[background noise] >> i've been out -- that depends. i've been on medical about five years. i've been injured ever since 2000. i was deployed -- on the 9/11 survivor in iraq and afghanistan. >> were you expecting a job better? >> now, the only thing i was expecting this i wanted to put a great store the veterans administration website talking

about how trump towers is opened for veterans to above to apply you need a job. i got a job. he might do you with the veterans affairs? >> no, i am freelance. i submit stories and submit posts on blogs in everything else. the whole purpose of me being here today was trump towers is open for veterans looking for a job. this area has more wounded warriors and more retirees than most places. >> would you support him politically? t. support him politically? >> anyone who has done what he did for me today really, really gets my vote. alicia watkins. i'm a tired. my rank was staff sergeant. i am retired. alicia what kids. -- alicia watkins.

>> where are you from? >> i'm from washington d.c. i live in the suburbs. march 14th was my birthday. >> yuji know he was going to offer a job? >> added that he was going to answer my questions honestly. i was just asked him, will this be open to veterans and will you have the same -- i wanted to make sure that what he said in his plan he was willing to do any good to cut to everyone. i'm ecstatic because i needed the job. i have not worked in a long time because of the back-and-forth from walter reid. >> why did you get emotional? >> if you understood my story, i was a homeless veteran. until opera broke my story in 2010, i struggled --

>> to find a place to work and live? >> if it wasn't for my fiancé, i believe i still would. it is nice to find someone that will listen to you. i got emotional. first of all, i'm an emotional person and i got emotional because they needed a job. i had to kind of make a fashion or employment because of my disability is and because of what i've been through. i've kind of utilize designed to be something taking my mind away

from the. the reason why i got emotional because if you do how long i've been fighting to be employed, you would understand. >> thank you for sharing your story. you are in no way connected to the trump campaign? >> i don't know -- this is the first time i saw him. it was not planned. i came here not even the hopes that i would be like way in the back. i didn't think my question is going to get answered because i'm just a blogger. i am not a credible news. he took my question and the only question i wanted to ask was well the hotel be open for veterans. absolutely, absolutely. honestly, i am excited.

>> thank you for sharing with us. appreciate it. [inaudible] >> i was in the air force. network engineer. >> where were you working? >> if it's cooler. e. ring. >> there's a lot of questions. good lord. >> he served in the air force in iraq and afghanistan? you said you were in iraq and afghanistan veteran in the air force. which unit of the air force? which squadron. >> the air force doesn't have -- >> or rebates, what do you do? >> on the network engineer. the first time i went, i think i deployed with the special

operations command central and the second time i was at the combined forces afghan to. couldn't remember the name. it was in kabul, afghanistan. >> why did she want to come today? >> i heard about the event as i like everyone else wanted to hear a political candidate. every political candidate's view of veterans is very important to me. i have not been to many other political events. i came here with a question about specifically veterans in the trump towers and i wanted to see if mr. trump, whose plan that i do like induce support

would put work with his own hotel. you understand. he's a little different. i wanted to know that. >> what he do for a living now? >> right now i have to take medical leave out of college because of my injuries. i am dealing with severe ptsd and dramatic brain injury and then also dealing with some diseases that are 9/11 related. so i'm back-and-forth between reid and here. >> when utah republicans participate in tuesday caucuses, a first online voting.

byron tau has been looking into this. he is a reporter for "the wall street journal." >> we just got a date for the secretary of state about 59,000 republicans participate in the online vote. what happens is that they separate registration. they already have to be registered to vote. they get a pin number or code that allows them to vote tomorrow cast their ballot online to make sure everything was reported. >> everything online. this is the largest six are in the presence of voting 2004 in michigan. what happened then and why now. >> a couple of experiments both worldwide and in the united states with voting. in michigan, 46,000 people cast

ballots in the democratic primary election. in arizona and over 40,000 people cast ballots for the democratic primary. so both of those were pretty big experiments, but they never took off. they were never put in permanently by either state party. if we get the turnout online tomorrow, this would be the largest experiment in online voting in american history. >> why has the utah republican party decided to do this now? what motivated them? >> there's a couple factors that they switch from a state-run primary election to a caucus and they wanted a way to keep participation high. one of the ways to do that isn't on my boat. caucus and takes a long time. it's usually at night. so why not just allow people to

vote online. that will keep our participation rate to a state-run primary. that was one of the biggest factors in sort of an experiment to it that a lot of big parties and governments are interested in this and want to see how it will work. >> when will the online polls be open and when will they close? also, how does the state department ensure there is no fraud? >> proposal be open on tuesday between 7:00 a.m. and 11:00 p.m. i assume because it's digital, it will be a quick tally. so the way that they describe security measures for the polling is everyone gets a receipt. if they receive matches who you vote for, the state party does require your vote. it is more secure in some ways than voting a machine because

you can see and make sure the party captured their ballot. the company has done this including estonia that they've never been aware of the security breach, but it's a similar rate of failure or other errors. >> byron tau, norway, france, canada also with online voting. >> online voting is difficult. difficult because we are learning increasingly how vulnerable the internet is, how often banking gift tag, how often websites get hacked, how portable personal data is. when it comes to something as important as election come and there's no way to secure the systems from hackers and people that would do harm. a lot of countries had

experimented with it, but no one has put in place except for estonia, the one country that has had universal online voting since 2005 as an option there. so far they haven't had any reports of breaches. it's only a matter of time before people start paying attention to this and this processor to expand. >> your story points out this is the largest online voting in a number of years. what will you be looking for tomorrow and more significantly, what lessons can stay partisan secretaries of state take from this moving ahead? >> yeah, we will certainly be looking to make sure the outreach of voters were recorded properly. essentially that this goes off without a hitch. if it does, the other parties do this and perhaps even state

government from some of the elections in this country. going forward it will remain to be seen whether it's workable insert may whether the participation in the election. >> online voting in the utah republican caucuses taking place tomorrow in that state. joining us on the phone from out west, byron tau following the story from "the wall street journal." thank you for being with us. >> thank you for having me.

>> now, a look at monetary policy with former treasury department officials to attack about the economy and with the u.s. is capable of doing in the event of another recession. this is two hours. >> good afternoon. welcome. i am transfixed, director of fiscal and monetary policy europe hurricanes. today we are going to ask a question that is only slightly less scary today than it did about six weeks ago, which is,

are we ready for the next recession? i am going to kick it up with a little bit of background come about five minutes and then we will have one segment on fiscal policy, which i'll introduce later, one segment at monetary policy. my colleagues will, but moderated panel among all participants at which time will liberate you to give your questions. i will warn everybody that this is very much on the record and as you know there's two cameras there. one of them is ours. it's being webcast. one belongs to c-span. so the basic question is are we ready for the next recession? in case you were wondering, we have recession sometime to time and deal that point on this site is to remind you that the comment irregular intervals. i'm not a believer that you can say that expansions die of old age, but it is a fact that it's been a long time since the u.s. has been a recession.

it may not go the way to a lot of people, at the recession ended in 2009. we had thought. the slow growth. the question we are asking today is what is. what if we had the misfortune to be had by recession again if the fiscal authorities, congress, taxes and then it did what it did the last time. it's equipped to do what it's done in the past to fight a recession. a particularly interested in what happened it happened sometime soon because we don't know what our position will be a decade from now. this is the reality we face. this simply shows the debt to gdp ratio. the size of our federal debt as a fraction of the economy and the important thing to notice is it's pretty high now. we haven't done this since the end of world war ii. at the end of world war ii, came down rather sharply.

projections suggest that the current policy line that the current policy debt to gdp ratio is headed higher and higher. my colleague and his co-author alan auerbach have drawn another line drawn another line there which shows you what if interest rates stayed really low for a long time and you can see it rises substantially less rapidly, but it still pretty big. we have had deficits during the period of the great recession. you can see how it was in 2009. you can see the deficit down and the economy has improved as congress raised taxes and there was biaxin a lot of spending restraint. you can see the deficit is not getting much bigger in the near term, but it starts to get bigger during the end of the decade. but for a nation that has federal debt, which is proposing to raise a current policy

(-left-parenthesis a 3% of gdp for the foreseeable future, it turns out the rest of the world is still willing to fund a lot of money at low interest rates. the yield on 10 year treasury is not adjusted for inflation and is currently below 2%. you can see here how unusual that is. one of the things about fiscal policy in our country is that it automatically adjusts to recession that some of our panelists will talk about so i don't want to belabor it. this is a nice chart based on cbo data. ..

although the target cost 600 million win was announced, or 600 billion of the t.a.r.p. was committed come in the end of the ultimate cost only about 40 billion. you can see congress did quite a few things during the great recession. the question given that level we have today and given the political environment would we be willing to do that again, would congress be willing to do it again? i personally would be happy to do it again if we had another recession. and it comes to the question of monetary policy. once upon a time we believed you didn't really too much fiscal policy because the fed could cut interest rates. the point is simple. the fed has cut interest rates, they are entity or. if you look carefully at the bottom they have barely get off the bottom about a quarter of a percentage point. we used to think interest rates

could go below zero. now we are learning maybe they can go a little bit below zero. we will talk about that. this is a graph of the countries abroad that have negative interest rates. you can see switzerland are at three quarters of a percentage point negatively. if a bank the money on reserve at the swiss national bank has to pay the swiss national bank money. it doesn't get interest rate. the other thing they did is buying a lot of assets. when ben bernanke took over at the fed had less than $1 trillion in assets and today they are $4.5 trillion in assets. one of the questions is what's wrong with 5.5 or 6.5 or 7.5? is the limit to what the fed could do in qe? is a some reasonably additional quantitative easing would not have the same effect assisted before? body cam this comes at a really unusual context and the context is that interest rates around

the world are very low. this is a nice chart taken from, it's by some bank of england economist and it shows you what interest rates are around the world adjusted for inflation on 10 year government bond. in other words, what we are seeing now is unusual. rates are low but it reflects a long period of rates being little. the point is that we have reason to believe that interest rates may be lower than normal for a long time. the trend is well beyond the great recession and the question is in the context with the fed be stuck near zero for a long time and how much will that limit their capacity? could the fed do more, could congress do more, and what would that be? to kick us off we are three speakers each of them has different cut on fiscal policy. we decide is going to first? wendy edelberg will be going for some the congressional budget office.

she's speaking for herself and not cbo. she's speaking for cbo, great. ben spielberg who has a nice paper with jared bernstein at posted on the website this morning, a link on a website about ways in which we might want to expand the automatic stabilizers. and then the third is phil swagel, university of maryland, formerly of bush treasury who will talk about how he sees things to each of them will speak for seven to 10 minutes ago bring to all. and we will have a discussion. try to come it's all yours -- wendy, it's all yours. >> i bet i can do it but you can do it faster.

[inaudible] >> on wendy edelberg from the congressional budget office the congressional budget office. no, associate director for economic analysis and i'm delighted to be here to discuss the important topic. solemnity a quick roadmap of what i will say. first i will briefly walk you through cbo's budget and economic projections and i will highlight some of the significant consequences that we see from our projections of high and rising federal debt. i will also talk about how the economic projections influence our budgetary projections and the interplay of those. finally, i will talk the automatic stabilizers and fiscal policy during times of economic weakness. this might look familiar because

of david just showed it. under current law revenues are projected to stay constant as a share of gdp over the next decade. bug with the aging of the population and rising health care costs, cbo projects a substantial boost federal spending on social security and the governments make health care programs. so alongside rising federal interest payments, deficits are expected to increase from current level of 2.9% which is just a touch our phone average of 2.8% over the past 50 years to 4.9% in 2026, which leads us to projections for federal debt held by the public. if current laws generally remain in place, growing deficits are projected to raise federal debt held by the public 86% by 2026, up from 74% in 2015 and almost twice the average of the past five decades. so some of the consequences of

high and rising debt. so the focus of this discussion today is that increased borrowing would restrict policymakers the billy to respond to economic challenges, whether it's through an economic downturn or the result of the financial crisis. that would make those economic challenges have larger negative effects of on the economy and on people's well being. in addition just more straightforward direct effect is that increased borrowing would increase the but of interest the federal government would have to pay which would make it all that much harder to stabilize debt to gdp in the future. harder to quantify is that we think that high and rising levels of federal debt increase the likelihood of a fiscal crisis. such a crisis would prevent policymakers with significant challenges and lead to significant and negative impacts on the country. there is no particular tipping point at which we think of fiscal crisis would occur and

you would think investors would care not just about the level of federal debt but also that expected trajectory of federal debt. nonetheless, to be sure a high level of federal debt and a steeper, higher level of federal debt at a steeper trajectory federal debt worse in those risks. so in addition, look at that second bullet point, sorry, the first bullet point, we estimate sustained higher deficits lead to lower gdp couple of economic output in the longer-term by crowding out national saving a domestic investment in which is to say we estimate higher federal borrowing crowds out private investment. going to skip that's life. to take our projections over time, they are there despite the fact we're also projecting improving economic conditions over the next several years. beyond pathetic several years, after 2019, cbo does not attempt

to predict tony or magnitude of fluctuation cbo's projection should be interpreted as the average of likely outcomes. in other words, those averages reflect cbo's projection that any cyclical strength or weakness after the next couple of years would be offset or counterbalanced by cyclical weakness or strengths such that gdp is projected to grow on average with potential in the latter part of the decade. we endeavor to set our forecast in the center of the distribution of possible outcomes. with that in mind, we see both upside and downside risks to our forecast. so, for example, gdp growth in our forecast might be too pessimistic over the next five years. so, for example, firms might respond to increases in overall demand by doing more robust hiring an cbo projects and that would lead to faster increases in household income and consumer spending and we project.

on the other hand, the our downside risks. we might be too optimistic over the next five years. so, for example, increased tightness in the labor market may not lead to a spouse as increase in wages as we project and that would just as the flipside lead to less consumer spending over the next five years. international conditions could be worse than we anticipate. there could be more of a slowing in china then we project and that would have spillovers on the u.s. economy. as we were discussing today the possibility exists that the economy might into a recession and the next several years. the current economic expansion is over six years old which is slightly longer than expansion since 1945. over the past 30 years expansions lasting at least six years with really low level of unemployment as we see have fallen into recession within two years. however, length of economic expansions vary greatly as david said.

although the longest expansion in the last 11 business cycles has been 10 years we see no statistical evidence that the length of a recovery or an expansion is in and of itself a prediction of an economy going into recession. nonetheless, it is of course risk. so in the latter part of the projections cbo projects that gdp will be one half percent below of a potential and that's because we estimate output has been roughly that much below potential over the last seven complete business cycles. so that projected output you can barely see some daylight between those two lines at the very end of our projection. that has budgetary implications. just as in the past any cyclical strength or weakness that we project has budgetary implications to the automatic stabilizers. let me go back to automatic stabilizers are provisions in law that decrease government revenues would increase government expenditures. when the economy goes into recession and then did vice

versa when the economy expands and that's always out any additional actions taken on the part of the government. stabilizers tended to reduce the debt of a recession and vice versa attempt to dampen expansions. basically stabilizers that the aggregate demand so households and businesses who pay less in taxes or who receive more in transfers we think those changes flow through to differences to changes in aggregate demand which affects the economy. so this chart which is very similar to the one david shoji but with more history shows what has happened to automatic stabilizers, the contribution to the budget in history and in our projection. cbo expects her law generally didn't change automatic stabilizers going forward would be much smaller than the event over the past seven years. for this fiscal year cbo estimates automatic stabilizers will add $89 billion to the deficit, have to percent the

potential. so by comparison from 2019-2015, cbo estimates automatic stabilizers added on average about 125% of potential to deficits. in later years on the big stabilizers are projected to continue to shrink although they are influenced by that projection of an average output. so this table gives the numbers on automatic stabilizers have responded to recession in the past year in the recent recession which was severe after four quarters automatic stabilizers added the equivalent of 1.5% of potential to the deficit and an after eight quarters, 2.1 prison. 2.1%. previous recessions have seen small increases. small increases in the deficit from automatic stabilizers. about 1% after eight quarters over the previous three recessions. body can also as david said, still a lot of my thunder come

even after county for the role of automatic stabilizers deficits are still cyclical. for example, automatic stabilizers account for much, not much but not all that much of the increase in deficits since 2008. and, indeed, in recessions deficits are typically increased both to automatic stabilizers and through active fiscal policy. like automatic stabilizers would estimate active fiscal policy that lowers revenues or increases transfers boost aggregate demand in gdp. in the past access fiscal policy has provided a short run stimulus for at least a month. two-thirds of the time the economy was in recession in any particular year. in nearly every case that stamos involves a reduction in revenues and, in fact, about half the time most of that stimulus was a reduction in revenue. policy, active fiscal policy has often had the reverse effect during economic expansions. dampening growth during boom times about half the time.

so automatic stabilizers and changes in fiscal policy have different implications for budget projections. so by design automatic stabilizers are budget neutral. but importantly i should note that fiscal policies underlying the automatic stabilizers generally do not budget implications which is to say that the policies underlying automatic stabilizers may affect revenues and spending even when the economy is operating at potential. for active fiscal policy, reducing deficits to stay with the economy without imposing comparable fiscal restraint in future years would reduce output and income in the longer run relative to what would've occurred with no changes in fiscal policy, which is to say cbo concludes that the estimates that the benefits of fiscal stimulus are temporary but the cost of permanent in absence of any offsetting changes to fiscal policy in the future.

i should say some researchers come to a different conclusion and estimate that maintaining policies that boost overall demand in the short term have positive long-term economic effects, because basically the crowding out that those increases in deficits create is more than offset by increases in potential that result from the stimulus. which is to say the increase in demand raises the economy's long-term potential enough to offset the negative effects of crowding out. how significant that is usually unclear. figuring out how to net out any positive effects of potential with a negative effect on some crowding out is really complicated at the cbo doesn't incorporate this effect but we continue to look at it. that's all i have. i know i am over time. thanks very much. [applause]

>> so i just want to start out by thanking david and hutchins center for hosting this event today hosting this event to date and also thank you to all of our fellow panelist and all of you for being here to talk about what we think is an important topic. i also want to thank michael author, paper we just released, jared bernstein. thank you very much. i want to thank michael author jared bernstein to all of our colleagues at the center on budget and policy priorities who gave us an invaluable feedback as we develop the ideas that are contained within our paper. when i think about the question that motivates this event, arborvitae for the next recession, i really think there are two answers to this question comes up short and the long answer. the short answer is no or not. but the long after i think is

really what motivate us to write this paper added that motivates a lot of people who are also speaking here today, and it is still no, we can be if we take the right lessons from our historical experience and start to prepare for it now. with that idea in mind, jared and i in our paper try to outline two sets abroad recommendations that we think can really enhance our preparedness for the next recession before it hits. those two broad recommendations are first, we want to strengthen the automatic stabilizers that david mentioned and wendy talked about. and the second is that even outside the automatic stabilizers, we think that there is architecture we can either leverage or build in other programs, such that when the next recession rolls around if congress is going to take countercyclical action we can maximize the effectiveness of that countercyclical action. i'm going to talk about those two broad policy areas and then give an example in each area of

what we talk about in the paper just need to get a flavor of what our recommendations are. so first i'm going to talk about the strengthening of the automatic stabilizers and try to give a great overview of what automatic stabilizers are. again, they are programs that expand when the economy is weak and contract when the economy is on his way to recovery. in our paper we discuss the automatic stabilizers come an opponent insurance, snap which was formerly called food stamps, and medicaid. just to get a sense of what an automatic stabilizers looks like, if you can get her something like unemployment insurance why does it expand when economy is weak and contract when he can't dishonestly to recovery, when we're heading into recession people lose their jobs, more people qualify for unemployment insurance compensation so that for government spending on that compensation increases, putting money in people's pockets and that's the cost of increased

consumer demand that wendy is talking about them when they come is on his which recovery and people getting jobs again fewer qualified for an opponent insurance compensation and, therefore, government spending within decline. that's what we'r we are talkingt when we talk about automatic stabilizers. the three programs that we discussed in the paper are particularly suited in our view for additional countercyclical stimulus of automatic stabilizers because there's already an efficient administrative infrastructure in place which you can leverage for more countercyclical funds. what i'm going to talk about is something called fmap. but fmap is it is common stands for federal medical assistance percentages, that it is a share of medicaid funding that the federal government covers for state. so this ranges from 50% in some of the wealthier states like massachusetts, for example, to a much higher percentage in states

that are like, for example, mississippi at 75%. and during the last recession and during the recession in 2001, the federal government boosted the fmap, being a paid a higher share of state medicaid costs. this was a really effective form of countercyclical stimulus during those recessions because it's a form of state fiscal relief. you might know that states have balance operating budget requirements, so during recessions when the revenues are falling, there's a lot of pressure on states to either cut services or raise revenues to make sure they meet those requirements. and what is boosting the fmap does for boosting the share of medicaid spending the federal government covers is that it lets states use what used to be fair share to cover other aspects of the budget shortfall. so it's really effective in that respect to make sure that whatever service cuts or revenue

increases states might have to undertake during a recession are not as severe as they might otherwise have to. what we recommend in the paper is because it's been done during the last two recessions and was effective, we think of something that should be a part of permanent law that this should happen automatically during future recessions. we want to make this an automatic stabilizers that the federal government enhances fmap went a recession hits. the other recent that's really credible is because it helps with the timing if you make it into an automatic stabilizers. you can be more assured it's not going to end too soon or begin to late when a recession roles around. the devil is in the details, and how you make sure that enhanced fmap is going to trigger on automatic and ventured off on the economy is on its way to recovery is somewhat difficult. what we do in the paper is offer to potential sets of triggers which are economic indicators that can say at this point the

economy is doing poorly so we're going to turn this on, and then at this point the need for the fiscal relief is no longer necessary and we're going to try turning it off. these triggers are inherently arbitrary to a large extent so it's hard to design a perfect one. we are not wedded to the two that we propose in the paper. we did want to get some option but if people can come up with a better when we are all for that. the main thing is that enhance fmap should be something that triggers on and off automatically rather than relying on congress for discretionary stimulus in the future. the other thing i would note about the options we propose in the paper, we do look at how they would have worked during previous recessions and you look pretty good to us, but again they are somewhat arbitrary and would be interested if others have ideas about how those should work. so that's the first set our recommendations and you ought and staff we have proposals that we believe would enhance our countercyclical properties. the other thing i want to talk

about is what we can do outside of automatic stabilizers. the other thing we think is true is that there is the possibility to either leverage existing architecture or build new architecture in certain programs such that when the next recession roles around if congress wants to act, whatever actions they take and be more effective. we talk about this in the paper in the context of both direct and subsidized job creation, and housing assistance. the one i'm going to talk about is direct or subsidized job creation. what we propose in the paper is a creation of an employment fund. what the employment fund would consist of his two components. one would be subsidized jobs program, a flexible funding stream so that states could find subsidized job programs. this is modeled after a program called that tanf emergency fund that was in active during the last recession, and worked

pretty well. the other aspect of the employment fund we propose is something that commission co-chair by larry summers proposed lester which is a set of fully funded national service jobs, they recommend about 500,000, and this employment fund would leverage both those fully funded national service jobs and the flexible funding stream for state subsidized employment programs on an ongoing basis. this would be during normal economic times. the reason we proposed this is because these programs are difficult to ramp up from scratch immediately, and even though the tanf emergency fund subsidized jobs program was effective during the last recession we think it would've been more effective if it more effective if they that had and infrastructure developed already and could of gotten off the ground sooner. our belief is especially if we have this ongoing structure in place during normal economic times when the next recession roles around congress can do much more efficient stimulus

through some subsidized job creation and some direct job creation. to bring it full circle again, i think we are all kind of in this place right now what if we were asked arborvitae 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 really think that we will be ready for it when it gets here. so thank you very much. [applause] >> thanks everyone. thanks very much. i'll also talk about policies for the next recession will be my focus.

i just want to start by applauding an injured. i've taken a quick glance at the paper on first glance some things i agree with, some i disagree but it seems like really important and neglected doing to the hard work of saying what's the right thing to do and how to prepare and the point that ben date at the end about is a good program have and infrastructure set up we can wrap up, that seems really important. i'm going to focus a bit and 42 which is the trigger off. i have this and sometimes the trigger on 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 but don't end up being temporary. so the next recession some of the focus on policy for 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 in the since the current recovery is

not super satisfactory and i think it's implicit in the discussion of economic policy in the current presidential contain, which i gather is going on. [laughter] so it's implicit in some of the responses we've seen that maybe we need more or maybe we need to do. it seems like the way to start that is by saying i was the recovery we can? on a difficult things this recession is that the many factors behind. there wasn't just one thing to fix. i've listed some of them, financial sector was impaired and policy some of the i was involved in in my time at the treasury, help stabilize the financial sector and then there were choices they kept the financial sector impaired and continue to keep an impaired in some ways. doesn't partially addressed but not entirely the debt overhang on businesses at least in the u.s. much of that has improved but not entirely if you look at

the surveys of consumer finances and other data sources where it is linked to inequality that it could a relatively high income or hide wealth households, their balance sheets are looking pretty 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 as the fiscal stem is was not big enough and i will talk about maybe it was big enough but not good enough or sort of the quality was low. i'll talk about fiscal quality. i think is impossible to avoid instances of the rahm emanuel point of don't let a good crisis go to waste. that went counter to what would've been best for our economy. obviously understand from a political point of you wanting to jim through things when there are 60 those available to jam them through. but i suspect they went in the wrong direction.

i'm skipping a bullet. i'm in the recovery is held back by policy choices. a sense in which we are layering on disruptive change in the middle of recession. so without going into with aca a good thing or a bad thing, though into all the arguments, dodd-frank, the regulatory surge, uncertainty of the rule of law and various situations. it's a lot of stress on the economy. it's a lot of disruptive change. it seems like layering that on to a recovery is inevitably going to -- at the same time many people would say that the political system was disruptive to the recovery. of course, we know today financial markets and maybe tv audiences know to kind of tune out the political show, we will not default on the debt and things like that, but, of course, back in 2011 maybe people didn't quite get that.

so i do understand the idea that there's been political disruption that is interrupted the recovery. it's kind of tough to say fix the political system as it's not a great policy recommendation. there are times when things work and to me i look at things that work, and student loans for example. president obama and congress worked very well together. the medicare doc fix, what i call the obama bush tax cuts were extended in full and then mostly made permanent. so there are times when the political system has not held back growth. and then lastly i think there's still a question about is the recovery wearecovery weak or doe a diminished role for trajectory? i will return to that at the very end when i talk about my solutions. so let me talk briefly about the fiscal response, and this is a little bit of a catalog of what we've done in addressing the

last recession ended up we used that to think about the next one. i start from the premise that it's helpful but not sort, not the end of the discussion to address the proximate cause of the recession. that's not always possible to do that and to think my first bullet is exactly the the housing sector in 2007-2008 was an important source of the financial crisis. when i was in the treasury did administration sort of made the choice to do some on housing, but really to focus on the broad economy, to say the housing market has to adjust and will adjust and policy will address the broad economy. there's a fiscal stimulus in early 2008, only 150 billion, seems like a whole 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

problems of housing and those continue to weigh on the economy. there's the bank, broader financial sector spot in 2008-2009. my point there is the response was very politically difficult, very effective, very cost effective. so of course the t.a.r.p. with a large amount of money but in terms of the net cost turned out to the relatively small, depending on how you count it, whether it's plus or minus. and the stress test that were put in by treasury secretary geithner and the fed were incredibly effective. and incredibly cost-effective. as they continue to be cost effective. so those two things together sort of went directly to the part of the source of the problem driving the economy down. and then there were other things, the targeted fiscal support infrastructure of the spinning that i will talk about next and then the automatic stabilizers and current monetary policy which will be on the next panel.

i think there is broad agreement among americans that infrastructure spending should be part of the next fiscal response and americans want that to be in the form of a wall. [laughter] i'm not sure that is the highest quality infrastructure spending but i think there is that agreement. so 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 administration staffers about my three bullets, they turn into teenagers and their eyes start rolling. teenagers know that there's a phenomenon and understand the administration position on high-speed rail and sort of the greenport and tease out is just preposterous your but to me that's the problem is it's hard to have a discussion about infrastructure into we agreed not to burn taxpayer resources.

just a few weeks ago did administration have another proposal to have a gas tax attack the rim and just burn it. i know that because the first words i saw were high-speed rail. that's a synonym for burning taxpayer resources, as far as i can tell. obviously the northeast corridor is probably not burning taxpayer resources but it is also not high-speed rail. so to me that's the real key, is having high quality fiscal stimulus. rome or and roemer did a paper analyzing this data plan and they downplayed the impact of fiscal, of infrastructure spending for long-term growth but they still see some benefit for it in the medium term -- romer and romer. so let me think about policies and fiscal room. i'm going to skip ahead a little bit in the interest of time. so my answer is yes, i think it is a fiscal room to do a new stimulus spending. if there's recession soon i

think we could do it. before then they may be useful to prepare for the next downturn. the things i have in mind are exactly the work that jared and then are doing is saying what works and d do more of the good and less of a better especially focus of us on the bed. think about what didn't work unless duke is out of the and have a growth agenda to say the things we can do to improve our growth trajectory and i think that's the agenda for the next president, whoever that should be. [applause] >> thank you all for trying so hard to stick to the time, even though try for major skip over two-thirds of your slides.

i want to pick up the on one thing you said at the end, and that's wendy entry what about this but there is a view out there that we don't have the fiscal space. that is that debt is so high that if we had a recession soon, that we would not be able to raise to borrow money to fund whether the 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? >> 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 of debt. we can make those qualitative statement but it's hard to know went investors might lose confidence. one thing i will say is that it

should be true that investors should care not just about levels but about trajectories. a fiscal response to economic weakness that credibly only temporarily raises deficits and debt, and comes coupled with some sort of long-term response, or maybe even actually gets layered on top of the longer-term fiscal agenda that stabilizes debt to gdp should have very different implications 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 that short-term stamos the long-term deficit reduction, and so far none of them have been elected to congress. >> but we can continue to say it. >> ben, how do you think about them do you worry at all about having too much debt? >> i think our perspective is we like to think of ourselves as

cyclical don't, structural hawks. so definitely agree that all else equal we want declining debt-to-gdp ratio, but our view all else is an equal and especially that's the case during recessions. so we think that when you think about the automatic stabilizers and the types of recommendations we are making in the paper we need to weigh what are the benefits of doing these things against the potential drawbacks of higher debt to gdp. we really think that the benefits far outweigh the potential drawbacks. louise came out with a paper recently which examined the long-term fiscal outlook for fiscal space, and i think agreed that automatic stabilizers are a place we should definitely be bolstering what we currently do. >> is it your point you are cool with automatic savers but you're not so much with fiscal policies? fiscal policies have not been very well-designed?

>> it's a mix. i'm cool i guess is the word you used with -- >> be sure to tell your teenagers you were cool. >> i look at the discretion of fiscal policy of the last two recessions and it actually worked reasonably well. i looked at the 2008 fiscal stimulus. i accidentally almost implied something good about arra so i take that back. back. >> i was noticing that. i was a little worried. >> there is literature suggesting arra was effective in some ways. probably not as effective as it could've been at the 2008 singers was in some was remarkable about how quickly it was agreed upon and how quickly i got out into the economy. it was presented as a contrast with the 2009 stimulus. i'm not against discretionary fiscal policy. i think there is an affordable for congress. we want congress to be

responsive, if the same time i do agree, with the authors of the paper there is a role for better speed is your point about 2008 that george bush stay with a barack obama stamos it's okay if it's tax cuts but it's not okay if its spending? >> arra was a mix. there were some tax cuts that went in wage packets, and the bush was more heavily on the tax side. that's been a part, i think there is a rule for spending. we think about which is about the long-term come to me that's exactly it, that spending on preschool for example, lots of evidence that what is a really important thing and you want to get away. were asked spending on increasing sal sosa could benefits for high earners which is part of senator sanders plan company that's hard to explain why you would want to do that. >> one thing i don't understand is you citizens like a nice thing to say that it's easier to

trigger it on and trigger a doctor but i thought it was a critique of what fiscal policy in the last five years have been that was just the opposite, that the obama stamos pass pretty quickly. some of it got out quickly, some of it didn't but it triggered off too soon. >> what we did have a chance to talk her into his home in the paper, on a plan to discriminate with the paper is unemployment insurance. there's a debate about ending and extending ui. there's some evidence in the paper about what people call the north telling question. to set that aside whether indian or extending ui with the right thing or not, the administration said the world will end if we don't extend ui. we didn't extend ui and the world didn't end. the recovery cd. i think there's a lot of questions about some of the automatic stabilizers. >> what weight isn't the evidence of the last couple of years we turned them off and do some people think that was a mistake? we had the sequestered, the arra

stuff ran down, things expire. i mean, i thought this was a case study and you can't have temporary fiscal stamos. maybe it was to temporary. >> no. i would look at what is the automatic part. to me that's the question. that is why ui is the example. out of if something that is preprogrammed automatic, how do we have it actually ended? the sequestered in things like that, there's lots of discussion about the political dynamics relating to the pattern of spending. we clearly did not have the optimal pattern, i don't think that says different we should have more spending or less spending. if you could take out the political drama and say what spending should we have had, to me, that's an important discussion but i don't know, it doesn't seem indicated. >> 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 that the politicians will do it trigger off? >> also, we try to be clear in the paper that our conversation about the triggers on and off are abstracted away from the discussion of what's been adequacy during normal times. i think that's a whole separate conversation but we definitely do think if you your document programs themselves be countercyclical singers they should have the on and off trigger. i tend to agree much more with you that during this past recession we saw things trigger off too soon. i think if we want to talk about, for example, unemployment insurance compensation which was discretion of stimulus that congress passed did in at the end of 2013, and we would contend they're still remaining slack in the labor market and it could have gone on longer. the proposal we have in the paper actually for enhancing the automatic stabilization capability of the unemployment

insurance system is to incorporate new tears where additional unemployment benefits would trigger on which would object some of the need for congress to do the discretion of thing, ad hoc basis. so to some extent i think that our proposal would solve some of the concerns that we are worried about because without an automatic way of trading on and off. >> you want to respond? >> again i haven't 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 is a this argument by respectable researchers back and forth. the other thing i was thinking of, remember during the gigantic snowstorm there was a d.c. school system open some the schools and had school meals. to me that seems like the initially high quality spending. in other words, unkindest i'm not against all spending. >> well put.

>> one thing i do want to say is, so i showed this graph of what deficits with automatic stabilizers and deficits without automatic stabilizers look like between 2008-2015. you can see deficits without automatic stabilizers shrunken more quickly than deficits with automatic stabilizers, which is to say the automatic stabilizer portion of fiscal policy was continuing to do more to stimulate the economy. >> okay. >> i don't mean those in rank order. >> even when they cut back on discretion and fiscal policy speed automatic stabilizers were continuing on. >> some has to do with how much do we want to ask congress to try their hands what you do in advance and how much do we 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've had here could have been said

when interest rates were at 4% or at 7%, but now interest rates are bumping along at zero and reasonably to be close to zero for some time. how does that change our thinking about the role that fiscal stimulus plays in the recession? >> i think to the extent monetary policymakers are constrained it has some of the same applications we talked about in the room with whether we think fiscal monetary, fiscal policymakers are constrained to the extent policymakers are constrained individually to respond economic challenges, that's going to make the cost of those economic challenges deeper both for the economy and for well being. so that's due on the monetary policy side, to on the fiscal policy side. so yes, the fact that interest rates, even in our projections even do we project that interest rates will come up notably from their current low level, we still project interest rates even in a long-term will be lower than they have been, lower into projections of them have been in recent decades.

so to the degree that that represents, that suggest that monetary policy might be more constrained in the future, yeah, but now you have not just one problem but to. >> why don't you guys stepped out and we are starting with rich or jon? okay. now we will try to monetary policy and the two speakers are rich clarida was also a veteran of the bush treasury, currently at columbia and pimco and will be followed by jon faust who is a reason veteran of the bernanke galvan said edison at johns hopkins. i will come back after the finish, had a little conversation and then louise will come up there and have a conversation with everything all at once. >> thank you very much and it's a real treat to be here. it's my first visit to the hutchins center although you've got a great web presence and i follow what you do actively. the assignment is to talk about

are we ready for the next recession from the point of view of monetary policy. let me begin by saying i don't think the next recession is imminent but it is worth thinking through the options. i think in particular the discussion regarding monetary policy is especially interesting these days. so what i'm going to do is talk about where we are now vis-à-vis monetary policy, then talk about how the impact either insights into we might see in the next downturn. so traditionally 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 women get the zero lower bound in december of 2008 in the u.s., the fed had to present out of necessity different measures. the primary unconventional or

new measures the fed pursued for 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 long been a bit misleading because what's been important about qe is not the size so much of what the fed has been buying biggest been buying a lot of mortgage-backed securities and it's been buying a lot of long duration or lung maturity treasuries. i'm certainly in the camp that believes that although there's some academic data perhaps i think the cut by program included by the fed had worked because they have taken interest rate risk out of the market that have taken the risk embedded in mortgage secured in the market. i think that perspective is important because you try to look at quantitative easing through the traditional milton friedman lens, it's very confusing because the balance sheet as expanded.

this is the growth in orange but their demo our last offsetting reductions in the money multiplier. we know there excess reserves in the banking system. so the impact of qe has not been through generating inflation directly not by changing asset prices in a way to be supportive -- to be supportive o of the economy and how i'll come back a moment as to the attractiveness and the feasibility of doing more qe in the next downturn. here's a snapshot that i had in the system put together. this is essentially the maturity profile of the fed's balance sheet under a scenario where at some point they passively let the portfolio but all. you can pick your favorite date. the fed is committed to reinvesting those proceeds as those securities mature. mortgages are tricky because mortgages nominally last for 30 years but most people pay off the mortgage on average work is outstanding for about seven

years. you have to make assumptions about the maturity of the payoff on mortgages. the impact, the message of this is simply that because of the size and the scope of the qe program is going to take some time even in the absence of the next recession for the fed's balance sheet to normalize. and importantly as i'm sure jon for my discomfort normal sense of the fed's balance sheet is a lot larger than was in 2007 because of the growth in the demand for currency which if anything is growing more rapidly. even if the fed gets back to a normal balance sheet this will be bigger than it was in 2007 or eight. another key fact of life that they yelled and fed has been reminding us on, of come is this notion that the lift off for fed raised and again david's chart showed with a microscope you can see that 25 basis point increase in december but there is a list of path that will come back to

ththat in a moment. one reason why we have a very gradual lift off path as communicated by chair yellen and others is this notion that the equilibrium once i call it the neutral real interest rate in the economy is more than before the crisis. the neutral interest rate is an important input to monetary policy. that's also unobserved and timesharing would just jon faust as the jon faust as the worldly expert can tell you. 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 fed destination in this cycle is lower. a corollary of that is it when you 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 where the central bank will have to use unconventional tools. the rule of, and the famous john

taylor rule was to aim for a policy rate of 2% inflation plus john's assumption of a 2% neutral rate. you would have rates of about 4% to indeed on average from 1994-2007 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 bottling is the evolution in the way financial markets think about the destination for fed policy. so what i have plotted here is the evolving view about short-term interest rates in the u.s. at a particular point in the future. december 2018 this contract has been traded in the futures market for a long time. what's striking about this, and again got to make corrections for things like liquidity but this gives you a first cut at the evolving market views of where the ultimate destination is for fed policy. what's striking is you go back

into those dark days of '08 and '09 and even after the tape or tantrum in 2013, folks off the fed were going to get rates up more of us when they had before the crisis. roughly 2% inflation plus 2% real. you see those expectations have been trailing down very substantially to the point there's a pretty big gulf between the feds blue dot exercise which we can discuss during q. and a, and market pricing. part of this is of course simply the facts market pricing have to factor in not only the most likely scenario for the economy but the tail risk of not getting to neutral in slightly different from the dots. but the relatives that the markets have certainly are very much in this view of a gradual lift off. just a little bit on economic theory. you probably remember from a macro course you took in college that there's a rule of thumb that relates real interest rates to growth rates. if you look at the underlying math there's a lot of slippage. i'm just trying out an equation

from one of my papers. they key point is that even if you're in work with of thing that drives real rates is growth, modern back a model say it's really the global growth rate not anyone countries growth rate. we have integrated capital market. even if they've not changed our view o of the was growth outloo, the global growth slows we would expect that have an impact on rates. i think that needs to be regarded as well. yet another reason why we are more likely to see the fed needing to use unconventional tools in the next downturn. this is a chart which a key putting in because it attracts a lot of attention. i type into google a chart illustrate the complexity of middle east geopolitics. this is the first thing that popped out. i love. i had occasion to have a conversation with daniel juergen about a year ago and i should in this chart and i said what you make of this what he said it looks about right. [laughter] and, of course, he knows a lot more than i do. they key point is not to get into our views of alliances

accomplished in middle east but merely to say even though so far we haven't seen any huge repercussion, there is a lot more risk geopolitically in the world potentially. ken rogoff you all know quite well had a nice piece recently making what is a very basic but fundamentally important point in which is that even a small increase in investor sentiment about extreme outcomes can be two very big we pricing of safe sovereign bonds in a world where there is a desire told the assets as an insurance premium against adverse outcomes. suggested give you an example of this, what i plot is the total realized return to some who on january 1, 2008 about a 30 year treasury bond. don't do anything fancy, you just buy the bond and go to sleep. even the bonds are boring come at the end of the year your total return would've been up about 40%.

so sovereign bonds have a handful of countries can think of germany, the u.s. come to provide a premium. so in addition to the other aboe factors, slower growth and neutral and the like, that is this desire for these assets. and, of course, given that many other central banks in the world have coded negative rates, there's yet another reason this gets to the discussion about profile for u.s. rates. i had given phrase examples of forward guidance. there was a recent conference in new york discussing forward guidance as a tool and it's important to remember that in a lot of our textbook models, forward guidance should not have any impact. but in the real world it tends to for a couple of reasons. one is that it gives us some insights into the central bank's reaction function. and number two, depending upon how you formulate the guidance in particular the calendar date guidance which began under greenspan and was extended under bernanke can have a very

powerful effect on market expectations are so forward guidance is one of those things that industry should work but in practice if it is communicated i think can work. just a couple more slides to finish up. we know that we've gone through a big severe crisis but it's also true, and these are cbo estimates the potential output. so another factor tha that makee fed's life either interesting or propagated, depending on your choice of adjectives, is the fact that even though because oil prices the recovery inflation than below the fed's target. we are getting to the point where the traditional output gap measures are closing which creates an interesting problem for the fed if there's perhaps more inflation down the road than currently expected. and then finally a little bit on options for the fed. ..

confidence because she was asked this question last week i a bloomberg reporter in particular in the context of whether or not he would see the negative policy rates out of the fed in the next downturn and essentially as i read her answer she indicated that the fed

option would include various forms of guidance, maturity extension which is a version of the quantitative easing without the balance sheet and then quantitative easing. she seemed to indicate the negative rates perhaps because of the experience of other countries are not at the top of their list. i would also point out another factor that the central banks have at their disposal is they did not use in the last downturn but simply in principle could be deployed is an exclusive program that would try to cap the yield on government bonds through substantial intervention. you might think they did everything in the kitchen sink but they didn't have the yield on the government bonds. so i think that i .-full-stop they are and look forward to john's comments. thank you very much. [applause]

it's a pleasure to talk about this somewhat ominous question. rich rich is much more quickly prepared, so i haven't had an opportunity to make my talk dovetailed. so the issues have been set up very nicely. but i think there's a few ways we can think about this question. is the fed ready for a session? there is a lot of ways you can think about this. is it where they are prepared to do what they can? with the response be powerful and effective? so we got yes, yes and at best, modest lisa. that is the answer about what the fiscal policy is as well. i want to end alleged that the

-- embellish that. i spent a few years as a special adviser to advisor to the board and was there when the a4 mentioned fiscal cliff happened and there's a lot of questions about when the recession might come. the chair, bernanke at the time, was asked what can you do. would you be able to respond if there's a recession, and he said no. the tools in place at this time didn't -- were not enough to offset such an event so the question is why would we think things could be better now or worse now as things pass, and i think the answer is probably the economy is healthy or so it would be less scary, but as far as the tools are concerned it is the same or perhaps weaker, so

let me go through that. we can go through various kinds of tools, the one that chair was asked about in the press conference. i'm going to divide them into things the fed is trying to come it didn't try in things folks talk about that probably are not legal. in the last are various forms of helicopter drops. so, let me talk about things that were tried. forward guidance. you tell folks what's going to happen. there's a misconception often times a distinction isn't drawn between the guidance. i'm going to call one prescriptive. the idea is that somehow the current fomc dictates the policy in fact dictates they will follow policy will not want to follow. this goes into the discussion no central bank in the world has tried this. so when we get to the discussion but not now.

things they did try is not for guidance. it's information only guidance. an example would be the finished threshold. we are going to keep interest rates at zero as long as the unemployment rate is 5% and well behaved. that is a paraphrase of a longer statement. then there's the under appreciated the fact that information only forward guidance is going to have accommodation only at times when the public misunderstands what the federal intentions are. when the public understands how a comedy that they tend to be, telling folks what you're going to do doesn't do anything. now come as we saw in the picture interest rates declined fairly steadily and still remained high relative to today in mid-2012 and 2013. there was still room to say no,

no committee you don't get it. we intend to be accommodated. it's not clear that room is still there. in fact anybody would realize market measures in the expected policy or the market's expectations are being more a comedy comedy that and it claims it is going to be. so if you did the forward guidance right now, it would actually represent a tightening. so forward guidance still works. it's clarity about what you're going to do with the information only. it's a great thing. but it's not going to have the what it did when folks didn't get it so the fed would announce something and people would say oh i see. they are really serious about this. next time around there won't be as much as that, unless the

market changes its opinion. next, there is large-scale asset purchases. the fed calls its large-scale asset is the reason that rick pointed out. it is kind of a misnomer or misleading. the idea is you go out and buying a bunch of long-term bonds and may increase the demand of the price, which is the same thing as driving down the yield so you drive down the long-term securities and hope only then that stimulates the economy. so you can ask is there still a capacity to do that, and there are various ways you can look at the capacity question. you can say is they're still quantity stuff to buy, and and there's only so many mortgage-backed securities and so many government securities, so there are limits but there's still plenty of capacity. but in the other sense, it isn't clear that it's quite as large

and it's the same point about interest rates that we've been talking about. q. e. and the famous qe2 were around three and a half and then the sequence of programs including the maturity extension programs and qe3 pushed the rate down to about 1.5 where they stayed until the fed decided that it was time to start normalizing things. so there was about nearly 200 basis points of easing in long-term rates. but we are starting up now syria xp to >> we are starting at different points. there isn't so much room to lower the long-term rate as there was in 2012 or 2010 when

qe2 was adopted. it would be easy to push those negative but that is an ambiguous question. most folks think going from 2.5 to 3% is a good thing or 50 basis points to minus 50 that it's a little ambiguous, not enough room. so arguably it is a bit less potential than before. so you could still provide some support to the economy. things not tried others but prescriptive forward guidance where you promise to deliver an inflationary boom in the future, when interest rates are no longer zero. so you say once i get the power to do so, i'm going to produce an inflationary boom. and the idea is that households households in the distance is anticipating future good times spent more today because that is when economists say there will be good times in the future you start doing more today.

so why didn't anybody use it? no academic paper says they do the right thg and no central bank tried in the world but it requires the sector to overextend itself today having faith that the party is going to happen in the future. and the central banks announced in their explanation for why they didn't do that the bank of england have all said we have lots of reasons to be dubious about this. for the fed, one reason is that the current fomc can't dictate future policy. we could have a chair turn over soon were the chair turnover with the administration. we can think about promising to deliver a party to years from now, that rand paul is the chair at that moment. the point is there is no legal way, no credible way to promise that several years in the future that this will happen.

still, worth a try if things get bad enough, sure. so, close cousins to this our price level targeting, racing the inflationary targets. the immediate effect is to cause the 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. it may be the right thing i'm about what it has the immediate benefits that we are looking for? perhaps, but it's no more likely than the prescriptive guidance to do so. right here, negative rates on the table, but not favored. i don't want to say more about that until the discussion. i will say what rich did on the table. the chair said not going to be done. finally, helicopter drops. all central banks can do it. you can issue currency, distribute to people. the question is when is

opportune to do that? it turns out central banks have mandates. most couldn't legally give away cash, so what has to go some other way. maybe there are stealth helicopter drops, so there's various ways that could happen i suppose. but my main point about helicopter drops is that for the fed, the mandate is narrow and much more precise than other central banks so you have to check with the layers first before using some kind of helicopter drop is going to work. lots of federal legislation about fees and interest rates and other legislation have the clear intent of having the fed alternate at market prices and avoid any implicit or explicit subsidies to the system until all of these ways that starts to look like helicopter drops are dubious in the defense mandate.

maybe folks can figure this out and maybe they can't. the bottom line comment it can still provide meaningful support, but that is modest support. you might try some stuff that hasn't been tried yet there's a reason because folks didn't think that it would be as good as what they were doing. [applause] i think we should go right to the panel i just want to mention jared bernstein is going to take his questions and you will get the benefit of two tall people. i want to mention also that on june 6 we are going to have a discussion about negative interest rates as it has been mentioned particularly focusing on what we've learned in the experience we have a number of

people learning from european central banks that have been doing this and now it is no longer theoretical. i want to call your attention to ben bernanke who has a blog that posted last week where he took the view slightly different in the way he suggested that the negative interest rates might be worth trying before the fed tries another round, and he had length he wrote with the research system. peter olson suggested that so here's the deal. you have a conversation and will ask the right question when we get to the q-and-a. before the great recession the conventional wisdom is we shouldn't be a policy, we should use monetary policy.

now it seems like it's moved around and we should use a combination and of the fiscal policy is more important. how effective the policy is or is that because we are at the zero bound? anybody can answer. it's great to have such a great crowd and compelling topic. it think it speaks of the lower bound. it's not that complicated and when the federal reserve has more ammunition and a combination that's relevant i thought ben bernanke made a lot of sense when he went to congress regularly during the initial part of the week recovery in 2010 and 2011 saying we are doing all we can. we need a fiscal help from

congress and in fact the fiscal multiply your is larger and more potent. so i think that makes the world we are in. >> he re- iterated that david just advertised what we need now is a mix because the tools are so weak. >> we also learned it can be effective. they agreed to it very quickly so there's lots of other people. >> if we think that interest rates are going to be low and more or less hit by the bound you said it didn't make sense there was no immediate impact of raising the target is now what if we are in the era that the probability was hitting the bound and a lot higher than we

thought were cut if it is time to raise the inflation market or is it not come is it something to be on the table looking forward? >> but 2% was chosen explicitly to balance the risk of high inflation as costly, but low inflation as the zero bound. it's trickier to get out of than we thought. both of those should redo that computation, the same one you did update it and see if it still says 2%. i think that is undeniable. >> going off of what i thought was a great presentation, i thought they implied they wouldn't take them seriously. >> whether you can hit that on average over the last 50 years that's going to be the policy

can you achieve that? right now people expect three and that has the stimulus where we are asked, that's what we are doing. >> do you agree? >> i think it is a practical matter and it is unlikely the formal inflation but i do think over the next three to five years -- >> we are going to leave this discussion and go live to havana cuba where president obama is set to address the people. the white house expects to make a statement on the attacks in brussels and on the subway system. 31 people have died and dozens injured. [applause] >> thank you so much. president castro, the people of

cuba, thank you so much for the warm welcome that i have received and my family have received and the delegations have received. it is an extraordinary honor to be here today. before i begin, please indulge me. i want to comment on the terrorism attacks taking place in brussels. the thoughts and prayers of the american people are with the people of belgium. we stand in solidarity with them in condemning these outrageous attacks against innocent people. we will do whatever is necessary to support our friends and allies and and build job in bringing to justice those that are responsible, and this is yet another roll the world must unite and be together regardless of nationality or race or faith in fighting against the scourge of terrorism. we can and we will defeat those

people all around the world. to the government and the people of cuba, i want to thank you for the kindness you have shown to me, michelle, malia, sasha, my mother-in-law marion. [applause] in his most famous poem, josé made this offering of friendship and peace to his friends and enemies. today as the the president of the united states of america i offer to the cuban people

[speaking in spanish] ' vanna is only 90 miles from florida but to get here we have to travel a great distance. over barriers of history and ideology, their years of pain and separation. the blue waters beneath air force one carried battleships to the island to liberate but also exert control over cuba. those waters also carry generations to the united states where they don't support for their cause. and that short distance has been crossed by hundreds of thousands of cuban exiles on planes and makeshift rafts of people that came to america in pursuit of opportunity sometimes leaving

behind everything they own and every person they love. like so many people in both countries, my lifetime has spanned a time of isolation between us. the cuban revolution took place the same year that my father came to the united states from kenya. the bay of pigs took place the year that i was born. the next year the entire world held its breath watching as humanity came as close as we ever have to the horror of nuclear war. as the decades roll by, the government settled into an endless confrontation, fighting battles. in a world that remade itself time and again, one constant was

the conflict between the united states and cuba. i have come here to bury the last remnant of the cold war in the americas. [applause] i've come here to extend a hand of friendship to the cuban people. [applause] i want to be clear difference between the government over the years are real and important. i ensure president castro would say the same thing and i know because i've heard him a person address those differences at length. but before i discuss those issues, we also need to recognize how much we share because in many ways the united

states and cuba are like two brothers that have been estranged for many years although we share the same blood. we both live in a new world, colonized by europeans. cuba, like the united states, was built in part by slaves but here by africa. the cuban people can trace their heritage to both slaves and slave owners. we've welcomed both immigrants who came a great distance to start their lives in the americas. over the years our cultures have blended together. doctor carlos has paved the way for generations of doctors including walter reed who drew on his work to help combat yellow fever.

justice wrote his famous words and ernest hemingway made a home in cuba and sought its inspiration at the waters of the shores. we shared a national pastime. and later today the players will compete on the same field that jackie robinson played on before he made his major league debut. [applause] and is said they once paid tribute saying that he would only be able to reach the draw with the great cuban stephenson. [applause] even as the government became adversaries, the people continue to share these common passions, particularly as so many came to

america. in miami you can find places to dance and eat. people in both countries have sung along with gloria eschaton and now listen to pitbull. many people share the faith that i've paid tribute to in miami, the piece that cubans find. for all of our differences, the cuban american people share a common value in their own lives, a sense of patriotism and pride. a profound love of family, a passion for our children and a commitment to their education.

that's why i believe our grandchildren will look back on this period of isolation as one chapter in a longer story of family and friendship. we cannot and should not ignore the differences that we have about how we organize our governments, our economies and our societies. cuba has a one-party system. the united states is a multiparty democracy. cuba has a socialist model. the united states is an open market. cuba has emphasized the rights of the states for the individual despite these differences on december 17, 2014, president castro and i announced the united states and cuba with "-begin-double-quotes is to

normalize relationships between the two countries. [applause] since then we've established diplomatic relations. we have begun initiatives to cooperate on health and agriculture, education and law enforcement. we have reached agreements to restore the capacity to travel and do business. and these changes have been welcomed although there are still opponents. why now? there's one simple answer. what they were doing was not

working. we have to have this knowledge to correct the truth. but it made little sense in the 21st century. the embargo was only hurting the cuban people instead of helping them and i've always been beaten with martin luther king called the urgency of that. we shouldn't fear change we should embrace it. i [applause] that leads me to a more important reason for these changes. [speaking in spanish] iab lead in the cuban people -- i believe in the cuban people. the united states of america is

normalizing relations with the cuban people. a [applause] today i want to share the vision of what it can be. i once the cuban people especially the younger people to understand why ibb that you should look to the future with hope, not the false promise that it insists things are better than they are or the optimism that says all of your problems can go away tomorrow. hope that is rooted in the future that you can choose and shape and build for your country i'm hopeful because ibb the cuban people are as innovative as any people in the world. in a global economy powered by ideas and information. the country's greatest asset is its people. in the united states, we have a monument to what the cuban people can do and it's called miami.

here in havana we see that same telling. cooperatives and old cars that still run. [speaking in spanish] [applause] cuba has an extraordinary resource that values every boy and every girl. [applause] and in recent years the cuban government has begun to open up to the world and open up more space for that talent to thrive. in just a few years we have seen how they can succeed while sustaining the cuban spirit.

being self-employed is not becoming more like america, it is being your self. look who chose to start a small business. we can adapt without losing our identity. it's not imitating that simply being ourselves. [speaking in spanish] a barber whose success allowed him to improve conditions in his neighborhood. i realize i'm not going to solve all of the worlds problems, he said. but if i can solve the problems in the little piece that i live, it can revel across to them. that's where hope begins with the ability to earn your own living and to build something you can be proud of. that's why our policies focus on supporting cubans instead of

hurting them and we got limits on remittances so that they have more resources. that's why we are encouraging travel with building bridges between our people and bring more revenue to those cuban small businesses. that's why we've opened up commerce and exchange so that americans and cubans can work together to find a cure for disease and create jobs and opened the door open the door to more opportunity for the cuban people. as president of the united states i've called on the congress to lift the embargo. [applause] it is an outdated burden on the cuban people and the americans who want to work and do business or invest here in cuba.

it's time to lift the embargo. but even if we left vm bardo tomorrow -- lift the embargo, they wouldn't realize their potential here in cuba. [applause] it should be easier to open a business here in cuba. a worker should be able to get a job with companies that invest. currencies shouldn't separate the kind of salaries cuban can earn. the internet should be available across the island to connect to the world and to one of the greatest engines of growth in human history. [applause] there's no limitation from the united states on the ability of cuba to take these steps. it's up to you. and i can tell you as a friend that sustainable prosperity in

the 21st century depends on education, health care and environmental protection, but it also depends on the free and open exchange of ideas. if you can't access information online, if you cannot be exposed to different points of view, you will not reach your full potential, and over time, the youth will lose hope. i know these issues are sensitive, especially coming from an american president. before 1959, some americans saw cuba as something they exploited, ignored poverty, enabled corruption. and since 1959, we've been shadow boxes in the geopolitics and personalities. i know the history, but i refuse to be trapped by it.

[applause] i've made it clear that's the united states has neither the capacity or intention to impose change on cuba. what changes come will depend upon the cuban people. we will not impose our political or economic system on you. we recognize every country, every people must chart its own course and shape its own model. but having removed the shadow of history from the relationship, i must speak honestly about the things that i believe. the things that we as americans believe. liberty is the right of every man to be honest, to think and speak without talk or see the need for -- without hypocrisy. i can't force you to agree, but

you should know what i think. i belief that every person should be equal under the law. every child deserves the dignity that comes with education and healthcare and food on the table and a roof over their head. [applause] on a believe citizens should be free to speak their mind without fear, to organize and criticize their government and to protest peacefully. and the rule of law should not include arbitrary intentions of people that exercise those rights. [applause] iab lead that every person should have the freedom to practice their faith peacefully. and yes i belief that voters should be able to choose their government in a free and democratic elections. [applause]

not everybody agrees with me on this. not everybody agrees with the american people on this, but i believe that those human rights are universal. [applause] they are the rights of the american people, the cuban people, and people all around the world. there is no secret that our governments disagree on many of these issues. i've had conversations with president castro. for many years, he has pointed out the flaws in the american system, economic inequality, the death penalty, racial discrimination, the war abroad. that's just a sample. he has a much longer list. [laughter] but here's what the cuban people need to understand. i welcome this open debate and dialogue. it's good. it's healthy. i'm not afraid of it. we do have too much money in american politics, but in america, it's possible for

someone like me, a child raised by a single mom, mixed race who doesn't have a lot of money to pursue and achieve the highest office in the land. that's what's possible in america. [applause] we do have challenges with racial bias in our communities and the criminal justice system and society. the legacy of slavery and segregation. but the fact that we have open debates within america's own democracy is what allows us to get better. in 1959, the year that my father moved to america, it was illegal for him to marry my mother who was white in many american states. when i first started school, we were struggling to desegregate schools across the american south. the people organized.

they protested. they debated these issues challenged government officials and because of those debates and because of popular mobilization, i'm able to stand here today as an african-american and president of the united states. that is because of the freedoms afforded to the united states that we were able to bring about change. i am not saying that this is easy. there is still enormous problems in our society. democracy is the way that we solve them trade that's how we got help care for more of our people. that's how he made enormous gains in women's rights and gay writes and we concentrate so much wealth at the top of our society. because workers can organize, and ordinary people have a voice. american democracy has given people the opportunity to pursue their dreams and enjoy a higher standard of living.

[applause] there is still some tough fights. it isn't always pretty, the process of democracy. it's often frustrating. you can see that in the election going back home. but stop and consider this fact about the american campaign taking place right now. you ask to cuban-americans in the republican party running against the legacy of a black man who is president while arguing that they're the best person to beat the democratic nominee who will either be will either be a woman or a democratic socialist. who would have believed that back in 1959? that is a measure of the progress in the democracy. [applause] so, here's my message to the cuban government and the cuban

people the idea that it's the starting point for every revolution. america's revolution, cuba, the revelation all around the world. those ideas find their truest expression in the democracy. not because it is perfect but precisely because it is not. and like every country, we need the space that the democracy gives us to change. it gives individuals the capacity to think in new ways and reimagine how the society should be and make them better. there's already an evolution taking place inside of cuba. a generational change. many suggest i come here and ask the people of