my brother and his wife and his three girls -- where my brother and his wife and his three girls lived and that they had people in the neighborhood and if me, meaning his brother, the congressman, didn't stop telling lies about the election, something bad was going to happen. >> this week, you will also hear from two texas representatives, colin allred and ronny jackson. "january 6, views from the house," sunday on c-span, c-span.org, or on the c-span app. ♪

♪ host: joining us is the chief economist with moody's analytics to talk about the outlook and spending proposals by the biden administration and congress. back to "washington journal." is it too early to do an assessment of where the economy stands in the midst of the surge of the delta variant? guest: it is -- prior to the delta variant, the recovery was strong, gaining traction. unemployment has been declining. early to see any impact of the

variant on the economy just yet, but if you look across states and states in the southern u.s. where the variant is most prevalent and infections and hospitalizations have risen the most, there are indications that economic activity is beginning to weaken. on the margin, we are starting to see some impact. if the variant gets wider spread, a bigger problem in more of the country, it may start to do some damage to the recovery. not yet, but there are some worrying signs. host: most of us were not surprised by the labor departments report, u.s. consumer prices surge in june by the most since 2008. we have all seen prices go up for some time now. how surprised were you by this and what do you think is ahead

in terms of consumer prices? guest: not surprised. the spike in inflation is not a typical coming out of recession's. typically, what happens, demand picks up quickly, demands for goods and services, but it takes some time for businesses to get together to kick in and catch up. econ 101, you do not have quite enough supply and prices rise. this demand-supply imbalance has been more pronounced because of the nature of the pandemic. it has significantly disrupted global supply chains and did a lot of damage to the job market. a lot of people have been permanently unemployed. the spike in inflation has been more pronounced.

my sense is that like in the past, demand will start to moderate and businesses will get it together, factories will turn on the lights, and builders will be able to start to build more and the supply-demand imbalance will write itself -- right itself. it will take some time. as we make our way into next year, inflation will be back down to close to the 2% range the federal reserve has been targeting. host: are there any areas of consumer spending where you think those high prices will be with us for some time and may not go down, as you predicted? guest: homebuilding area, that may take a bit longer for that to moderate. there is a shortage of homes,

particularly affordable homes both to own and to rent. a low to moderate priced home. there are builders who are ramping things up and there are restrictions on their ability to ramp it up quickly. that might be an area where we continue to see strong price gains. as many people are aware, vehicle manufacturers are having difficulty making cars because of a chip shortage. thousands of chips go into these vehicles and they are in short supply. chip production will take some time. demand for chips across all industries is very, very strong. anything we buy these days has

some kind of semi conductor in it. those are two cases where host: we talked about this before you came on. the senate works on the infrastructure package. you wrote an analysis recently. infrastructure budget packages will boost growth and jobs. talking about the infrastructure package itself. the $3.5 billion budget package. on infrastructure, what do you see that is historic in the size of this package? guest: 550 billion dollars, on top of money already appropriated. about $1 trillion in infrastructure spending financed by the federal government over the next decade. that is going to help a lot in regards to roads and bridges,

the power grid, water system, rail, all of the things we can agree we need. in the historical scheme of things, it is still pretty small. if you go back to the 1950's, even into the 1970's, as a nation we were investing a lot more into our infrastructure than we are today. at least in the terms of the shares of our economy. it is a good policy. it is want to make a difference. everyone will benefit. we have done bigger, bolder things in the past. host: you look back at the spending in the 60's -- 1960's, or their lingering inflation or deficit issues that continued to bog down the economy? guest: if you go back, the big

project then was the interstate highway system. hard to imagine, but we did not have this large road system in place. that was a boon to the economy. it opened up the suburbs and created jobs all over the country. the economic benefit was substantial. ultimately, i do not think it added to the deficit. it added to the economy. it was a positive thing to do economically. in that case, no. it did not add to the deficit. host: do you think the size of the infrastructure package is enough that the impact will be felt in every state across the country? give us an example. guest: i think so. lawmakers, they going to make sure of that.

for this work politically, all parts of the country need to benefit. if it were not the case, it would be difficult to get into law. there is a lot of work being done to make sure that all corners of the country can benefit. i think all corners of the country need the help. we have been under investing in our infrastructure for so many decades. there is a lot of need everywhere. i could put a map of the united states on my wall. close my eyes, they're a dart, -- throw a dart, draw a mile radius, i'm sure i could find an infrastructure project in that circle that had a return that is meaningful. a greater return than the tenured street bond that would then used to finance that infrastructure project. i suspect lawmakers are careful.

making sure everybody benefits. host: we welcome your comments and calls. republicans, it is (202) 748-8001. democrats, (202) 748-8000. independents and others, (202) 748-8002. the other push by democratic members of congress is the $3.5 billion budget package. why this is an important piece in your view to pass along with the infrastructure plan? guest: this is a very large plan. it range -- it has a range of social investments. housing, health care, things related to climate change, try to mitigate the fallout from the change in the climate.

research and development, training, a broad range of things. to help pay for it, there are tax increases in the plan. it would roll back the tax cuts that high income wealth -- households got in 2018. that will be rolled back. large multinational corporations would pay a lot more in taxes. there tax rate would be -- their tax rate would be rolled back. it is complex. a lot of moving parts. in my view, it will be a positive for the economy. it will support long-term economic growth, productivity growth, growth in the labor force. a lot of people come into the workforce and begin to work.

the combination of greater productivity growth and labor force growth means a stronger economy in the longer run. it is a benefit to the economy. it is designed to help ensure that the benefits of that stronger economic growth go to low and middle income households. it is targeted to help the folks who have been left behind. there is a lot of complexity here. the biggest risk is what i would call execution risk. can we get all of the things proposed here done reasonably efficiently? that is the biggest risk. i think, it is a good piece of legislation. it will help the economy. host: the $3.5 trillion budget package seems to be a tougher political lift in the senate. guest: there is a lot of bipartisan support for infrastructure.

what's not to like? that is an easy political sell. nothing is easy, but that is easier. the special investments, that is more difficult. if it gets into law, it will have to be passed through reconciliation. that would require only democratic votes in the senate and house. there is better than even en suite going to get a package, it might not be that big. it will be a relatively large package. i think the democrats will get that through into law. host: the terms of hard and soft infrastructure have been used. one piece largely roads and bridges is hard infrastructure, the conciliation package in your view is what is called soft

infrastructure. social programs and spending? guest: that is the way people think about it. the heart infrastructure is traditional -- hard infrastructure is traditional. related to the transportation system. roads and bridges, dams, transit systems, rail. that is typical infrastructure. so card "hard -- so called "hard" infrastructure. it is more important in investing in research and development, making sure and supply chains are secure, producing sensitive materials and products here in united states. so that if we get into another pandemic, we do not have the same supply chain problem's in the future.

also social investments. thanks make it -- thanks that -- things that lived activity -- lift productivity. it makes it easier for folks to go to work. if they are being helped with their childcare costs and the cost of taking care of their elderly parents. and makes it easier and more economical for them to go to work. that is what i call a social investment or "soft" investment. that is a reasonable way of doing it. host: our guest has written several books. economic advisor in the 2008 campaign. tony in twitter says does he think that increasing the money supply has fueled inflation?

guest: no. i do not think there is a link was when the money supply and inflation. the money supply is increased because of federal reserve report has been working to support the economy through lower interest rates. that has been a central. that -- essential. that has kept the economy together during the pandemic. i do not think that is the fundamental cause of the recent acceleration in inflation. the economy reopened very quickly coming out of the pandemic earlier this spring. people went out and started buying things. we started to go to restaurants again, to get our hair cut, do

all of the things we were not doing when we were sheltering in place. with that in demand, -- surge in demand, we cannot hire fast enough. factories cannot turn on the lights fact -- fast enough. the pandemic is still raging in parts of the world. that is disrupting global supply chains. you have a lot of demand, that is the reason for inflation. host: we go to diane in toledo, ohio. independent line. caller: as they -- as a young retiree to take care of people who are having issues. i'm not a big fan of infrastructure -- inflation. i want to understand why inflation is actually a good thing. the whole federal reserve target

thing and being that they want to exceed over a. -- over a period of time so i can average after their targeted inflation rate. i want to understand it a little better. i have always wondered after the great recession, how the ratings companies did not get as bad as it -- of a name as banks? they cause the whole huizinga -- housing crisis. guest: i am sorry to hear you had so much trouble during the pandemic. with regard to your first question, great question about the federal reserve's target. the federal reserve would like to see inflation measured by growth and the consumer expenditure.

about 2% over a long period of time. if inflation is below 2%, like it was prior to the pandemic. inflation was below that 2% target. there has to be a period of inflation that is above 2% so that on average through the business cycle, it averages out to 2%. the reason the fed wants around 2% inflation is that means most parts of the economy are experiencing inflation. if it is 2% across the economy, some industries are experiencing higher rates of inflation. it is really tough for business or industry to operate with prices falling.

if the price of what you're just -- selling is declining life becomes difficult. what do i do with -- wages for my workers? the prices i am getting for the business services are declining. life gets complicated. it is tough for the economy to operate. if you have a 2% inflation rate on average, almost all businesses are experiencing some form of inflation. that makes it easier for them to operate. the economy functions well. there is nothing magical about 2%. it could be 3.5 percent. 2% is where the federal bank has coalesced over time. based on experience and decades of experience across the globe, that seems to be the sweet spot.

once inflation goes above 3%, people get uncomfortable with that. there wages are not rising that fast -- their wages are not rising that fast. they cannot buy as much stuff. there wages are not rising. you want to see something around 2%. host: do you want to respond about the ratings company after the great recession? guest: for disclosure, i am not in the reading agency -- rating industry. i am in part of the organization not related to ratings. i am not sure, if they got off any better than the banks. that is a matter of perception. in a sense, the banks coming out of the crisis did face

additional regulatory scrutiny. there was. frank. there were changes in the regulating agencies. i think the key reason here is because it is not clear how to make the system work better. i think everyone agrees it does not work perfectly. the rating system does not work perfectly. we have mistakes. everyone's mistakes are made. it is not clear how he would change the system to make it operate in a way it would be more efficient, safer, provide better results, that would occur. that is the issue. we may not exactly like what we

have got, what would you do to make it better? no one has been able to come forward with better. that may be the difference. the banks, it was clear that the banking system coming out of the great recession did not have enough capital. it did not have enough of a cushion in case things went off the rails for the banks to survive. a big part of the reforms coming out of the great recession was requiring them to hold more capital. the solution was filled more obviously -- felt more obvious. host: back to inflation. are we just keeping up with the inflation rate -- our wages keeping -- are wages keeping up

with the inflation rate? guest: inflation is rated by the consumer price index. somewhere around 5%. that is overstating the case. you're comparing it to prices back in the peak of the pandemic. a lot of his misses or slashing prices to survive -- a lot of businesses or slashing prices to survive. wage growth is 3.5%. you can do the arithmetic. real wages, is negative. i think that is temporary. when you ask me a year from now, we will see wage growth is probably true .5%. inflation -- 3.5%. inflation is back down. this is a temporary hit to real wages. not a typical.

--atypical. host: john, on the democrat's line. caller: why are they watering down the bills to the point where they are barely giving us enough money to fix our infrastructure? wages are stagnant. jobs are not plentiful. no one -- everyone is claiming sunshine is shining on us. we are all going to be healed. we are not. host: on the bill being watered down? guest: i think he is making an important point. we look at the broader

statistics for the economy and economic data. that is taking a picture of what is going on on average across millions of americans. across many communities. some of those 250 million americans are doing -- 350 million americans are doing well. for others, not so much. the overall statistics look good. there is a record number of open job incisions out there. according to the bureau of labor, there is 9.5 million open positions. there has never been anywhere close to that. go back to the prior of the pandemic, the job market was tight. employment was low. labor markets were good. we had a 6.5 million open job positions.

having said that, there is a of things going on underneath. some folks are doing fabulously well. others, not so much. it is a struggle. we need to take that into account when we look at these aggregate statistics. host: next up is a clay in metairie, louisiana. republican line. caller: thank you for taking my call. i have watched you over the past 10 years. you are a will ask -- well respected economist. i have a question. assuming 3.5 million -- trillion package is passed, i am a simple man. i would like an explanation. hypothetically, i am making

$75,000 a year. with the housing market i sell my house for one million. -- one million .2 -- 1.2 million dollars. the first million dollars would be tax-exempt. how would this work with the package passing? guest: i do not think that would change for you. i do not think there's going to be any change in tax law as part of the $3.5 trillion package which would affect you. in the legislation, -- >> welcome to our witnesses. good friends of the committees, the honorable bill. the former director of the