host:

the director of macroeconomic analysis at the roosevelt institute with us this morning to talk about inflation, the biden administration in the u.s. economy. tell us about the institute in your work they are and what's its mission and how is your group funded? >> where nonprofit partner of the franklin delano roosevelt library. we arere at think tank that is dedicated to caring out the legacy of franklin. we are funded through a series of trusts that were set up in grants towards those projects. mypr project which macroeconomic recovery on how this recovery's beenen going. is that we will begin with inflation because before you hocame on the program the consur price b index was announced and the jump in june and from "the new yorkce times" they say inflation hit a four decade high and prices climbed 9.1% read what is driving most of that?

>> guest: it's a combination basically everything. food and energy prices following the russian invasion of ukraine andd not enough supply at the global level. thus inflating food and energy prices. goods are still high given reopening supply chains things like; there's the high price of automobiles, so good and services are also not what we expect. and that's driven by housing but it's also broader. no matter where you look inflation is higher than you'd expect. >> host: do you think the response will be on the federal reserve side am interest rate side? >> guest: the fed is raising their ratio another 75 basis points. they were hoping to see a few months of decline in it would have made them feel better but it's higher across-the-board not just driven by one thing.

it means it will probably hike up at us like a more aggressive rate. >> host: this 9.1% increase the fastest rate since anyone does that mean the u.s. is in a recession? >> guest: it doesn't mean we are in the recession. it's a high number though the euro will be distorted by unique effects last summer. employment growth is still very high. those are thee things that generate the business cycle in a recession. they could see a recession. if we did it wouldio because the federal reserve hiking cycle and cool demand rather than the level in inflation. >> host: you mentioned the job market and that number was reported on friday. what did that show was? >> guest: the jobs number was higher the highest since 1980 and still very high. it's three and 60 which is high

given how low unemployment is. unemployment is 3.6% a rate we haven't seen for 60 years. it's a record low and that kind of job recovery is very strong. if we go into recession or verse quickly and there are some things we are nervous about. it's very unique and situation related to the fact that the country in the globe is recovering from the pandemic in the reopening in the past year and a half. highea inflation gdp numbers vey high growth in spending numbers and employment numbers. >> host: what are the dangers, the economic dangers and the implications on the less of the continued conflict in ukraine? i >> guest: from a humanitarian concern and an ability to address our energy supply both here and both here in an era. it's a bigger issue in europe.

the ability to have enough i natural gas to keep energy prices at a reasonable rate going into the winter in particular. we need to coordinate a global response to have as much energy. >> host: one of the push back's from democrats on inflation is you should see what it's like in europe it's 9%, 10% and double-digit at 9.1% number. is that still lower the inflation we are seeing in europe? >> guest: the inflation in europe is in large part driven by energy prices over the last several months. lyou want to be carefully make n apples-to-apples comparison. inflation is higher here than in europe on an apples-to-apples comparison. there's a trade-off thinking about about the rate of recovery. energy prices are what hit people in their pocketbooks and

what they are feeling every day going to to the gores are starting filling up their cars. it's ant important indicator is important to know that's not anything the federal reserve can deal with. it requires a coordinate it national international policy response. >> host: mike konczal is our guest and we are talking about inflation numbers that more broadly the u.s. economy. we welcome your calls and comments (202)748-8000 and for democrats to line for republicans to his 027-48-8001 and independents (202)748-8002. housing is likely to fuel inflation figures. housing costs are set to keep inflation elevateded this year creating another challenge for the federal reserve. theve price pressures are easing before slowing their interest-rate increase.

what is keeping is high our mortgage rates climbed as well. >> guest: the way the federal reserve record inflation and housing is a complicated thing because they need to figure out a way for people who own their own homes on how much value to add to that. we do know that housing prices are coming down. this is where the federal reserve's rate hikes have had the most effect. mortgage rates at gone up and wasting the closing prices have gone down. that market is cooling and that's where we will see the federal reserve with a disconnect there is going to go more but the prices are starting to come down. if you want to think about in the context of the broader picture the broader picture is higher than we want. housing, we have seen an impact and we have seen an impact with

the housing starts and new construction. that the fed has taken on strong action. >> host: what's causes that housing starts a new construction left >> guest: new demand and prices are fueling it. people are going to buy less housing it means prices will come down but itoo also means ty are still more housing. >> host: do you think there's a strong consumer demand across a broad front that we have seen that is sort of a follow on or residual effect of the will of the pandemic? >> guest: people built up a lot of savings during the pandemic and really can change pltheir consumption patterns. people were buying less services and people were buying home gym equipment and less gym memberships.

people have a negative opinion about the economy people are spending money and things are going pretty well so that disconnect it's interesting how that will result in the next six monthst. people are buying things. >> host: what is the potential psychological effect? it doesn't mean we are in a recession and the psychological effect1% potentially the board that says yes we are now in a recession announcing to the public that hey we are in a recession now and when you think that happens? >> guest: if that happens they tend to do that with -- so a handful of economists is tend tn declare that. most people know we are art in a recession. we have a negative gdp growth excess of inventory and calculation so underneath that very strong.

by the time we declare we are in a recession. >> host: you recently did a paper on level mark-ups on corporate profits as well. some of the findings from that show w the mark-ups and profits have skyrocketed to record levels since the 1950s and firms in the u.s. increase their mark-ups and profits at the fastest pace annually since 1955. describe the term you used firm level mark-ups and what's behind these profits. >> guest: mark-ups basically means profits for all intents and purposes. it's over th' cost of goods sold. combined with some of the things that basically a profit. those are at record highs. we knew from the statistics that corporate profits are very high last year. it's hard to tell what caused that was its supply or demand or some kind of concentration?

we will able to finally go and get firm level data based on public records and we found a couple of interesting things one is that profits were upup across-the-board. every firm no matter how profitable they've been in the past was able to earn more profits. certain industries we saw huge increases in profits weathered semi-conductors shipping and so forth. some industries in particular were hit by theo reopening. there were firms that have higher profits before the pandemic hit an even more higher profits and it couldig be a mart power story as well. the 2021 story in 2022 inflation more broadly. those profits are real and that they can come down through competition or government action that can help with the good headwind to help bring down inflation without necessarily causing any other problems.

>> host: is there away free as an economist to quantify gouging? >> guest: it's hard to separate it from consumer spending and supply chains and other things that can be disrupted. we look at firms that we are the thought had i profits right before the pandemic, abnormally high profits before the pandemic we saw that they had higher profits afterward so that's deadly something to look at. there's a question of whether this exists period. there's something real here and it's worth investigating no matter what whether these profits comewo down through competition or increase supply or government action became bring downup inflation. >> host: what do you think is the best strategy for the ministries and to help ring down the inflation numbers? >> guest: they should have the bill lowers prescription drug costs and puts money directly in people's pockets and help bring

down the cost for people. that would be really important. deficit reduction and a reconciliation bill and deficit reduction possibly taxes on corporations. that would be helpful to supplement the federal reserve's actions. increased actions to deployto supply-chain would bring down goods prices. there's a bill in the house and senate and they are trying to reconcile b it. there is funding in place for the infrastructure bill which would also be very helpful in looking at public profit to do a little bit to push competition bureau radio measures that we are to have in place for that whole of government approach hitsts the broader picture. given how high inflation is a means of a all up government approach. >> host: on our democrat line you are on with mike konczal.

go ahead. >> caller: i want to know if gas is going down and why is inflation going up? >> guest: that's a good question.wi the gas prices you've seen the prices at the pump going down over last month. it's a month delay so this number will be lower next month and that's really encouraging. more broadly the more prices level in stabilizing come down because of ordination in private and public action the more inflation will come down. support remember that inflation is broader than that. for some individuals that will be a huge relief. the price of at the pump in the price of groceries coming down this is the broader problem that requires vigor government action. >> host: the measurement of it is broader than the consumer price index. >> guest: they look at a slightly different view which is elevated. they are starting to diverge a

little bit. no matter where you look inflation is higher. >> host: to your, m maine on the independent line. hi there. >> caller: hi. thanks very much for taking my call and thank goodness for c-span. the only issues i have understand everything that's going on pretty much with economy, be it good or bad the problem that i seem to have and i can't figure out is the connection between the cola in the cpi. when i was -- i'm a retired machine at -- machinists and i have been retired 10 years. when i built my first house of buildup for 30,000 night the mortgage that was 17%. that job i had was a government job at $10 an hour. i was a machinist and that payment was for dollars a month. today that same house is a thousand at the same job is only

$26 anb hour. so how is it that thee price of my home jumped 10 times. pemy wage only jumped 2.5 times? >> guest: absolutely. thek. price of housing is very high. there's a housing shortage over the last 10 or 15 years particularly since the great recession. you might remember that great recession was a housing bust and a lot of people just built fewer houses. there were a lot of foreclosures and a lot of builders when under and that left a gap in housing. years later we are paying the price for that in addition it's hard to build houses especially in blue states and blue cities. it makes it hard to build new housing relative to demand. also for many people housing is unaffordable no matter what the supply levelus is for the biden demonstrations push for expanded

zoning and housing vouchers and build back better would actually make a difference. it's not going to deal with inflation in the next few months in the next n few years as one f the major things generationally for young people and it's just a major cost for so many people. the senate has returned from her recess. now back to the senate floor for more live coverage here on c-span2. be. the clerk will call the roll. vote: