potential gdp in 2007 look like this and potential gdp under current projections looking like that and there's a lot of daylight between them. we actually don't attribute most of that revision to the recession. we actually attribute most of that revision to impossibly optimistic projections for labor force growth and for hours growth in particular. pre-recession. we were just in retrospect, they were just implausibly fact. >> a really quick thought and i agree with a lot of what jared

said that in some ways the long lived nature of this is the event of '06, '07, '08 are living with us today, matter socially and politically every profoundly. so to me that's why this is so important, getting the policy right. sort of every dollar burned on greenport or whatever is a dog that didn't go to preschool teachers. to me that's why quality matters. >> i don't think we need to do it now, to debate some of the aspects of the recovery act. >> the crazy train. >> joe biden. >> what is frustrating to me and you can see the frustration when i was up there is the repurposing of earning money on high-speed rail, the crazy train to nowhere. to me that's the hardest part.

he wants some introspection. >> the train think i'm less sort of -- i think the green investments i would argue you have mischaracterized. i think some of them were a lot more effective than the. and by the way, not to get into account in the interest of time, the work of michael greenwald is very instructive on this point. >> thank you so much. we're going to open up to the audience know. the mic medical come to you and tell us who you are and where you are from. this gentleman right here. we might take a few questions. >> thanks very much. on fiscal and one monitor question on the fiscal side maybe wendy specifically. looks to me like we've got an incredibly high elasticity of tax revenues to income in this expansion. in fact, if you look at the charts people were putting up, huge swings in budget deficits relative to what's been quite stable gdp growth.

so i wonder if he felt the automatic stabilizers what actually a little bit bigger than the little rectangles that you are suggesting? or more to the point we make it the next downturn was the chance we catapult from a sort of 3% of gdp deficit back to double digits? that's the fiscal question. on the monetary side, very simple, very complicated question in some ways is why is there so much focus on the front end of monetary policy, i.e., the fed fund rate and virtually no function on the transmission mechanism? isn't the problem with the fed has been doing in tapping the accelerator just hasn't moved the wheels? so that transmission mechanism we should be focused on, not the fed. >> since those are two questions -- >> i'll let you handle that. >> i don't think that we've been

particularly surprised by what's happened the automatic stabilizers. what happened to revenues relative to taxable income, into the way i square that with the point you're making about gdp growth is i am positing that taxable income has moved more than gdp growth, but because the question came to be really fast i didn't have time to verify that. [laughter] >> i think that's the right question about what is the focus at the short in and out on the transmission mechanism? the answer is the focus is very much of the longer and and on the transmission mechanism, where it should be precisely. especially with the federal funds rate at zero. that's why we are buying, why several banks around the world are buying longer-term securities. there's a lot of study done on the basic channels, the wealth channel, how is that being affected by problems were

households as bill mentioned rebuilding the balance sheet come out of that affect the wealth channel. has the exchange rate channel changed? is interest sent to spending much less interest sensitive that was at one time? so the focus should be there and i think the focus has been there. >> both of our monitor friends have introduced a really important point in their presentations. rich focus on this particular come which is the international dimension. i cannot over emphasize how important that is. ben bernanke has asia since the mid-2000s has been stressing through his savings pluck discussions the critical importance of their them. to the point where you are even seeing monetary policy being challenged by these dynamics such that countries lower rates expect their currency to go down in the coast of the that happened in japan recently. to the tune of 8% so it wasn't trivial.

when the fed turned a bit dovish in their meeting about a week ago, the dollar depreciated sharply. and so those sensitivities, those blessed to cities are much more important -- have not been an important in the past but they are much more important now. >> lloyd with the policy science and award to ask an early warning prevention and big data question. cbo has been saying for years, decades, that model are not good at turning points so we're three quarters into the recession before things happen. but couldn't you today think more optimistically with big data about early warning systems that detect a downward cascade at the start, of several places,

it didn't move much faster with the new repertoire policy tools? >> another question before we answer that? go ahead. >> thank you. this has got me thinking a lot of different direction. some of the papers i read and applied that there's a lot more than just negative interest rates. and the interest rate is not just a number. it's a correlation. and if you insert money or change a policy, that can do the equivalent of a negative interest rate already. and rogoff and reinhardt said this time it's different, and they can't admit that it isn't different but in a way i that is different because the definitions of all the variables have changed. and keep changing. what goes on with cpi, stock

market goes up, that's good but the s&p 500 has a way different p/e than it had in the '90s. similarly unemployment is 5% but the labor participation is lower than it's ever been. i liked that diagram of all the lines interconnected. some of the papers have each of those lines that they have not just a number on those lines, but each one of those lines is a complicated nonlinear partial differential equation. let's move along. >> the real numbers going on. >> one more. >> this is for richard clarida.

an article in "the wall street journal" and you were quoted about commonsense they're sort of a little bit of a disparate between you and dr. fauci to him in the actual but you seem to think that helicopter money will happen if the things that in the next five to 10 years under want to know more -- >> certainly the u.s. would not be at the top or even in the middle, probably closer to the bottom of my list but our 182 country in the world, given the level of specificity of my answer, i am confident. and i will say from own blogger peace him as i said in the article there are different flavors of helicopter money, and i think more likely is what i call in the quote in the piece disguised helicopter money. the milton friedman case as you announce on january 3 the government is going to issue a huge amount of debt and it's going to place a private with the central bank which will extinguish it and essentially promised never to raise taxes and then the issue is how much inflation do you get.

we may not see that we may see it come a close cousin of that, which is essentially given the big fiscal program, say you are doing continent that after three years say you just read the article, we should have a big balance sheet. so basically we are never going -- we were rolled over forever. i don't think that's implausible at all but i don't think that's the u.s. source. let me be clear. >> i had this idea, for automatic stabilizer, that triggers. either some triggers that would be faster and earlier and maybe the unemployment rate or is that something we could think of? >> i must say, and i will not waste your time by going to answer your question because i just don't know enough about it, but if you think that that is probably some there. they talk about these ideas using all the input that google gets. the one constraint that can want

and i had come and we got a lot of input for our trigger discussion, and everybody said it has to be something simple that congress can sort of understand and deal with. that kind of leaves you with what the bls is going to generate. >> mike, do you want to take on the question of raising interest rates preemptively? go ahead. >> i think the conventional wisdom is pretty strong on this one, unlike some other types of conventional wisdom, i'm not going to question it. if i might, just a couple of quick observations about what we've been talking about your i guess i'm impressed by my profound ignorance, which is even greater than i thought before we went through this financial crisis. one thing that wasn't mentioned, and i suspect it's not a proclamation terms of thinking about what we might if there's

another recession, so we've embarked in varying ways in different countries on macroprudential oversight. i don't see there's a great enthusiasm for thinking about that as a countercyclical tool as opposed to something that just creates an ongoing greater resiliency. but one could envision in some countries at least, maybe more difficult than the as we don't have a lot of different tools, but doing something on that front. but going back to this question of interest rates and what we might do, but that itself has already shown a concern about the possible effects of persistently low interest rates. so that sort of raises the question about whether they would want to quickly move to a still lower interest rates. the questions of creating financial asset bubbles or other types of bubbles, real malinvestment, to use the term

you don't hear from the fed very much come at a don't think that i'm very concerned about it. but in some circles it is especially republican circles, is a very big deal. the question of creating further problems in financial intermediation, that is one of the concerns with negative interest rates that we've heard, but he might not even have to go to negative to be concerned about that. i might cite "wall street journal" article today about the problems of insurance companies with long-term care insurance in raising premiums. that's almost a variation on another question of how do consumers respond to lower interest rates? one could envision that there are some consumers who are not so impressed by how it's cheaper to borrow advocate to out and buy another car, but have their retirement savings are being affected and feeling and it, sort of a target savings approach so that you might not

get the consumption response you are expecting. there's also, well, i guess that sort of covers the main once you here, but a lot of arguments you here for why would i be a good thing to go to lower interest rates. >> go ahead, back there. >> thank you. alex frank from johns hopkins. quick question on on the fiscal and the monetary side, and impact of regulatory policy and terms of our preparedness. it was briefly mentioned by the professor bordo pictures to your more in depth from both the monetary side of the house in terms of the fed's ability and capacity to deal with things with the impact we have seen somebody regulatory policy on the fluidity of markets.

>> i'll make a quick fiscal. that was at the point about some of the large changes in health care policy and financial regulations that collided with a recovery that would still find its legs but feel a thing i would say is that the political timetable doesn't necessarily track with the cyclical on the way you would always like it to. but we thought we had to and i was at the administration, we felt we had an opening to do an historical health care reform, and i think we did and ultimately that will be come history will show that was very positive policy change. >> questions? >> also give me the rates issue,

on growth, seems like the right, i call it a regulatory surge and added some effect on growth. i don't know if it 10 basis points or 100 or 150 basis points but it had some impact. it would be useful i think to do better cost-benefit analysis or even some cost-benefit analysis and figure out how to undo the right, or the wrong regulations. >> i think on the monetary side or the financial system side, it's pretty clear that regulations have a certain burden. as far as what they've done for resilience, i think a key contribution to resistance has been that financial institutions now have a lot more capital. and that's not particularly all complicated, the 800 page regulations and the like. i think unambiguously we know

what they have a lot more capital and that makes the system more resilient. there's a point of which require them high level capital is also a drag, but this is is much more resilient. the think you can point at is the capital. we'll spend a long time revising and sorting out the regulations which are beneficial, which made for the revision. >> the last two questions here and there. >> i just want to get back to the fiscal space and creating an army. is a part of the argument for automatic stabilizers that you can build into their design that they turn off and maybe compensate? but also want to ask how important do you think the fiscal space, that we will not go off? and, frankly, 2013 was a net. they spent time between 2011 and 2013 preparing come and you saw have cuts on short-term treasury bills.

>> it's a great point. i remember old and sex always puts out these great chart of fiscal impulse, and 2013 was a huge negative. 1.5 points of gdp. you could map that onto a million jobs pretty quickly. when fiscal impulse went from negative to nutritious offerings pick up pretty quickly. so i take your question very socially. on the triggers, yes, ma as ben very good articulated by turning on and turn it off is what's most important to us and we think we've come up with ideas that would make them more timely. i would just, i would steer people towards a paper that i think was very important, a brookings paper and goes in a different directio direction the the things try to set the it's not a criticism. what happens is the research gets out ahead of cbo and then it becomes true, and cbo is absolutely. do not change their views based on a paper or do. two. i think there's a long summer's paper, a brookings paper a little while ago that showed

windows even a very small degree of histories and with evidence there wasn't one of our papers the degree was larger than that, that, they argued countercyclical stimulus pays for itself and i probably would not go that far because i'm uncomfortable talking of free lunches. it becomes a very low-cost launch. you can see in europe and cases where austerity was bitten off big time but, in fact, their situation worsened because they hurt the growth so much. >> to mee me the schizophrenia n this issue is illustrated. on the one and decrying this question and understand that. on the other hand, celebrating the fiscal adjustment. i understand that also. so they can't decide which side of this question they want to be on so they are on both. >> can i say although that about the paper that charity mentioned? if you take like an infrastructure program that costs $100 billion, or let's say

we think we'll have a rate of return, let's even say we think right now seated at the heart of the private sector rate of return is 10%. let's and we think and for such a project will have the same rate of return, which is as it will increase gdp every year by $10 million. the revenue that the federal government will get from the increase in gdp of $10 million is maybe $2.5 billion. so that's not very much revenue. and if you think that the increase in borrowing that the government did in order to finance that infrastructure, assuming that's how they financed it, increased interest rates at all, first of all that means they are defined as the $100 billion but keep in mind even if you increase interest rates by a trivial amount, our debt load is so high that that very small increase in federal borrowing rate also has a negative effect on the deficit,

which is very easy to swap the increase in revenue that you get from increase in gdp from infrastructure. >> quick last question. >> given the interconnectedness that you talked about from country to country, several speakers have mentioned that or agree to that point, how important in advance is it that central banks or others think of able coordinate their response indicates of a new recession? or other competitive advantages that countries can obtain by waiting to see what others do and, therefore, is not advantageous to coordinate response? >> in theory there can be. in practice when people actually at least a month because try to calibrate against to cooperation, they are typically found to be pretty small. i think a lot of what we observe in practice which is sometimes a call policies, or later policies, countries get hit by

common shocks edits in the interest to do the same thing. so, for example, in '09 there was a global recession. was about coordination or was that correlation to a common? it's a harder problem when you get into the details than it may first appear to sort that out. >> the mission of the hutchins center is simply the court of fiscal and monetary policy, which requires things like jared and ben's paper, thinking how fiscal policy to be given. and approving publication of those which required the cooperation of people like these to spend time explaining to things to us, answering questions and making powerpoint slides. so, on, i want to thank everybody for participating in coming. number two, the slides and that all the speakers present or on our website if you want to read the small print. and three, if there's paper or coffee cups atrophied, pick them up and put them in the garbage at the end. please join me in thanking

louise and our panel. [applause] [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations]

>> tonight on "the communicators" a look at the fcc's lifeline subsidy program and a plan to include broadband internet access in order to bridge the digital divide between higher and lower income americans. the fcc is expected to take up the proposal at the end of march. we will talk with the policy director and visiting scholar at aei center for internet communications and technology policy. we are joined by a "national journal" technology reporter. >> low-income consumers need access to broadband now. it's unclear to me that congress would be able to pass a support that is directly aimed at low income users. this congress has not been particularly supportive of folks who are in poverty. the conversations that have been

on the hill has been hard to decipher. >> they are putting the cart before the horse because they have done a study to suggest these are the drivers that are keeping low income people from adopting broadband service and this is about what going to need. we don't need if we need $9 a month or $45. the fcc hasn't done that level of analysis. >> watch the communicate tonight at eight eastern on c-span2. >> booktv is in prime time on c-span2 start tonight at 8:30 p.m. eastern. each nigh night will feature pis of programs on topics ranging from politics and education to medical care and national security. plus encore presentations from recent book festivals. tune in for booktv in prime time this weekend on c-span2. go to booktv.org for the

complete schedule. >> the pro israel group aipac is on its annual meeting in washington, d.c. but they will be hearing from republican presidential candidates jon kasich, donald trump and ted cruz as was house speaker paul ryan. you can watch live coverage scheduled to start in just under one hour 5:00 eastern right on c-span today we will take a look back now at some of the morning speak at the house majority leader kevin mccarthy of california and democratic whip steny hoyer of maryland. ♪ >> well, good morning, everybody. very nice to wake up with 18,000 friends in the middle of washington, d.c. i have had the great privilege of joining aipac for several years now, and several stimulating discussions. and while the topic of those discussions have buried there has been on a threat that has remained the same and that is

the commitment to bipartisanship when it comes to this issue. and this is what we're going to discuss disappointed in that spirit i would like to welcome our next two guests to the policy covered stage, two leaders in congress good example by what it means to stand on this issue together and across party lines. ladies and gentlemen, please join in welcoming house majority leader kevin mccarthy and house democratic whip steny hoyer. [applause] ♪ >> gentlemen, good morning and welcome to the rotating stage.

so as we've just seen in this video, both of you participated in the mission to israel. it's not your first time doing g it. i've spoken introductions about the sense o sense of bipartisant allows a little bit about your own story, what motivated you to traveled to israel and take the freshman class with you, what you get out of these trips. >> first of all the first time i went to israel was in 1976. my wife was still alive and we had an extraordinary experience for seven days. and experience that changed my life, changed my perspective and i've been back 13 times since in every decade. [applause] >> the 1976 come a long time. what do you get out of it? >> i do something to out of it every time i go. enforceable i tell people i get a revival out of it. i get a reinvigoration of my principles and my commitment,

and how critically important a relationship between israel and the united states is that we need to work very hard to make sure that it remains bipartisan issue and effectively sending a message to the world that israel's survival and security is a critical issue to the credit of america. >> what do you get out of it? >> well, the first time i ever went i wasn't in congress. i was in the state assembly of what went on a bipartisan basis. i knew my love for israel it created a unique bond. you don't understand the size of the proximity or the threat or the challenges of what they are able to overcome. and it's such an emotional time just that when wiki or there. so we did something much different than when i became majority leader i went down to steny on the floor and actually talk very often. i said why don't we do something different this year? why don't we do it when they go, overlap, because when you leave this country you are an american

first. and you know the most unique thing, steny agreed right away, but spent a couple of days republicans and democrats together while we are there. and do you know where we went? [applause] we broke bread. we had lunch, but we went and stood before the iron dome, looking down to gaza. and we think a lot of these are bipartisan votes of what we support, but there is a bond there that breaks party, that understands israel is our greatest ally. and if we are not supportive, where does that break the world? >> we don't hear a lot -- [applause] we don't hear a lot about bipartisanship these days in this town. is this the real deal on this issue? >> first of all i think there is more than you about because competition is what you hear about. but having said that israel is unique. the commitment to israel i think is unique a and get bonds both

republicans and democrats in common cause, and i think that that was true yesterday. it could and will be true tomorrow. [applause] >> well, you just want to the speakers are all coming to you that everybody can get on every side of the aisle. i don't know of any other organization that can do that. but they all have the same mission, too. we know the bond between israel and america has to be the strongest. if it's not we will lose. >> let's dig in here for a few minutes. this is the region that is on fire, across the region is more tumultuous, more unstable, more violent, more unpredictable than we've seen in many, many years. that's been the case what each of you see as the most serious threat facing the region, and where do you see the israeli-u.s. relationship addressing that? >> i think iran is clearly the number one threat that exists. [applause]

they clearly have a policy to impose hegemony on the region. they clearly want to be a power of which people are afraid. and clearly one of our major responsibilities to israel and the united states working together is to assure that iran never gets a nuclear weapon. without controversy about that, but that commitment needs to remain strong good vice president lied and talked about it last night. that needs to be our number one focus. -- vice president biden. it is interesting at this time, it's irrelevant -- a relatively unique kind of the surrounding community does not have its own internal issues and are confronting one another as much as their confronting israel. that i think is a change in circumstances, but it is a destabilizing effort in the middle east. very dangerous. >> it's no doubt iran is using the resources now to fund

terrorism. they feel in your apartment within the region. what we need to do is make sure our relationship is not only close that that we work closely together from cybersecurity to a military advantage. when israel and america are strong, the world is more peaceful and the world is more stable. and we need to have a responsibility. [applause] when there is question and doubt, went iran feels they have an advantage come as you notice the world becomes destabilizing. >> we have time for just one more question. >> very briefly. one of the things i think is the reality of the surrounding world needs to know, the idea and the department of defense our cooperative as closely today as they ever had that needs to continue and be expanded. [applause] >> very, very quickly. we'll have a couple of minutes left. .com want to ask you both, the u.s. and israeli government is trying to wrap up this memorandum of understanding to provide israel security guarantees, support over the

next decade. how will congress respond to these conversations? >> congresses responsibility would be to appropriate the money. and i will tell you from a bipartisan basis there is more commitment a special after the iran's agreement, let's make no longer agreemen agree but here y stronger agreement with there is no doubt israel -- [applause] >> our premise has been for a long period of time now that our investment in israel is an investment in our security. [applause] that premise needs to be maintained. hopefully we will receive, we will achieve a new memorandum of understanding in the short term, and again, indicate a bipartisan consensus that we have in defense the visual. that is an important message to send to the middle east.

>> windy think a slap in? >> sooner rather than better come and we need to make sure that israel has what it needs to defend itself and remain secure and solvent. [applause] >> when you talk about the agreement, this arrangement, what is the most important component of it besides longer and stronger and? >> innovation and advantage. when israel is strong, they will not be challenged. when they know the bond with america is strong, the world is safer. so if you want peace in the middle east, the relationship with america and israel has to be at its strongest and tighter and cooperation be all in all. [applause] >> gentlemen, our time is a. i would say, however, it is very encouraging to see that there is conversation across the aisle and it's an important place where bipartisanship --

>> not only conversation but cooperation. >> and i will tell you this. the issue with israel and america brings more bipartisan inside congress. so it's only a helpful ability that we can work together. we stand on the stage together and we traveled to israel together. >> gentlemen, pakistan, thank you very much. appreciate your time. [applause] ♪ >> the american israel political action committee meeting in in washington, d.c. and we'll be hearing from them shortly live with republican presidential candidates visiting the conference. jon kasich, donald trump and ted cruz as was house speaker paul

ryan to you can watch live coverage sketch to start in about 40 minutes here on c-span2 live at 5:00 eastern. the speaker is expected to announce he will be traveling to israel over easter recess as politico reports it will be his first trip abroad as speaker of the house. one of the earlier speakers was democratic presidential candidate hillary clinton. we will take a look at her appearance before we head back to aipac for live coverage. ♪ >> anthank you so much. [cheers and applause]

it is wonderful to be here and see so many friends. i've spoken at a lot of aipac conferences in the past, but this has to be one of the biggest yet, and the our so many young people here, thousands of college students. [cheers and applause] from hundreds of campuses around the country. i think we should all give them a hand for being here in beginning their commitment to this important cause. [applause] you will keep the u.s.-israel relationship going strong. you know, as a senator from new york and secretary of state -- [applause] i've had the privilege of working closely with aipac members to strengthen and deepen america's ties with israel.

now, we may not have always agreed on every detail, but we've always shared and unwavering, unshakable commitment to our clients and to israel's future as a secure and democratic homeland for the jewish people. [applause] and your support helps us expand security and intelligence cooperation, developed the iron dome missile defense system, build a global coalition to impose the toughest sanctions in history on iran and so much more. since my first visit to israel 35 years ago, i've returned many times and made many friends. i've worked with and learn from some of israel's great leaders,

although i don't think yitzhak rabin ever forgave me for banishing him to the white house balcony when he wanted to smoke. [laughter] now i'm here as a candidate for president, and -- [cheers and applause] i know that all of you understand what's at stake in this election. our next president will walk into the oval office next january and immediately face the world of both perils we must meet with strength and skill, and opportunities we must seize and build on. the next president will sit down at the desk and start making decisions that will affect both allies and livelihoods of every

american, and the security of our friends around the world. so we have to get this right. as aipac members, you understand that while the turmoil of the middle east presents enormous challenge and complexity, walking away is not an option. [applause] candidates for president who think the united states can outsource middle east security to dictators, or that america no longer has vital national interests at stake in this region are dangerously wrong. [applause] it would be a serious mistake for the united states to abandon our responsibilities, or see the mantle of leadership -- seed --

for global peace and security to anyone else. [applause] as we gather here, three involving threats -- iran's continued aggression, a rising tide of extremism across a wide arc of instability, and the growing effort to delegitimize israel on the world stage -- are converging to make the u.s.-israel alliance more indispensable than ever. [applause] we have to combat all these trends with even more intense security and diplomatic cooperation. the united states and israel must be closer than ever,

stronger than ever and more determined than ever to prevail against our common adversaries and to advance our shared values. [applause] this is especially true at a time when israel faces brutal terrorist stabbings, shootings and vehicle attacks at home. parents worry about letting their children walk down the street. families live in fear. just a few weeks ago, a young american veteran and west point graduate named taylor force was murdered by a palestinian terrorist near the jaffa port. these attacks must end immediately and -- [applause] and palestinian leaders need to

stop inciting violence, stop celebrating terrorists as martyrs and stop paying rewards to their families. [cheers and applause] >> because we understand the threat israel faces, we know we can never take for granted the strength of our alliance or the success of our efforts. today, americans and israelis face momentous choices that will shape the future of our relationship and of both our nations. the first choice is this, are we

prepared to take the u.s.-israel alliance to the next level? this relationship has always been stronger and deeper than the headlines might lead you to believe. our work together to develop the iron dome saved many israeli lives when hamas rockets began to fly. [applause] isil its effectiveness firsthand in 2012 when i worked with prime minister netanyahu to negotiate a cease-fire in gaza. and if i'm fortunate enough to be elected president, the united states will reaffirm we have a strong and enduring national interest in israel's security. [cheers and applause] and we will never allow israel's adversaries to think a wage can

be driven between us. [applause] when we have differences as any friends do, we will work to resolve them quickly and respectfully. we will also be clear that the united states has an enduring interest in and commitment to a more peaceful, more stable, more secure middle east. and we will step up our efforts to achieve that outcome. [applause] indeed, at a time of unprecedented chaos and conflict in the region, america needs and israel strong enough to deter and defend against its enemies, strong enough to work with us to tackle shared challenges and strong enough to take bold steps